For most organizations, knowing how to keep customers from straying is akin to finding the Holy Grail. Only a select few have mastered this challenge and made it to the top of their industries. To Frederick F. Reichheld, author of the acclaimed Loyalty Rules!, the secret to lasting business success comes down to putting customer loyalty above everything else. In today’s economic environment, it means identifying the characteristics that make customers stay. It’s the acid test of leadership, as Reichheld calls it. FuelNet caught up with the founder of Bain & Company’s Loyalty Practice to get his thoughts on customer retention.

FuelNet: Why are some companies experiencing a crisis in their customer loyalty programs?

Reichheld: Too few leaders can really define loyalty, let alone demonstrate to their troops why it is in their best interest to be loyal. Furthermore, many companies have not been loyal to their customers and employees, and they will reap what they sow. If you look at successful companies, you find that the employees believe that working for the particular company has value. They have a relationship with their employer. When employees feel this way, they will work harder to make sure that the company retains its customers.

FuelNet: Why are investments in CRM technology failing to build strong customer relationships?

Reichheld: CRM can provide very effective tools, but the objective must be right. These powerful tools must be focused on delivering superior value to customers, and on appropriately rewarding their loyalty. Otherwise they’re a waste of time and money, and the company will never reach its customer retention goals.

FuelNet: How do you get the most value out of CRM tools?

Reichheld: Customer loyalty has two sides, the head and the heart. The heart side values things like, “They know me, they value me, they listen to me and embody my ideals.” The head focuses on values such as best features, functionality and price. CRM can help with both sides by customizing an offer to attract specific customers on the basis of their needs and specific situation.

FuelNet: How do you measure customer loyalty?

Reichheld: The best measure of customer loyalty is what we at Bain call the net-promoter ratio. This is the percentage of customers who rate you 9 or 10 on “Would you recommend the company to a friend or colleague?” minus the percentage of customers who rate you 0 to 6. The reason that this is the best measure is that it ties closely to [customer] growth rates.

FuelNet: Are more organizations finally getting the message about building customer loyalty for a brand?

Reichheld: In the go-go ’90s, everybody was worried about employee loyalty. After the bubble burst, everyone was more concerned with customer loyalty. I believe there is a bright future for those who lay the groundwork, who measure customer loyalty and then manage it.

Permalink: http://www.fuelnet.com/?p=147