X-factor: good treatment equals good publicity

Winning new business can depend on what rating utilities get from existing customers in online reviews. Andrea Collins says it's time to turn loyal customers into brand advocates.

There is no doubt that customers make purchasing decisions more slowly and deliberately when the economy is uncertain. These days, decision processes are further influenced by the proliferation of cost comparison websites and the abundance of customer reviews via social networking sites and blogs, which serve to radically transform consumer pre-purchase research.

Today's customers have unprecedented access to information on companies. Technology is facilitating the sharing of this information, and customers are compelled and empowered to voice their views on their experiences with suppliers. In fact, recommendations and referrals have become core criteria of customers' purchasing decisions. Research by Loudhouse found that 69 per cent of consumers most value word-of-mouth recommendations from friends and family.

In this environment, candid customer reviews in the public domain can help make or break a brand. Consequently, many companies are increasing their focus and efforts on enhancing the customer experience to build loyalty and transform their most valuable and loyal customers into brand advocates.

Economics

The economics of customer loyalty are simple. It costs on average seven times more to acquire a new customer than it does to retain an existing one. Furthermore, loyal customers are more cost-effective to maintain in difficult times. They typically increase their purchases and percentage of spend with you. Their value exponentially increases as they go out of their way to refer others. They are willing to pay a premium in return for what they perceive as value. And the costs of sales associated with them are amortised over a longer period. Companies with high rates of customer retention and loyalty typically outperform the competition.

Building customer loyalty can be challenging for companies like utilities, which offer highly commoditised products and services, because they are less able to influence the customer's level of involvement or indifference in a purchasing decision. More creativity is required in the loyalty-building programme.

The first step is to adopt a customer-centric approach within the organisation. Although the benefits of this are well documented, many companies remain either product or service-centric, daunted by the prospect of the transition. Only when a company has placed the customer at the heart of its operation can it start to optimally leverage its business assets to cultivate and nurture loyalty within its customer base.

Exploit your assets

Specifically, the following business assets must be exploited:

Environment. The intuitiveness and usability of a company's online presence, or the efficiency and responsiveness of its contact centre, can affect the customer's perception of the organisation.

Knowledge. Customer insight and intelligence is paramount in building loyalty and advocacy. Rich data pertaining to customers' preferences, purchase histories and expectations provides a firm foundation for effective customer incentives and highly targeted loyalty programmes.

People. Those employees who are best equipped to support a company's loyalty drive are those who are fully engaged and who have been empowered to make decisions.
Products. Companies are no longer able to dictate what they sell or how they sell it. If they are to compete effectively in this loyalty economy, they need to define and communicate their products' quality and value from the customer perspective.

Service. Reliability, flexibility and consistency in service will always draw customers back. Reliable service is crucial. If there is a reason why a deadline is going to be missed, be proactive: communicate and be prepared to compensate. Loyal customers expect to see a commitment to resolving their issues, not to be rigidly read the company's policy guide. And be consistent. While loyal customers have a greater tolerance of the occasional mistake or inconvenience, inconsistency in a company's level of service has the power to erode loyalty that has taken years to build.

Processes. All company processes must be designed with customer experience and loyalty in mind. Most companies have deployed technology to automate processes and manage the volume of customer throughput. However, loyal customers do not tolerate being treated as "transactions". They value real-time exchange of communication via whichever media they choose and during whichever point in the process they require it. Onerous, inefficient, non-customer friendly processes and procedures will ultimately lead to customer defection.

Brand. A brand is defined by what a company is and what it can offer, and it plays an important part in securing customer loyalty. Customer experience is the delivery of a company's "brand promise", so developing and delivering a consistently branded experience for customers is paramount in enabling them to form the essential emotional bond that keeps them loyal to the brand and the company.

Branded experience

So, what is a branded customer experience? Customers' loyalty is increasingly determined by the experience they have with a company. Companies that have succeeded in securing loyalty, and indeed advocacy, have done so by providing customer experiences that are intentional, differentiated, consistent and valuable. A branded customer experience must meet a customer's perceived needs or wants, while at the same time evoking a highly positive emotional response.

A product can be of superior quality, but if the process of obtaining that product results in stress or irritation, then the customer experience is severely affected. Acknowledging the important role that emotion plays in a customer's choice and propensity to refer others is key to defining a branded customer experience.

Ultimately, those companies that profit despite this challenging economic climate will be those that have managed to encapsulate their customers' physical and emotional needs in a truly branded experience, such that those customers are not susceptible to competitor offerings, remain loyal and refer others.

Andrea Collins is director of iCustomer Experience.

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