Customer Loyalty - The New Standard

May 16, 2014

 

In this morning’s edition of the Richmond Times-Dispatch, Gary Poehler writes about the value of customer service and knowledgeable, helpful sales associates and the lack of both in most retail establishments (article). The author asks the question “is customer service an obsolete concept?” The answer unfortunately is, “Yes.” Not because companies cannot benefit from attracting and retaining customers. But rather because customer service programs fall short of today’s consumer requirements. While I agree with Mr. Poehler on several points, I think he stops woefully short in the most critical area.

 

I agree that creating “valued customers” will help you to grow and sustain your business, even in tough times. I call these priceless people loyal customers. But why is customer loyalty so important? Loyal customers are a competitive advantage. A loyal customer always returns, they brag about your organization providing word of mouth advertising, they are willing to pay more for your product or service, and when there is a mistake, loyal customers are more forgiving.

 

Where I disagree with the author is on the how. Mr. Poehler suggests that to build customer loyalty, business owners only have to treat their customers as “they would like to be treated.” I believe this is a bit misguided. To build loyalty, you must treat the customer at each interaction the way they want to be treated. This is not as simple as Mr. Poehler suggests. First, it requires that you get very close to your customers, asking and analyzing every point of connection to determine how to create an exceptional customer experience. Second, you must train, manage and incent your employees to deliver that experience. This is not a trivial task.

 

Customer satisfaction is at best a mediocre measure. If a customer comes into a store to purchase a new skirt or pair of pants and leaves with those items, they should be satisfied. They accomplished what they came for. Along the way, they may require help finding the correct area of the store for their size. They will need someone to help in collecting the required payment before leaving the store. If this happens in a timely and accurate method, again, they should be satisfied. They came to purchase something and they did. But, surely the effort required of the store personnel to provide this level of service deserves at best a grade of “C.”

 

Up until the last several years, Ukrops built an amazing business by providing exceptional customer service and the best product in town. Even though the stores were closed on Sundays and did not sell alcohol, they had a “loyal” following. To build a base of loyal customers, you must provide the highest level of service at every point of interaction with your customer. What Richmonder has not told an out-of-town friend about the Ukrops practice of walking you to an asked about item rather than telling you on which aisle it is located and having you fend for yourself? However, when Ukrops began to play the “low price” game, I started teaching my strategy students that it was only a matter of time before the great grocery chain was no more. When Ukrops diluted their focus away from exceptional customer service, they lost their competitive advantage.

Building and sustaining customer loyalty is not a simple task. But, in our experience, it can be the critical difference in growth and profitability.

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