How to improve customer loyalty.

customer loyalty

Customer Loyalty Post Summary:

  • Capturing customer loyalty
  • How keeping customers improves business value
  • Four simple ways to increase your customer experience

Customer Loyalty

Increasingly the quality of the customer’s total experience is being recognised as the key differentiator in capturing customer loyalty. A recent survey of the customers of 362 companies revealed that a mere 8% of customers described their experience as superior contrary to 80% of companies that believe the experience they have been providing is well above average!

There is clearly a huge discrepancy between what customers describe and perceive, and what companies believe they are doing.

The question is how to close the gap.

It has become clear to many managers that it is no longer enough to have a great product with great functional features and good quality. What is needed is to provide a great customer experience.

The fact is that customers cannot but have an experience! They will have one whether you want them to or not. The question really is how random or how managed the experience your company is delivering and how the discrepancy between what customers perceive and what you believe your company is delivering impacts the customer experience.

Below are 4 simple ways to bring in more customers and increase your customer experience.

1. Good products are not the same as good experience

What does customer experience mean? How does it capture customer loyalty ? Customer experience really means the take-away impression formed by people’s encounters with products, services, business, and the physical surroundings. It is a perception produced upon consolidation of all the sensory information provided.

Take Starbucks as an example. Customers are not just buying a cup of coffee there. What they see (attractive in-store design, merchandise display, and barista’s enthusiastic performance with flare), hear (classic or jazz music), smell (coffee aroma), taste (hand-crafted coffee with high quality coffee beans, each of which has a story conjuring up an image of the location), touch (the edge of countertops and the texture of the slate floor) all contribute to the experience of being in an oasis that one can relax, enjoy, and contemplate.

As people’s senses are directly linked to their memories and tap right into their emotions, much of what is called the “total experience” is simply the sub-conscious, unconscious, or emotional. The thing to bear in mind is that ninety percent of purchasing decision is driven by emotional needs, rather than the functional attributes of the product. These emotional needs derive from what is called “total experience”.

Consequently, customers and companies need to provide customers with some kind of emotional linkage or emotional bonding with their product or service. This in itself can be a great barrier to competition – and one might take the resounding success of people’s attachment to their Ipods as an example.

2. Creating the experience

Capturing customer loyalty is about the experience. How does one create the customer experience that will bring the shoppers back again and again?

The experience journey really starts with the “pre-purchasing stage”. Prior to purchasing and consuming products and services, people have certain expectations. This is based on word of mouth, past experience with similar situations or indirect encounter with the companies – such as a visit to a web page – which will automatically form expectations.

The second stage of the experience is during the consumption, when it is about how the experience is perceived. This is a crucial part in shaping the whole experience.

The last stage comes when, having purchased and consumed the product, customers are ready for the next purchase. Whether they purchase the same item again will largely depend on their past experience, as they recall it.

Here comes the disconnect. We all know, through our experience, that what one expected is not necessarily what one experienced. Additionally, what one remembers, does not necessarily truly reflect what one experienced. How can companies manage this?

3. Managing expectations and perceptions

The answer is about managing expectations.

One thing companies can do is to help set realistic expectations for customers, through clear communication and through physical, tangible cues. Another is by managing the “perceived experience”. And in order to do this, one needs to look at the “five effects” from sensory, improved sequence, duration, system, to people effects. For example, the system effect means that the process, technology, and system should be easy for customers to understand and easy to use.

4. Increase the customer experience

The top driver for the purchasing experience is that people want to feel special. If you want to improve customer loyalty you need to manage the tangible and intangible.

Businesses need to understand and manage expected experience, perceived experience, and remembered experience, and try to minimise the gap. To contextualise it, managers need to pay attention to the customer encounters in terms of transactional encounters, interactional encounters, and physical encounters. Courteous, responsive, smiling, caring front-line employees will inevitably make the difference.

 

Dr. Winter Nie is Professor of Management at IMD. She is the regional director of IMD Southeast Asia and Oceania.

 

 

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