As industries continue to evolve and compete for dwindling customer attention spans, a new business metric is quickly taking the lead as a primary indicator of success: the Value of Relationship™ — something Amazon Prime members won’t be surprised to learn. In fact, at the same time Amazon faces more competition than ever before from online retailers, the percentage of people who shop exclusively on Amazon when they shop online, increased from 10% to 14% last year, making Amazon Prime one of the biggest factors keeping customers coming back, according to PwC‘s 2018 Global Consumer Insights Survey. And, this is for a company that recently increased subscription pricing for more than 100 million of its Prime members (most of which, by the way, are accepting it without blinking). It also played a role in Amazon’s recent ranking as the world’s most valuable brand ahead of Apple and Google, according to the 2018 Brand Finance Global 500.
Customer loyalty and depth of relationship—two areas Amazon and Apple have worked hard to master—have proven to be reliable barometers for measuring and projecting customer retention, repeat sales, and referrals. That’s because whether you’re selling the latest electronic gadgets or offering highly personalized solutions for complex business and personal challenges, without loyalty, you risk losing the attention of your clients, and if you don’t value the relationship, you drive your customer to a competitor. This makes creating touch points that deliver on your client’s needs and speak directly to their goals and desires a critical part of cultivating and maintaining strong relationships. To do so requires clearly articulating your value to customers and prospects, delivering on that promise through each interaction, continually engaging clients in a manner that’s both personal and meaningful, and measuring your effectiveness.
The latter comes easier to some companies and industries than others. If you’re Apple, you can measure unit sales (or the number of people camping out in front of your store prior to a product launch). You can collect and quantify customer testimonials and reviews in their various forms, dialog online with customers and participate in product forums and chat rooms.
Fortunately, there are ways businesses across all industries and sectors can measure customer loyalty. Depending on the type of business, you may define a loyal customer as someone who is likely to:
- Refer you to friends, family members and contacts
- Consider other products and services you offer
- Buy from you again as long as the need remains
- Provide feedback and/or favorable product or service reviews
- Enroll in membership and rewards programs
- Consolidate their business with you
- Provide you an opportunity to resolve problems or issues to their satisfaction
A loyal customer may also be someone who is not actively shopping your competitors or other suppliers and not open to competitor sales pitches. No matter how you define what a loyal customer means to your business, it’s important to be able to measure it. Two relatively easy metrics for businesses of all sizes to incorporate include the Net Promoter Score® (NPS®) and Customer Loyalty Index (CLI).
Net Promoter Score® (NPS®)
NPS® is a customer loyalty metric developed by Bain & Company and Satmetrix. The score is calculated based on responses to a single question: How likely is it that you would recommend our company/product/service to a friend or colleague? The scoring for this answer is most often based on a scale of 0 to 10. Depending on respondents’ scores, they’re labelled Promoters (9 -10; likely to exhibit value-creating behaviors, such as buying more, remaining customers for longer, and making more positive referrals to other potential customers), Detractors (0 – 6; believed to be less likely to exhibit the value-creating behaviors) or Passives (7 or 8; their behavior falls between Promoters and Detractors). The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters. For purposes of calculating a Net Promoter Score, Passives count toward the total number of respondents, thus decreasing the percentage of detractors and promoters and pushing the net score toward zero.
Customer Loyalty Index (CLI)
The Customer Loyalty Index (CLI) is another tool that enables tracking of customer loyalty over time. This tool can vary based on user preferences from a long and detailed survey to the short example included below. This example uses a 6-point scale where 1 stands for “Definitely Yes” and 6 stands for “Definitely No”. The CLI is the average of responses to the following three questions:
- How likely are you to recommend us to your friends or contacts?
- How likely are you to buy from us again in the future?
- How likely are you to try out other of our products/services?
Don’t be blindsided by longevity
While in many cases the longevity of a relationship can be a marker for customer satisfaction and an indicator that the relationship holds value for your client or customer. However, it’s important not to assume longevity equals loyalty. In business categories where switching providers is perceived by the customer as difficult or time consuming, such as moving multiple bank accounts to another institution; or where no viable competitor exists, such as a cable service provider, customers may remain with a company for years due to inertia. However, in today’s modern marketplace consumers are fickle, never fully satisfied, overwhelmed by options and more aware than ever of small triggers that can push them from complacency to action, such as a rise in fees or the emergence of a new competitor.
Whichever path you choose to measure and track customer loyalty, make a point to capture that data in your customer relationship management (CRM) system. A CRM is a valuable tool for automating a highly personalized experience for both prospects and clients. The key is to institute CRM best practices across your business. When CRM tools are used consistently by all team members and associates to capture information about prospect and client interactions, you can target communications to individuals or client segments that are highly personalized. This can lead to deeper relationships resulting from meaningful interactions even when the process is completely automated.
Some companies call this “humanizing the brand.” Others refer to it as the client experience. Yet, what we’re all aiming for is redefining the Value of Relationship™. There’s a growing desire by the modern-day consumer to establish and nurture relationships with the products, services and brands they consume on a daily basis. It’s especially true in financial services because of how impactful an advisor’s role can be in their life. Next time you ponder your financial future, re-assess your current lifestyle or plan for the next stage of life, ask yourself, “Do I feel I have a relationship with my advisor that provides value beyond a doubt, or is it just a recurring transaction?”
Whether it’s your financial advisor, attorney, CPA, or local insurance agent, if they can’t demonstrate value beyond a doubt, then it’s time to pick someone who can.