Satisfied customers may be the beginning of the end

Many companies aim to keep their customers happy. Small companies understand that their only chance to conquer the market lies in offering a fantastic customer service. It’s in their DNA to go the extra mile for their customers. This approach works in many cases. Success leads to a bigger organization, more procedures, less motivated employees and a deteriorating customer-first attitude. Of course, there are exceptions but I’m sure you’re familiar with this vicious cycle. In other words, the end goal should not be to increase market share. The end goal should be to keep the client-first DNA in your organization, even with an increase in market share.

The satisfied customer paradox is the biggest threat for incumbents

More than ever, incumbents are under attack from agile start-ups. It’s becoming increasingly hard to defend themselves against the rate of change those smaller companies bring. In addition, compared to a decade ago, the market is more open to welcoming new players. Too many incumbents settle for an average customer relationship. Their key focus is on managing financial indicators and customer relationship indicators often come second. Making the customer relationship your priority is the only way of averting the danger of a growing market share based on satisfied customers from the past.

Stay small, even if you are big

How to break the satisfied customer paradox? Well, there is only one way to do it: stay small, even if you are getting bigger. Try to organize your company in such a way that employees are willing to keep going the extra mile for your customers. It’s about having a back end that is aware of this approach, it’s about giving your front end staff the freedom to help customers even if this means a short term financial loss and it is also about installing a reward system based on customer satisfaction.

In this post, I would like to share four approaches that can help companies restore the emotional relationship that may result in loyalty.

1. Customer involvement

When people feel involved, they feel part of a team. The moment people start to think about a certain group, organization or company in terms of ‘we’ and ‘us’, it implies they view themselves as members of this group. Speaking in terms of ‘we’ is always a sign of commitment. Too many people think customer involvement is only about the co-creation of advertising or products, but it goes a lot deeper than that.

Customer involvement can come about in several ways:

• Crowd funding: when people are co-investors in a certain company, there is a greater sense of belonging from the get-go. It is a form of financial customer involvement.
• Crowd service: customers can become service agents for other customers. It allows companies to increase the service offering at a lower cost. At the same time, it creates a sense of belonging and this, in turn, inspires loyalty among the participants.
• Crowd sourcing: customers are actively involved in creating new insights for the company’s management. This can lead to the optimization of existing products or it may prove helpful in the creation of new products. Crowd sourcing is not just interesting for optimizing products and service, it may also help create content for other customers.

2. The element of surprise

In general, loyalty programs use a very traditional approach. Most of them still implement the ‘buy 10 get 1 for free’ idea. If customers spend enough money they receive a financial reward. As mentioned above, this doesn’t lead to loyalty but to bargain hunting. Panera Bread uses a different approach. In fact, Panera Bread has one of the more successful loyalty programs in the US. Their approach is based on the element of surprise. With the Panera loyalty program you never know what you’ll get. It could be a small present during your next visit to a store but it could also be a hefty discount on a new product. Their consumers really appreciate the serendipity effect. In a recent blog post, Gen Y expert Joeri Van den Bergh wrote about this trend. He concluded that Gen Y consumers are really getting into the serendipity aspect of the relationship. As a brand, we need to surprise our consumers on a regular basis.

3. Excellence in details

Customer loyalty is related to the level of customer satisfaction. Too many companies have to settle for 7.2/10 in their satisfaction scores. Companies still manage their customer relationships in silos. The polite word for silos is touch points. Companies manage the various touch points but forget to do the same with the interaction between touch points. A recent McKinsey study showed that the lack of interaction and consistency between channels leads to dissatisfaction. Loyalty is the result of excellence in details. Most companies manage their basic product or service well but they lack control of what lies in between.

4. True relevance

The new loyalty will come from real value. Customers will be drawn to companies that are able to offer personalized and real-time products and services. Just think of the current hype around Uber. Uber offers a new and highly personalized real-time service.

The brand paradox

On the one hand it’s no surprise that brand loyalty is on the wane. Apart from the odd exception, top brands aren’t able to retain their status as market leaders as long as they used to. A loyal customer base can melt away in twelve short months. Many of Nokia’s loyal customers switched to Apple or Samsung without a second thought. On the other hand, consumers do tend to attach themselves to certain brands. Research shows that consumers are prepared to commit to up to five brands as longs as they provide a clear added value. Consumers have an emotional attachment to these brands. As a result, loyalty to these brands is almost self-evident. In other words, there exists a certain brand paradox in the world today. People like specific brands while putting less trust in brands in general.

Why customer loyalty is down

Several causes explain the decline in customer loyalty:

1. Companies can’t  keep up with rising consumer expectations. In recent years, declining customer  loyalty has been an issue for most companies in spite of heavy investments  in service improvement. This is because the consumers’ pattern of  expectation is evolving even faster. Consumers don’t compare a company to where they were a year ago; rather, they compare companies to the ‘best-in-class’. If Amazon doesn’t question a faulty delivery and deals with the problem  immediately, consumers will expect the same of their local supermarket. The best examples create expectations across all sectors. Companies with a  certain history and an older infrastructure have trouble coping with  today’s rate of change.

1. Loyalty programs are missing their mark. Many companies thought there was a shortcut to creating customer  loyalty: the loyalty card. However, all the latest studies agree that loyalty cards slash profit margins on existing customers. Instead of  creating loyalty you’re really losing money. Loyalty is not for sale but  must be earned.

1. Digitization makes everything transparent. The world is becoming more and more digital. The fast adoption of smartphones and tablets has further enhanced transparency. Today, more than half of the consumers use their mobile devices to compare prices  while shopping. If a company or brand doesn’t provide a clear added value then consumers will shop for price. The online world has made price transparency very accessible, a trend that spells danger for any company  out there.

1. Focus on individual  touch points instead of on the customer experience as a whole. Companies are divided into various departments, with every department being responsible for the customer’s experience of one specific aspect of the customer relationship.   There’s hardly any contact between the sales and after sales departments  and invoicing is housed three floors down. Few companies take a holistic approach to customer relations, with just one person in charge of every  aspect of the customer relationship. In a recent article in the Harvard Business Review, McKinsey claimed that disloyalty is caused by a lack of understanding across the various touchpoints rather than by customer  dissatisfaction with a single interaction.

1. No unique  relevance to consumers. When customers are disloyal, they are really saying that a  product or service was not relevant enough for them to remain a customer  there. The product or service in question didn’t stand out from the  competition. In recent years marketers have launched scores of      innovations, often a new flavor or packaging. Too little thought is put into the role a brand has to play in consumers’ lives. The relationship is too rational in nature instead of emotional.

Everything becomes a commodity

The five causes of declining customer loyalty described above all point in the same direction. Digitization has created a rift between the consumer’s expectations on the one hand and what the average company is offering on the other hand. The ever-increasing transparency is turning nearly every industry into a commodity industry at a record pace. The problem with a commodity industry is its high focus on price. Some sectors even find themselves competing against a free alternative. For instance, free online content is becoming the bane of the printing industry. When paying solutions no longer have an edge on the free alternative, the outcome is predictable.

The solution: back to basics

According to popular theory, there are two ways to escape the commodity market. On the one hand a company can work more efficiently, making it possible to sell its products cheaper. On the other hand, you can offer a unique added value, thereby reestablishing differentiation so you can charge higher prices again. In today’s society, though, this theory should be revised. Rather than an ‘or’ question, we are now looking at an ‘and’ question. If companies are to survive, they will not only have to work more efficiently; they will also have to build a unique added value for their customers.

Organizations should explicitly ask themselves: what is our place in our customers’ lives? What is our relevance to their lives? The answers to these questions provide the basis for devising a new method of approaching customers.

It all starts by approaching customers with a transparent story that goes beyond mere product information. In addition, modern consumers expect companies to act properly on three levels. Ranked in order of importance according to the customers themselves, these are:

1. Treating customers well: customers primarily expect an excellent and proper treatment.
2. Treating employees well: companies that exploit their employees or use child labor can get into trouble.
3. Doing good for society: customers like companies with a sound world view. While      they don’t expect companies to wear a cassock, they do expect them to make a difference in a way befitting the company’s identity.

To meet this expectation, the story needs to be the same on all three levels. A company like Ben & Jerry’s is a prime example. They make delicious, high-quality products. Their employees and customers are treated the same and meanwhile they’ve started working according to fair trade principles. The overall picture fits, which enhances Ben & Jerry’s credibility on the market. No wonder Ben & Jerry’s boasts an above average customer loyalty.

Conclusion: customer loyalty is declining and we’re not going to solve it through marketing. The solution lies on a deeper level

This means you can’t boost customer loyalty through a simple marketing trick. A new customer program is not the answer and a new ad campaign won’t solve the problem either. The solution is not to be found in the marketing department (alone). Instead, we should look to the company’s top echelon. Those on the highest rung of the corporate ladder should have a clear vision of the added value their company has to offer and they should be able to translate that vision for their employees and customers. Getting your story straight on every level is the first step towards reaffirming customer loyalty.

Purpose-driven Culture

Clear & Inspiring Purpose

Most CEOs understand the power of purpose. A purpose is a “higher goal” for the organization. Starbucks says it best: “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time”. Starbucks is not about selling coffee but about bringing people together. When you visit the company, this mentality is palpable in every corner of the building. Every employee breathes this mentality.

Yahoo doesn’t say: “We make apps and we make people happy”. Instead, Yahoo says: “We make the consumer’s daily routine easier and more enjoyable”. Evernote doesn’t say: “We make software so you can make notes”. Instead, Evernote says: “We make our customers more efficient”. At a product launch, none of these companies talk about the product itself. What they do talk about is their philosophy. A philosophy projects passion and enthusiasm. It ties the staff to the organization. Thanks to the philosophy, employees are glad to go the extra mile.

Everybody Lives the Purpose

A purpose is great but it is worthless when it is not carried by the staff. We felt this clearly during practically all of our visits. The people working for these companies are proud of what they do and they believe in their employer’s purpose. No one makes products in Silicon Valley, they are all changing the world. We were all affected by the drive, the passion and entrepreneurship these people exhibited. Purpose and passionate staff are motivating factors. Customers feel this and it incites them to buy. Yammer is the perfect example. The founder of Yammer, Adam Pisoni, gave us a fantastic presentation about the organization of the future. At no time did he mention his product. Instead, he shared his vision and his passion. The result was wonderful: nearly everyone was interested in buying the product. If he’d given a product demo, the outcome probably would have been less spectacular.

Details and Passion

The power of a company is in the passion and the details. Details make a crucial difference in the customer relationship. Every organization has major processes to keep their customers satisfied. However, these processes often ignore the little details and the interactions between the various contact moments. Customer satisfaction is made or broken by details.

Besides details, passion is the prime ingredient of success. Self-confidence, pride and passion are contagious. We visited companies big and small but they all shared the same pride and passion. In fact, we found that the more passionate they were, the more enthusiastic we felt about our visit.

Modern organizations are faced with huge challenges. The external clock ticks faster than the internal one. Consumers’ attitudes towards companies are becoming increasingly demanding. The world is evolving at breakneck speed. A modern company has no choice but to adapt to this evolution. Darwin said that “it is not the strongest of the species that survives, nor the most intelligent, but the most responsive to change”. Today that Darwinism is being taken to extremes.

The way to adapt is: customer first without compromise! Build an organization that can deliver on that promise: a network organization driven by a strong sense of purpose.

Check out our full story:

But the real question is this: can it be done on a larger scale? Does modern technology allow companies to build a meaningful and emotional relationship with multiple customers? Well, the sky is the limit where technology and humanity meet.

Although I must admit that real-life examples are few and far between. Let’s just say this blog is a naive dream of mine.

Customer loyalty is declining

Considering the sharp decline in customer loyalty in recent years, it would appear that a dream is all it is. In his book “How brands grow”, Sharp even negates the classic 80/20 rule. The golden marketing rule that 20% of the customers generate 80% of the turnover, no longer applies. The ratio has shifted towards 60/40 and there are signs pointing to a 50/50 rule for the future. The hard truth is that growth is generated by disloyal customers instead of by loyal customers.

So much for my dream…

Let’s take one step back and wonder why customer loyalty has become such a rare commodity. Is it the consumer? Or have companies been doing everything to alienate their customers? Recently I wanted to book a room in a hotel. I stay there several times a year but usually just for one night. I was told there were no more one-night rooms available and I had to book two nights. This is an economic choice and while I understand their motivation, I was still less than pleased from a customer point of view. As a result, I opted to stay at a different hotel. The hotel put an end to my customer loyalty. This often happens with other companies as well. They keep track of how many new customers come on board but they ignore how many have jumped ship in the meantime.

Many companies don’t understand their customers’ infidelity. After all, they have a loyalty program, don’t they? It’s called a loyalty card. Sharp’s research teaches us that the average loyalty program has little or no impact. Customer loyalty is not earned through loyalty programs.

What if your best friend becomes a customer?

Let’s revisit the question from my dream: Can customers become friends in a world of declining customer loyalty?

To find the answer I’d like to turn the question around for a minute.

What do you do when your best friend becomes a customer?

The answer is simple: you do your very best to make the customer experience enjoyable. Quite possibly you’d try just a tiny bit harder for your best friend than you would for an average customer. After all, your friendship and reputation are on the line. It adds a personal dimension.

What characterizes a friendship?

Friends are all about having fun. You also share loads of everyday anecdotes and probably a few secrets as well. It’s fun to surprise good friends from time to time. And, if necessary, you ask them for advice on decisions great and small.

“Can a company build this kind of rapport with a customer”, you ask? Of course they can!

You can even hire specialized agencies for this type of thing. Just ask your creative agency to provide customers with entertainment and the odd surprise. Of course, we also share our daily content with them. Through modern research techniques we even ask their advice.

Turning customers into friends is easy this way. Or is it?

No, it’s not. Keep in mind that friendship goes way beyond what is described above.

Friendship is a deep emotional connection between people. You build memories with your friends. Friends help you without asking anything in return. Friendship is about spending time together. Friends forgive each other’s mistakes and shortcomings.

Can a company build this kind of relationship with a customer? It’s difficult but it can be done. People don’t have all that many friends. Companies can’t become friends with all their customers but it’s still a worthwhile investment. What would life be without true friendship? So how about a company then? What opportunities and quality moments will you miss if none of your customers are your friend?

Doing business from and to the heart

Building a strong emotional connection with your customers is one thing you can’t outsource. It’s about who you are as a company and not so much about what you do. Ben & Jerry, the founders of the eponymous ice cream brand, undoubtedly have friends among their customers. When the Dutch branch founded an online community with B&J fans, both founders decided to pay them a visit. The first 150 fans got to meet Ben and Jerry in person. They clearly thought it was worth investing time in a small group of fans from a relatively small market. Now that is doing business to and from the heart. It’s no coincidence that Ben & Jerry’s is one of the world’s top ten brands when it comes to customer loyalty.

Doing business from and to the heart is an intrinsic quality that a company either has or lacks. It’s extremely difficult to learn. Compare it to someone who’s on a diet versus someone with a healthy lifestyle. When you’re on a diet, it’s so easy to slip back into your old behavior in the face of temptation. Someone with a healthy lifestyle has no trouble whatsoever to continue down the chosen path and simply ignores temptations.

Fortunately some people manage to turn their life around by switching from a diet to a healthy lifestyle. Change is possible but it’s hard. While you can learn how to do business from the heart, it’s very difficult if it’s not in the leaders’/owners’ genes.

Only for small companies?

When you think about this approach, it appears as though this philosophy only applies to smaller companies, like my father who became friends with an SME owner. It’s probably easier in a smaller organization simply because they tend to work more from the heart than from Excel.

Still, some larger companies succeed in doing business this way. A prime example would be Coolblue, the fast growing e-commerce player. This online player is able to project a very human image. Conversations on social media are very personal. The messages on the packaging are emotional. Employees explain how the company’s products work in videos on YouTube. They open offline shops to further improve their relationship with the customer. Very few pure online players decide to open an offline shop with the sole purpose of enhancing customer satisfaction. Today, Coolblue boasts an above average customer loyalty. Doing business to and from the heart generates more customer loyalty than the rational approach.

Doing things together

Offering good customer service from the heart is an important step in building a friendship with your customers but you also have to take it one step further: you have to do things together. My dad and his friend became friends by working on the same project together. When the craftsman was working in our house, my dad would help him during weekends and time off. This collaboration is what sparked the friendship. Involving customers whenever you can is the key to turning a satisfied customer into a friend.

The words “crowdsourcing”, “consumer collaboration” and “co-creation” definitely ring a bell in the corporate world. Unfortunately it’s often the wrong bell. Co-creation usually means that consumers get to play along briefly in a marketing campaign and this purely for PR purposes. While there’s nothing wrong with that, it’s not what I would call a structural collaboration.

In order to become friends, you have to actually work together. Threatless allows its customers to design its entire product catalogue. Telecom player Giffgaff has its customers develop every aspect of their customer service. With this type of collaboration, the customer is on a par with the company. In these two instances, collaboration is more than just an afterthought.

Tupperware was probably one of the first companies to really get this psychological approach. At Tupperware parties, the customers do just about everything. The customers are the event manager, they take care of the catering and the logistic follow-up… As a result, those customers often feel they are an integral part of the company.

Friends with benefits

Can customers become close friends? The answer is unambiguous: yes, they can. It’s not easy, though. Few companies find the right recipe and that is exactly why average customer satisfaction scores are dropping.

Those companies that succeed in building a friendship with the consumer get to reap the benefits. Brand identification research conducted by InSites Consulting has shown that the emotional bond between company and consumer gives rise to a number of beneficial side effects: consumers buy more often and in larger quantities, they are more loyal to the brand and they mention the brand more often. It’s a friendship with benefits.

A dream?

As I said at the start of this article, this story is probably nothing more than a naive dream. Still, I can’t help thinking we should try to do business from the heart instead of with our minds a bit more often. Even if the results are not encouraging, it will at least make your own life a bit more enjoyable. Good luck!