Getting to loyal: defining loyal is easy. Getting there is a different story.
ASSOCIATION MANAGEMENT: What are some of the simple things that organizations can do to create loyal members?
Reichheld: The most important thing they can do is to be very clear about who the target member is--and not kid themselves into thinking that they can be all things to all people. Then they must focus their energy on attracting and retaining those target members.
Enterprise Rent-A-Car is an outstanding example of this. The company's focus is the home rental-car user, people who need a rental for recreational purposes or when their car breaks down. Enterprise has dominated this market by providing this target audience with extraordinary service and value. Now, as they expand into the airport segment, they're getting new customers to try them [because of their established reputation] without having to spend unusual amounts on marketing. And they'll focus on that market until they've dominated it.
What organizations haven't done is create a measurement process that makes it clear when promoters--loyal customers who promote the company to others--are being created and when they're being destroyed. The best organizations that I run into regard 80 percent or more of their customers as promoters. But the average is closer to 30 or 40 percent, and that's why most organizations don't grow.
Most organizations--corporate or nonprofit--have no idea who their loyal customers are. They don't even have a definition of loyalty. You can figure out who your loyal customers are by asking one simple question. And by gauging members' response to that one question, you can figure out if you've got loyal members, passive or indifferent members, or detractors. That question, for most organizations, is, "What's the likelihood that you would recommend us to a friend or colleague?"
Track this information, and be very clear about how many loyal members you have and what's creating loyal members. And when they stop being loyal, get on the problem and fix it right away.
This should be a steady, e-mail-based process by which you question your membership at least twice a year, probably quarterly, about the likelihood of their recommending you to a friend--because that's how you grow. It's not brilliant marketing or recruiting strategy or sales. It's turning members into promoters, who then become your marketing and sales force.
Bell: You want to solicit customer involvement and participation in ways that show respect. For example, Merrill Lynch asks loyal customers for help with sales calls.
Second, find ways to personalize the experience, those little, tiny attentions to detail that only take a second and don't cost you anything, but are an opportunity to say, "I noticed that you like this."
Third, assume what the customer says is the tip of the iceberg, then ask questions to learn what is beneath the surface for more powerful responses. And fourth, identify creative ways to enchant the customer. Pet-friendly Four Seasons Hotels and Resorts puts food and water bowls and pet toys [with the Four Seasons logo] in guest rooms for travelers with pets.
ASSOCIATION MANAGEMENT: Once they have a base of loyal customers, what are the top achievers doing to reward them?
Reichheld: The best thing you can do to reward the loyal member is to give outstanding value and service. Too many organizations focus on bells and whistles and add-ons instead of doing a fabulous job of delivering on their initial offers. Deliver brilliantly on your core promise.
Bell: The top achievers are providing more customized service, giving customers up-to-date information, and making members into insiders. They are providing valued experiences that reinforce buying decisions--things such as clubs, gatherings, and elite-status or specialized affinity programs.
Harley-Davidson, with its Harley Owners Group, is one of the best examples. It offers picnics, get-togethers, rides, all kinds of things aimed at people who own Harleys. BMW has started a club for MINI Cooper owners. When you order a MINI, you get a birth certificate with a number and the car's date of birth on it. Go to MINI's Web site and type in the number, and you can watch your car being built online. Jack Daniel's has tailgate parties associated with major athletic events, but you have to visit its Web site to learn about them. The company builds an e-mail list of loyal followers, then lets members know about a ballgame where it's going to have a party. It's any kind of affinity program that says, "We're going to take special care of customers who are loyal to us."
ASSOCIATION MANAGEMENT: What's the one sure-fire thing an organization can do to turn off a prospective member?
Reichheld: I would say that the worst thing is for the customer to have a lousy onboarding experience, meaning that either the initial promises aren't met or the customer is ignored after the first big come-on. Your organization must be clear about how to measure relationships and must be committed to fixing failures in service, or the negative experiences will fester for years.
Bell: [The worst thing is to] make a promise that is important to the customer, then fail to keep it or fail to give warning that it is not going to be kept. Professor Leonard Berry of Texas A&M University has done a lot of research on service quality and what most angers a customer when things go wrong. His research shows that [customers are most upset] when you betray their trust, when you demonstrate a lack of reliability, when you make or imply a promise--particularly a promise that is important to the customer--and then you don't keep it or you don't renegotiate it.
Customers can handle a broken promise if you give them a warning, if you say, "We promised this would be done in two hours, and we just discovered it's going to be three." You've given them a warning.
ASSOCIATION MANAGEMENT: How do you preserve customer loyalty in the midst of organizational, personnel, or leadership changes?
Reichheld: In the face of change, communicating with your customers is the most important thing to do. Make sure that service levels with your core customers don't drop. You have to be committed to ever-better levels of performance, and the way you achieve that is by publicizing the outstanding service performances of your individual employees and teams. If everybody sees, everybody fixes the problem.
Bell: You've got to tie the customer's experience to a team of servers, all of whom know the customer and the customer's unique requirements. Have a clear service vision that is not anchored to who is in charge. Instead, tie the customer to a team that understands his or her needs. That gives the customer confidence in times of change.
A great example of this is South-west Airlines. People thought that when [CEO] Herb Kelleher, the guru who created Southwest Airlines, retired, the company was going to be a different place. But instead of building who they are in terms of service around a person, they built it around a service vision that says, "This is who we're striving to be, and this is the culture we're trying to create." And that vision supersedes any one person.
ASSOCIATION MANAGEMENT: How do organizations deal with the customers they don't want?
Reichheld: The best way is to not bring them in the front door. And how you do that is by not giving incentives to [an employee] who simply brings in a body. Instead, reward those who bring in customers who turn into loyal members. Once you've recruited a customer, you really are obligated to give him or her a good level of service and live up to your promises.
Bell: There are customers you may not want--those who bring emotional or physical costs that greatly exceed the return they provide (or will ever provide). Send them to the competition. Let the customers know, sincerely and honestly, that you are unable to serve them in the manner they desire and that they might do better to go elsewhere [to get their needs met].
ASSOCIATION MANAGEMENT: How can executives hire smart to fill their associations with employees who will do their organizations justice?
Reichheld: Human loyalty, the emotional side of loyalty, is developed by frontline employees in their interactions with members. Therefore, frontline employees must have the right values and rewards for treating customers well. Most organizations don't even get the basics right. They have telephone representatives who are evaluated based on productivity--how many phone calls they [answer]. They require a minimum service or quality standard, and there's very little that goes beyond that minimum.
On the other hand, eBay gets daily feedback for every one of its service representatives from a large sample of customers, and then evaluates its representatives based primarily on this feedback. That's how they get their bonuses; that's how they're promoted. So, the service representatives are thinking, "How can I make my customers feel great about this experience [with eBay]?"
Once you have an effective dialogue with customers, listen to them, and gather the insights from that interaction so that the organization can learn and improve. There's a two-way dialogue that needs to take place. First, the frontline employees must be talking to your members in a constructive, respectful manner. Then, those same employees need to talk with the internal organization about what customers really need and how the organization should consider delivering an improved value proposition [for its members].
Bell: Every employee should be a recruiter, always on the lookout for great servers--for example, at hotels and restaurants. Organizations must develop service-selection processes that involve behavioral testing, not just the traditional interview. Check references carefully and probe to learn about an applicant's service personality and commitment to customer service.
One example of a company that's doing this well is Ritz-Carlton. They make sure that all of their employees have business cards, and they're always looking for great people. When a Ritz-Carlton employee finds a great waiter or flight attendant, he says, "You have the kind of attitude we're looking for. Here's my business card; give me a call. I'll connect you with the folks in our human resources department."
The other piece is looking for the right kind of service attitude. During the interview process, for example, use role-playing: "A customer just walked in. How would you handle this situation?" You can't do this through traditional interviews. You're not looking for the right answers; you're looking for the right attitude.
Douglas Vaira is a former senior editor of ASSOCIATION MANAGEMENT. E-mail: firstname.lastname@example.org.
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|Date:||Feb 1, 2004|
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