Customer Preference as opposed to Customer Loyalty

I was asked yesterday why there is no more customer loyalty. I responded that I would concentrate on customer preference and here is why:

Originally Posted - 3/19/08
I have found that using the term “customer preference” as opposed to "customer loyalty" and satisfaction seems to make the most sense for many companies. Following are some thoughts on the subject.

Often people use these terms interchangeably, thus causing more confusion. It is important to know the difference; Mark Twain said it best. “The difference between the right word and almost the right word is the difference between lightning and the lightning bug.”

I have always felt that striving for customer satisfaction is like running in a race and being satisfied that I finished in the middle of the pack. Not a winner or a loser just an average or mediocre finish. If satisfying our customers means performing at the level of their expectations, then any company that does it will be perceived as no better or worse that its competition. Being on an equal basis with your competitors offers no competitive advantages.

This means that our employees at the front lines must look at every customer contact and transaction as the “moment of truth.” They must fight the battle for customer preference.

Is there such a thing as customer loyalty in your business? How would Ford answer this when they continually do battle with GMC and Toyota in trying to convince customers to buy and re-purchase with them every few years. How about the phone companies? I have friends who boast that they haven’t paid a long distance bill in years because they keep switching. So in essence, it’s the customer’s choice or preference to do business with us or one of our competitors.

Creating customer intimacy may be the key to customer preference. Simply put, you need to nurture your relationships with your customers by providing error free transactions, tangible products, unique sets of ideas and solutions as well as forming relationships that exchange ideas, respond to technological changes and by offering value added products and services that creates more selling opportunities.

Competitive pressures and on-going regulatory and global issues, along with greater expectations of service from your customers are three of the major reasons for implementing customer preference initiatives.

In order to maintain your current customer base and gain new customers your business plans should include, educate and encourage the appropriate departments to focus in the following three areas:
- Identify and Define “Core Customers”
- Define criteria important to Core Customers and measure the performance
- Institute a “Culture of Customer Preference”
IDENTIFY AND DEFINE CORE CUSTOMERS
It is critical to determine the focus of the organization. Do you feel it is more important to be in step with your current customer base or potential customers? The basis for focusing on core customers is to understand their wants and needs and then implement performance measures to meet and exceed these expectations.

How do you determine core customers? Using the Pareto Principle can help. Who are the 20% of customers that account for 80% of current revenue? And, Who are the 20% of potential customers who will account for 80% of future revenue? This also begs the question “are we a customer-driven or market-driven organization?” Market-driven strategies aim at capturing additional customers, while customer-driven focuses on customer preference and retention. It has been my experience that most companies concentrate on both strategies; however, they don’t always create separate plans of action, which is required.

Process checks need to be done on your current method of obtaining customer-driven feedback to determine if you really understand the needs of your customers, you also need to gather feedback from potential customers as well. Obtaining market-driven data is more difficult because it is also necessary to find out why the customer preference is not interested in our product/service as opposed to those of our competitors.

DEFINE CRITERIA IMPORTANT TO CORE CUSTOMERS AND MEASURE THE PERFORMANCE

Once the core customers have been identified and defined the next step is to determine what to measure and then gather customer feedback to drive process improvement activities (i.e. root cause analysis, corrective and preventive action plans, etc.). Determining what to measure is vital, usually senior managers or an outside vendor specifies what should be measured. This is not the preferred method, customers themselves as well as front-line customer contact employees are best able to identify the customers wants and needs. In addition to performance measures on customer requirements customer feedback should provide information for process and outcome measures. These types of measures will enable us to determine the gaps.

Most companies have many methods to gathering customer information like customer surveys, market studies, customer complaints and others. What you need to concentrate more on is the “moments of truth” information that can be provide by our front-line employees who have direct customer contact. All of these methods and information need to be analyzed in a systemic fashion so that all the information can be provided to the appropriate process owners so that opportunities of improvement can be prioritized and corrected.

INSTITUTE A “CULTURE OF CUSTOMER PREFERENCE”

It is vital to an organization’s on-going improvement efforts that customer and market feedback is communicated in such a way that the appropriate process owners and their respective front-line workers are aligned to respond and improve customer feedback in a timely manner. Continuous education and training is required to build a culture of customer preference.

One way to enable the front-line employees to create an environment of customer preference that prioritizes improvement opportunities is to follow these steps:

1. Identify, and select a customer affecting process or service for improvement based on customer feedback data
2. Using SIPOC + CCCCbelow
3. Map the service delivery process, include those steps that direct customer contact is made (i.e. moments of truth)
4. Define customer wants and needs, as well as the customer affecting failure points in the service delivery process
5. Conduct a Barriers and Aids Analysis (Force Field Analysis) to customer expectations, and
6. Set priorities for eliminating/preventing barriers to customer expectations.

After process improvement priorities have been established, process owners should collectively manage the resources required to complete the project.
Hope this helps you in establishing a customer preference organization –
qualityg

Note - To read related posts on customers or learn about SIPOC + CCCC click on the Customer Label below and they will all pop up in order.