Customer Loyalty: A simple secret revealed

“Have you ever heard the story of Joshie the giraffe?” ask Matthew Dixon, Nick Toman and Rick Delisi at the start of The Effortless Experience, a book that spells out how to win customer loyalty.

It goes like this. Joshie is the property of a little boy who stayed with his family at a Ritz-Carlton hotel in Florida. After the holiday, Joshie’s owner discovered his toy was missing and to calm him down his parents told him that perhaps Joshie had simply taken an extended vacation.

So what did the housekeeping staff at the Ritz-Carlton do after finding Joshie? They created a photo album with the giraffe lounging by the pool, relaxing on the beach, and making new friends with other stuffed animals. And then they sent Joshie back with the photo album and some other swag.

This is the sort of story that customer service directors love. It is also a perfect example of what not to base your service strategy on, Dixon and his team assert. Based on detailed surveys with more than 97,000 customers of more than 400 companies, The Effortless Experience says that delivering superior service does not build customer loyalty for most companies.

Why is customer service important? Because only one in five brands is seen by consumers as truly differentiated. Every brand owner fears that they are seen as a commodity.

In Dixon’s research, 83% of companies believe that customer satisfaction leads directly to loyalty. They believe there are gains to be made from “delighting customers”.

nick_blog_1 But the facts differ. There is no difference between the loyalty of customers whose expectations are simply met with those whose expectations are exceeded. Dixon advises that companies “grossly underestimate the benefit of simply meeting customer expectations. Customers are quite happy to simply get what we promised them. If there happens to be a problem … help me fix it. No need to dazzle me. Just solve the problem and let me get back to doing what I was doing before.”

Consistently meeting the expectations of most of your customers is the most economically valuable thing you can do.

The second finding is that satisfaction is no predictor of loyalty. One in five customers researched reported that they were satisfied with the service they received but were intending to buy from someone else.

The third is that customer service interactions (your call centre) tend to drive disloyalty. This is driven by psychology. When people discover something great they like to tell people about it as a reflection of their own wisdom. With customer service they are more likely to talk about a negative experience to gain sympathy.

The statistics: 71% of people with positive product experiences engage in word of mouth. Only 32% with negative experiences want to tell other people about them. Only 25% of people who experienced positive customer service will pass the story on. But 65% with a negative experience will talk.

The fourth finding is that the way to reduce disloyalty is to develop an effortless customer experience. Having to contact a company more than once is the biggest turn off. While some companies report that they resolve all their calls first time, they often fail to take into account that if a customer has already been on their web site. If they have, the customer will see this as two contacts.

The book argues that instead of trying to shift the loyalty curve to the right by exceeding expectations, companies will do better by removing opportunities for customers to be disloyal.

The recommendation is that you:

  • Boost the stickiness of self-service channels so customers don’t have to phone. What customers want is a simple, intuitive and guided self-service experience.
  • If customers have to call, don’t just solve the current issue but advise customers on how to avoid future issues.
  • Train your representatives to actively manage the customer interaction and to understand the different types of people who they will be dealing with.
  • Empower front line staff to deliver service by moving away from stopwatch and checklist cultures so your staff can exercise judgement.

nick_blog_2Everyone loves the great customer service stories from firms like Zappos. But most businesses are not really in the same space and the Effortless Experience will provide you with lots of ideas how to better invest your time and effort in creating loyal customers.

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Nick Shanagher

Nick Shanagher

Nick Shanagher is the Managing Director of Newtrade, based in the UK. He has worked with independent retailers for more than 20 years helping them to be successful by sharing secrets such as having a plan and watching customers so you can make them happy. Under his leadership Newtrade has become one of the world’s top retailer marketing suppliers, working with blue chip packaged goods companies to help local retailers use the latest ideas on what to stock and how to sell it. He writes one of the UK trade’s best-read columns in Retail Express and is a regular conference speaker.
Nick Shanagher

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