Customer loyalty cannot live by customer service alone

by Pam Mitchell

Many of us began our careers on a strict diet of quality is free and the belief that excellent customer service was the bread and butter of business success. We were taught that if we could only maintain the best quality and service, we would attract the most loyal customers. Rife with indignation over that lost order when our quality and service were superior (in our minds), we began to understand that the formula for customer loyalty was not so simple.

The retail industry provides a telling example of this quality and service phenomenon. The top 20 general merchandise retailers in 1982 were mostly department stores that promised service and the highest quality merchandise. But something happened; the discounters began to climb that list and push the full-service retailers lower.

What happened? Many discounters had upgraded their merchandise. Department stores began to reduce their staffing to fund the discounts needed to drive customers into the store. Many downgraded their merchandise to compete with the market-snatching discounters. The line between full service and discounter narrowed. This blurring occurred because the marketplace voted with their dollars. Their votes said, “Our value definition is more complicated than quality and service. We want buying power!”

This phenomenon is not unique to retailers. Companies across the fruited plain are changing their value propositions to meet customer demand. If Webster’s decided to add value proposition to the dictionary, it might read, “The sum total of goods and services offered to the marketplace at a specific price.”

Market leaders rise and fall as each succeeds and fails to provide the marketplace with exactly what it desires. Quality and service are no longer adequate to describe the customer value equation. It has many variables.

Features
What features does our product or service have? Is it a superior performer in the market place? Are customers willing to pay for superiority? Does it have the exact features the marketplace wants? Does it have extra features for which customers are not willing to pay? How easy is our product to use?

Place
Do we take the product or service to the customer or do they have to come to us? Does our value proposition change if we add a delivery feature? Do we have enough locations? Too many locations? Do we have distribution in all of the right areas? Is our location more than pleasant; is it fun?

Time
Time is money. Do we waste our customers’ time with warranty claims, complicated ordering processes or long lines? How many times does our customer need to call the help line to get their online banking account set-up? Can we help our customers manage a just-in-time schedule? If we can save our customers time, perhaps they will give us more of their money.

Reliability
How reliable is our product or service? What are our warranty costs? Our reliability is reflected in repeat business. How many customers come back? Does our service work the same way each time? Does our reliability factor waste our customers’ time, or cost them money? How long will our product last?

Feel
The feel factor refers to the marketing aura that surrounds our product or service. Think of Harley. Think of Jaguar. Think of the hippest restaurant in town. Sometimes it just feels better to own one product over another, or to be ‘in’ with the ‘in’ crowd. What kind of marketing aura or buzz are we creating around our product or service?

A select few retailers are just catching on to this, as they create experience stores. Jordan’s Furniture in the Boston area is the master at the feel factor. When you walk into their 110,000 square foot store in Natick, Mass., they greet you with Mardi Gras beads. The kids hop in a Bourbon Street taxi/stroller. You don’t see any furniture when you first walk in because you have entered a French Quarters street scene. When you walk through one of the building facades, you walk into a different show room. At the end of this fantasy street, there is a life size, Disney-style puppet show every hour. There are snacks at The Streetcar Named Dessert, and oh yeah, great furniture too. The marketplace has rewarded Jordan’s for this experience with the highest revenue per square foot in the furniture industry.

Sometimes, it just feels good to do business with one vendor over another. How does it feel to do business with you?

Price
In the '80s, many businesses thought they could just add more features and command a higher price. They soon found themselves losing business to leaner, lower-priced suppliers. Market leaders have a good understanding of the features/price relationship desired by their customers.

How do we better understand our marketplace values?
Market leaders will always and have always been those companies that offer the most value as defined by the marketplace. They are able to offer the most value either because they are very lucky, or because they have established a dialogue with the marketplace so that they understand the constantly changing customer value definition. This dialogue, along with the ability to deliver value, is the key to market leadership.

Customer dialogue can take on many forms. Some companies have customer feedback databases. Each salesperson logs in reports from customers and prospects. How does the product work? What new features would they like to have? Why did they lose a large order? Was it product features? Was it timing? Was it price? This data helps them to understand how customer decisions are made and to become a better supplier.

Some companies have found focus groups or customer symposiums to be their best method to understand customers. A customer symposium is the B2B world’s version of the consumer sector’s focus group. Suppliers invite 10 to 20 customers and prospects to an annual symposium to discuss the challenges they face and to tell their supplier how to better support them. 

The purpose is two-fold. Attendees get to share best practices with their counterparts in other companies and discover some great ideas. The sponsoring organization learns more about the inner workings of the markets that they serve. Customer symposiums can be a cost effective market research tool for B2B companies where each customer represents a large portion of their business. Symposiums give companies an accurate understanding of the value definition in their marketplace. This puts them ahead in the competitive race.

We must always ask ourselves: Do we truly know what our customers value, or do we think we know what our customers value? Is our information based on conversations with our customers or based on our opinion?

Once we know what our customers value, we cannot keep this information a secret. Everyone from the shipping clerk to the president must have the same understanding of the customer value definition. Likewise, the entire organization must be committed to the proposition that creating value is everyone’s job.

The only reason that customers choose to do business with us is because we enhance their competitive position in the marketplace. When we fail to do so, they will find another supplier. And the voting process for the market leader continues. Customer loyalty does not live on quality and service alone. In order to earn customer loyalty, we must understand their needs and deliver more total value than anyone else.

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