A ‘Fresh’ Look At Customer Retention and Loyalty (Part I)

It isn’t just Donald Trump that mixes tidbits of fact with much fiction to appeal to those eager to believe. This is also the case when it comes to the business world. Especially so when we get to customer-centricity, customer experience, customer loyalty….. Whilst some folks can tell that Trump is talking nonsense, in the Customer arena it is that much harder to separate fact from fiction, and useful advice from nonsense.  So, today, let’s take a fresh look at customer retention and loyalty.

What Is The Central Assertion of Customer Loyalty?

No, I am not talking about the often mentioned statistic that goes along the lines of “A 5% increase in the customer retention rate can increase business profits by 25% to 125%.” That is just greed that has driven many to go for customer loyalty without a deeper appreciation of what is involved in generating this kind of financial outcome.

I am inviting you to do something that is rather extraordinary in these times: look beyond the surface, go deeper, and think.  What lies behind this statistic?  Consider that the central assertion is something along this line:

“…doing business with people you trust and understand is more predictable and efficient, and thus more profitable than doing business with uninvested strangers.”

Where Do Employees Fit Into The Picture?

As I understand it, Wittgenstein pointed out that a lot of nonsense is spoken due to language itself. One of the major defects is our habit of speaking-thinking in terms of either/or.  Another defect is simplistic cause-effect thinking which looks for only one major cause for any effect. Which might explain why there is so much opinion offered on where employees fit into the Customer Loyalty picture. Some say employees come first. Some say customers come first, employees second. Others ‘say’ employees aren’t all that important just one factor amongst many. Where do you stand?

Listen to this:

“…we could not progress beyond a superficial treatment of customer loyalty without delving into employee loyalty.….. there was a cause-and-effect relationship between the two; that it was impossible to maintain a loyal customer base without a base of loyal employees; and that the best employees work for companies that deliver the kind of superior value that builds customer loyalty…. our concern with employee loyalty entangled us in the thorny issue of investor loyalty, because it is hard to earn the loyalty of employees if the owners of the business are short-sighted and unreliable….. investor loyalty was dependent on customer and employee loyalty, and we understood that we are dealing not with tactical issues but with a strategic system.”

I also invite you to consider that just about every organisation that has jumped on the Customer bandwagon has done so tactically, not strategically.  And almost all the advice on Customer, that I came across, is tactical – which is to say it is centred on tactics even if these are given strategic clothing.  Which is to say that these folks have taken a superficial approach to loyalty.  Still wondering why most if not almost all large organisations have failed to make a meaningful dent in customer or employee loyalty?

Should Marketing Own Customer Retention and Drive Customer Loyalty?

Who should be responsible for cultivating customer loyalty? Who should be keeping a firm eye on customer retention?  Should it be the marketing function as many who serve the marketing function argue?  What is your stand on this?  Now listen to this:

Loyalty has implications that extend to every corner of every business system..… Tempting as it may be to delegate customer retention to marketing, what can marketing do to stem the outflow of employees and investors?  Retention is not simply one more operating statistic, it is the central gauge that integrates all the dimensions of a business..”

Ok, so the marketing function is not in a position to the do the job.  So, should you go out and hire yourself a Chief Customer Officer?  You know someone who sits in the staff function with little authority over the line functions of marketing, sales, service, logistics, finance…?  Will that do it?  Listen to this:

“..customer loyalty is too important to delegate. It has a crucial effect on every constituency and aspect of a business system….The responsibility for customer retention or defection belongs squarely on the CEO’s desk, where it can get the same kind of attention that is lavished on stock price and cash flow.”

Enough for today. Let’s continue the conversation another time and look into what it actually takes to cultivate loyalty and generate the kind of increase in customer retention that results in superior growth, profits, and cashflow.  In the meantime I thank you for your listening and I wish you great living.

 

 

 

 

Author: Maz Iqbal

Experienced management consultant working at the intersection of strategy, customer, and technology. Combine a tendency to think strategically with a penchant for getting my hands dirty at the coalface of implementation.