report

Commentary

Engagement: Key Customer Loyalty Indicator

While the presumption has been that satisfied customers will remain loyal, customer satisfaction can no longer be relied on as a metric to predict loyalty. Yes, customer satisfaction is a component of loyalty, but it is not the totality. For instance:

  • 40% of satisfied customers switch suppliers without hesitation (Forum Corp).

  • More than 60% of defecting customers indicated they are satisfied right before they left (BusinessWeek).

  • 65%-85% of customers who choose a new supplier claim to be satisfied to very satisfied with the former supplier (Harvard Business Review).

  •  85% of customers claim to be satisfied, yet willing to switch to other suppliers (University of Texas).

 As this research shows, one can be completely satisfied with a company’s product or service, but chose not to continue to do business with it.

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If satisfaction is not an effective metric to predict loyalty, then what is? Engagement. The stronger and deeper a customer is engaged with the brand, the more loyal she will be.

Look, for example, at such beloved brands as Apple, Nike, Nordstrom, Ritz Carlton, Harley Davidson, and Trader Joes. Why do these brands have such loyal customers? Because they realize that loyalty is often determined by the strength of the relationship and the interactions throughout a customer's lifecycle that affect it. Rather than focusing on discrete programs, practices or initiatives, these brands create experiences that allow them to build deeper, more emotional, more meaningful and sustainable bonds between the customer and their brands.

They realize that engagement is the journey … and loyalty is the destination.

As our company explains in its just-released white paper, “Engagement is the Journey, Loyalty is the Destination,” developing an engagement strategy begins with identifying the customers’ expectations from the brand. What are they looking for when they reach out to a brand? What do they want the brand to deliver? It is an accepted belief that when customers buy products or services, they expect quality delivered with good service at an equitable price. How experiences with a brand make a customer feel -- which is critical because more than 70% of consumer loyalty and spending decisions are based on emotional factors -- is what sets it apart from the competition.

As such, we have identified several key “feelings” that engage the customer, solidify the connection, and move the customer along the loyalty continuum. These drivers include:

  • I want to feel valued by the brand: Customers want to know that they can expect a company to go out of its way to support their needs and that the company values their business.

  • I want to be able to trust the brand: Customers want to know that a company is credible, honest, sincere and transparent.

  • I want the brand to be relevant in my life: Customers want a brand to integrate into their lifestyles.

  • I want a personal relationship with the brand: Customers want the brand’s message, offers and coupons to be tailored to their needs.

  • I want the brand to be humble: Customers want to know that brands are listening and are genuinely working proactively to fix the problems.

  • I want to feel part of the greater good: Consumers want, are willing to pay more, and willing to go further to buy products or use companies that support a cause.

As Howard Schultz, founder of Starbucks, is quoted as saying, “The art of marketing today is the ability to build this emotional connection. I am not going to tell people where they should be spending their money, but I would advise that all marketing be authentic, and relate to reaching into people’s hearts to let them know that you want to be part of their life.”

This is what creating customer loyalty is all about.

Mark Johnson, president and CEO of Loyalty 360, presented “Engagement is the Journey, Loyalty is the Destination" at Engagement Expo 2011. Taking place Nov. 6 - 8 at the Westin Stonebriar in Dallas, Engagement Expo examines the role engagement plays in the journey to customer loyalty and advocacy.

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