A Case Study On How Bad Profits Can Destroy Your Business

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Business is about profits. Yes, we all agree on this. Yet what we won’t all agree on is that some profits are really bad. To see the truth of this you just have to look at how some companies go about their business — and the way they treat their customers, how they make them feel and the negative word of mouth generated.

To put this into context I have put together a mini case study. I was inspired by the pain, frustration and anger I saw my wife go through with ADT Security and my absolute pleasure in dealing with Amazon.

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15 Reasons To Start A Movement, Not A Campaign

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I get this a lot: “We need to improve our customer loyalty and the quality of our customer relationships. Michael, we need a campaign that will get this right.”

My answer is always the same: “If you want to get this right you must start a movement, not a campaign.” I am always asked what the difference is.

Well, here are 15 differences between a campaign and a movement and why you need to start one right now:

1. Loyalty versus awareness

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Your Customers Are NOT Dumb?

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Walter Pike makes two very good points in his 2010 Bizcommunity.com trend report about the two assumptions that traditional marketing is built on:

  1. Most marketers think their customers are ignorant
  2. That these ignorant customers believe what they are told

It’s a point well made. As a consumer you know you’re not ignorant, you don’t believe what you are told. But as marketers we forget this and believe we need to build customer loyalty by trying to control the conversation. We believe that our marketing research defined marketing strategy is spot-on. Hogwash — and customer loyalty pays the price.

Here’s the truth about today’s marketing:

  1. What other people are saying about your brand is more important than what you say about it
  2. Most marketing research is hogwash. Most purchasing decisions are impulsive acts and are based on sub-conscious desires.

I can only wonder how much advertising money has been flushed down the toilet as these marketers attempt to push past the clatter to try and develop brand awareness as opposed to customer loyalty.

I know when I was at university I was taught this product driven approach to marketing. This system belief was supported by the large multinational companies are work for is the brand manager. The truth is the product driven marketing strategies are no longer relevant. Today’s marketing strategies have to be…

Customer Powered Marketing Strategies

One my favourite marketing authors is Seth Godin. Like most people I love his books. His ideas are expressed simply and clearly. If there are two things that I have learned from these books it is this

  • To be different you have to be remarkable. Good enough doesn’t cut it anymore and being mediocre doesn’t build customer loyalty.
  • You can no longer broadcast to customers. It is time to really talk to each other with out the window dressing, fluff and string of broken promises.

So what are the implications of this change? I see…

Five Key Marketing Changes

  1. Customer Loyalty needs to be the strategic benchmark for your marketing activities. Just cos I know about you does not mean I will buy from you. There needs to be something more solid that tells you how well you’re doing and customer loyalty – when stripped of fluff and satisfaction indexes – is the way to go.
  2. Change Management is built around developing customer loyalty. Why? Two reasons:
    • Because that’s the point your business. If you’re not building customer value and getting a return on your investment, what the point?
    • The customer experience is gaining ground as a valuable marketing tool and your entire organisation has to focus on creating this experience.
  3. Customer Line of Sight. Ever action has a reaction and is something your staff what reaction their actions cause. They need to know how they are impacting the customer experience.
  4. Start Listening – Really Listening.  A loyal customer wants to talk to you. They want you to succeed and they will give you real feed back when you are open, honest and sincere. The days of broadcasting to your customer are over.
  5. Front Line Empowerment. Your customer engages with your frontline staff and this defines the experience they have. Execs have always been loath to give too much away but with the proper tools in place this front line empowerment is easily managed.

I think the point that I’m making here is that it’s time to turn your business into a marketing department. It’s easy for your customer to see through the bull and they are looking for value for themselves — not you.

After if all you have is a product and no customers, you don’t have a business. And if you do have customer’s that are not stick around and buying more from you, you are far less profitable than you could be.

This year make your marketing goal to create a real customer experience and build customer loyalty.

Picture Credit: httpf://www.flickr.com/photos/torley/ / CC BY-SA 2.0

Here’s Why You Need to Know These 3 Customer Types

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Customer Loyalty Profiling for Business Growth

Not all customers are equal. Some customers will be a lot more loyal and lot more profitable than others and have a far bigger impact on your business growth.

The key for any business is to turn the few into many by understanding and managing your customer loyalty profile. By using loyalty as the benchmark that breaks down your customer profile, you can place your customers down into three categories:

  • Promoter
  • Passive
  • Detractors

Let me outline why this is so important for you to know:

Promoters

Promoters define customer loyalty. They love your brand and what it does for them in their life. It becomes an expression of their personal identity and is very important to them.

You create this type of customers loyalty when you exceed their expectations and keep on impressing them. You listen to them and take action on what they need from you. You grow and evolve through them, their needs and desires.

They love you for this and is why they account for 80 to 90% of your positive word-of-mouth.

Promoters are a lot more profitable. They buy more products from you; they stay around longer; and are a lot more forgiving when you make a mistake than other the customer types.

They form a community around you and your brands. They tell their friends about you; they resolve your problem when another customer has a problem; and they stand up for you when you’re being criticised.

The only problem with this type of customer is that they are in the minority amongst your customer base. The easiest way to get more of this type of customers is to convert your passive and hecklers customer into raving fans.

Detractors

As the name so aptly describes, this type of customers spread any to 90% of your negative word-of-mouth. There is very little customer loyalty and they have the potential to destroy your business.

A detractor is created when the buying experience did not meet up to their expectations. They are unhappy and frustrated with how they are treated; the customer service levels; or your product did not meet expectations.

This unhappiness about is a direct reflection of how you’re doing business. You have the ability to manage a Heckler’s expectations. Often all that is required is your ability to listen and take the correct action.

But as you know this easier said than done and that’s why we have built our customer loyalty model.

Detractors

Indifferent customers are just satisfied. They are not happy nor are they sad. All they are doing is waiting until something better comes along and then they’ll jump ship.

Being satisfied in today’s market environment is not enough. You need to excite your customers. It is the most cost-effective way of building your business. You just need to know what buttons to press.

What is your customer loyalty profile?

Research shows that promoters are twice as profitable as detractors.  That means without increasing your customer base you can increase your profitability by understanding your customer loyalty profile.

The best way to do this is to use the Net Promoter Model®.

Live Needs Marketing

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You know customer loyalty has a huge payoff. The best way to build this is by understanding their needs. Yes, this is obvious but the world has changed. Twitter arrived and the issue of real time search has become a reality.

This takes the idea of implied and explicit needs to a new level and introduced the idea of Live Needs Marketing.

What is Live Needs Marketing ?

Twitter recently posted on tcuheir blog that they will be making a location services available in their API code. This will probably mean little technically to most people but the implications are huge for marketing and customer loyalty.

Update: location now happened

Twitter currently offers a real time search platform. So let’s say you want to see if people are talking about Britney Spears. All you do is use twitter search and out pops the result of who is discussing what about her latest antics in the present.

If you did the same search on Google you would get a historical based search result. Your Google home page would show a list stories and information that Google has gathered in their many data sheds around the world.

Whilst both Google and Twitter operate off an internet platform, twitter is available as an application on smart phones and can be accessed lived. And this is where the real dynamics of marketing are starting to change.

A projection chart on The Business Insider shows that the sales of smart phone will pass the sales of PC’s by 2011. This just adds weight to how marketers will need to adapt in the future to create customer loyalty.

Technology comes and goes but the principle is established

Let’s go back to Twitter opening up their API code to location services. I am technically simplifying this explanation as there are technical and privacy issues that need to be addressed (which they will be in the near future).

Also Twitter may very well go under tomorrow so let’s not get too caught up in the technology side of this explanation. The principle is far more important than Twitter here.

By opening up its API code Twitter will now make it possible to pin point where I tweet. If I choose to open up the location service from my twitter settings anyone in that region will able to clue in on what I have just tweeted. This can be regionalised down to a neighbourhood level.

Some Examples …

Let’s say I fly down to Cape Town from Johannesburg and as my flight lands (and I have disembarked) I tweet “what is the best car rental price for this hour?”

Any rental companies awake enough can get my business by monitoring the tweets and giving me an option within a minute. customer loyalty built :) .

Let’s take this one step further.  As I am driving to my meeting I realise if forgot the power cable for the special projector I brought for the presentation (this really did happen to me). I need one urgently. I tweet – someone responds. Problem solved. Sale made.

How far can we go …

With the Twitter location services you will be able to monitor Tweets at a town or neighbourhood level. You can talk about the neighbourhood crime stats with neighbours you have never met, tell strangers about traffic problems as you encounter them or even let the local hospital that you’re bringing your kid into the emergency room with a cut forehead (yes, that happened to).

Live needs marketing is in the very near future and it will not be driven by your company, brands or products and services.

Live needs marketing will be driven by how our customer’s behaviour evolves over time.

So whether you are in an industrial, business or a retail environment, it will be relevant to you as a marketer.  How, I am not sure. But I do know that your industrial buyer also goes to MacDonald’s and may even be on Twitter. They are also a consumer and they will bring that experience into their business.

Customer satisfaction: Who Cares. What You Want is Customer Loyalty

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The old “if you get good service you’ll never use a different supplier again” reasoning has some flaws. The link between satisfaction and customer loyalty isn’t as cast in stone as most marketers and their surveyors would like you to think.

If you expect good service, see good service and get good service, it doesn’t mean you’ll be a loyal shopper. It’s easy for companies to get high scores on their customer satisfaction surveys, but difficult for these scores to translate into customer loyalty.

In fact the Harvard Business Review* showed that between 65% and 85% of shoppers who were satisfied with a company’s service, said they were just as satisfied or very satisfied with the previous company too. While it goes without saying that buyers are loyal to companies with good service, you cannot reverse it to mean good service creates customer loyalty. So how do you measure who’s loyal and who’s not? The Sideroad offers some practical advice:

Ask your shoppers if they’re happy with you
Although a satisfaction survey does not test loyalty it can show you how many of your clients are dissatisfied which shows you how many of your clients are clearly not loyal. Also most dissatisfied customers don’t say anything. They just leave. Better ask them if they’re happy before they go.

Account reviews
Your company should be conducting account reviews with your biggest customers. Only 15 to 20 minutes with your current loyal customers four times a year will help you to improve your service. This is not a sales pitching event, so leave the discount flyers in the drawer.

Ask for a reference
If you ask a happy client for a reference and they hesitate, probe a bit further. This really gets clients to open up about their relationship with you. If nothing else, asking for a reference will force unsure clients off the fence.

Offer a memorable experience
This old news, but it works. You’re not the only company offering a product or service to your buyers, so make your company about more than just the product or service. A memorable experience creates loyalty.

Measure wallet retention
This refers to how much money you’re making off of the contracts you’ve managed to keep over the last year. Divide the value of contract clients who have been clients for a year by the total contract value from the previous year. If how much money you make exceeds how many clients you’ve kept, it means your big players are coming back.

By focusing on customer loyalty you really can’t go wrong.

* “Loyalty Based Management”, Harvard Business Review, March-April, 1993, 71.

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