Use the 'Customer Loyalty Formula' to keep customers coming back

I found this article by Kevin Stirtz which I thought was a pretty good insight into the increasing demands of customers in a tighter economic environment. It is a reminder that although we may have a set of loyal customers, keeping them is not a static equation, it is constantly evolving  and challenging process that requires a new toolset and skillset to solve these service challenges. It is not by using old creativity tools developed for and used by manufacturing organisations. That's why using Service Design is so important  in helping Service based organisations that represent 70%+  of First World economies GDP. Over to Kevin...

According to a recent study, many big consumer brands are losing their loyal customers. It revealed that 52% of highly loyal consumers either reduced their loyalty or defected completely from the brands in the study. Further, only 4 out 10 brands in the study retained 50% or more of their highly loyal customers from year to year.

A big reason for this, according to the study is the recession. The economic downturn has caused customers to re-evaluate what they're getting for their money. Our priorities have changed so what we look for in products has changed too. Many customers are looking for more value in the products they buy. And if the big brands have not changed, at least in the eyes of their customers, then customers will defect. They'll try other brands that appear offer more value.

A way to look at this is by using what I call the Customer Loyalty Formula. Here's how it works:

Customer Loyalty = Connection * Value  * Experience

(Or CL=C*V*E for short.)

In this formula, Connection means, as a customer, how connected you are with the brand? Can you easily and conveniently communicate with people who represent the brand?  Value means your perception of what the brand offers you in the context of what you want and expect. Are you getting what you want or more? Do you feel the brand offers you the best combination of features and benefits for the price?

Finally, Experience here means how have you experienced this brand? Have you been treated well by the people involved? Do you have a positive emotional feeling associated with the brand?

This formula tells us where many big brands have failed in this recession.  They have failed to redefine their value. For a brand to keep our loyalty it has to change with us. It needs to show us it offers more value than before.

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Posted on July 3, 2009 and filed under Customer Experience, Service Design.