Andrew Wilkins, CEO and Founder, Futr AI
Customer loyalty is the holy grail for businesses seeking to grow. There’s a well-used statistic from Bain & Co that states a five per cent increase in customer retention produces a 25 per cent increase in profit.
That happens because repeat customers tend to buy more which means the cost of serving them comes down. So loyal customers deliver higher margins, which in turn means more profit to be ploughed into growing the organisation. In addition, loyal customers are more likely to refer the company to their personal networks.
Plus, genuine feedback from loyal customers can help hone and improve products, services and even the way the company operates as a whole.
How businesses can build loyalty
That said, it is one thing to want to build customer loyalty, and another to actually do it. In an era when there is more competition than ever before, more noise to cut through, and customers with increasingly high expectations of what good looks like, how do businesses incite loyalty?
First, they need to understand how to build it. It comes down to listening to what customers want, providing them with value and always working towards giving them positive experiences.
Second, businesses must be clear that achieving customer loyalty is not an end-goal in itself, but more a continual loop of feedback and action.
Third, businesses must identify and deploy ways in which they can capture that authentic, in the moment representative truth from customers.
The problem with measuring customer loyalty
Capturing authentic feedback is one of the greatest challenges with measuring customer loyalty. Currently, there are a number of tried and tested ways of tracking that sentiment, the most famous of which is Net Promoter Score (NPS), which looks at the likelihood of the customer to refer a company to a friend. While this succinctly captures one of the benefits of customer loyalty, it is quite narrow in focus as companies are striving for more than just referrals—important as they are.
More encompassing approaches include looking at repurchasing, up-selling, customer advocacy and engagement metrics. Usually gathered by surveys, in theory, these are solid ways of calculating customer loyalty. Yet if a business pins all its efforts on these surveys, they are going to struggle to get a clear picture. Why? Because getting customers to complete surveys, and in doing so, generating sufficient data to provide an accurate representation of a customer base, is hard. Too simple a survey and the data will be vague and lack useful insight; too complex or time-consuming, and completion rates will fall dramatically.
Changing how businesses track loyalty
What, then, is the answer?
It’s worth being absolutely clear on what businesses want to get out of this feedback. Do they want product reviews, thoughts on service issues, how the company operates, its purpose, how it communicates, how it can add additional value? Once that is determined, businesses can define how they are going to capture that feedback, and at what point in the process the customer is going to be asked for that data.
For most, that’s probably the easiest part – surely, it’s at the end? That’s typically when the majority of businesses try to gather feedback; the customer hangs up or ends the communication, then receives a message asking if they’re willing to participate in a survey.
What if “when” feedback is gathered is part of the issue? If a customer is only asked for their thoughts at the end of the engagement, the data is going to be skewed, with extremes of sentiment driving the need to respond. By waiting until the end of an engagement, businesses are more likely to generate wholly negative or wholly positive data, with little in the way of nuance.
Why “when” feedback is captured is critical
Businesses should be looking at capturing feedback, whether conscious or unconscious, throughout an engagement, however This requires a more subtle, natural approach. It would be a jarring experience to be asked how the business is doing if, for example, feedback on issues are yet to be resolved. Yet by incorporating such an approach into channels such as chatbots, social conversations and messaging apps (like WhatsApp), businesses could start to gather accurate, authentic feedback in real-time.
What’s more, it doesn’t need to be in the form of a survey. Particularly when using chatbots, algorithms can be trained to spot when customers use phrases that could be classed as feedback. For instance, if a customer has logged on to highlight a product fault, they might share feedback on the process for registering the issue or their thoughts on the initial buying process. If captured and stored appropriately, this provides real-time insight into a potential area of improvement.
What this approach does is ensure that businesses are capturing all feedback, and using it to enhance their products, services and operations. It is the company equivalent of active listening, and by incorporating it into how they gather feedback, not only can businesses get a better understanding of how they are viewed, the actions they take are more likely to meet customer expectations. In doing so, customers will feel listened to and valued and will be more likely to stay loyal to such a business.
Listen, respond and act
For businesses looking to build customer loyalty, listening and responding is critical. They (customer feedback) offer significant opportunities for learning, understanding customer challenges and seizing the opportunity to provide value beyond a standard product- or service-based transaction. To do that requires accurate, meaningful and reliable data, captured at the right time and in the right manner. Those businesses that can look beyond standard approaches to measuring feedback will be the ones more likely to help customers achieve their goals and, in doing so, generate stronger customer loyalty.