CEM Can Improve Customer Loyalty

A 5 percent increase in customer retention increases profits by 25 to 95 percent.

The greater the loyalty of customers, employees, suppliers, and shareholders, the greater the profits reaped .

This is the received wisdom from experts on the nature and importance of customer loyalty. Yet in a world of product and service commoditization and as the timelag between imitations to innovation declines, how can organizations differentiate themselves to build loyalty?

The answer lies with Customer Experience Management creating the emotional responses and connections with products and brands tha are difficult to build in any other way . In effect marketing is not just concerned with the uniqueness of the 4 Ps and more focused on the way customers feel about you through the emotions evoked by the customer experience. Need this be surprising, or is this long overdue? after all a dictionary definition of loyalty refers to it as a feeling or attitude of devoted attachment and affection .

Looking at the evidence from the services sector, the Market Metrix hotel index demonstrates this link between loyalty 'emotions', customer satisfaction and price premiums elicited by the experience of hotel products and services.

'Guests who experience the loyalty emotions at midscale hotels feel these emotions and they will pay on average $10 more. If they do not feel these emotions, they will pay only about $3 more'

A recent Gallup survey further found that:

Over a one month period shoppers whom were emotionally connected to a supermarket spent 46 percent more than shoppers who were satisfied but lacked an emotional bond

For the New York supermarket Wegmans this emotional bond is reflected in the customer experience with well cared for employees at the frontline treating Wegmans consumers in a better and friendlier manner.

Managing the customer experience to achieve the correct emotional response for loyalty involves more than the right price or the right product and dont expect satisfaction alone to be enough. For instance, delight and anger have been noted as emotions that may link better with understanding customer emotions and loyalty.

So look at your whole customer experience and ask the question, what emotions are you evoking and will these be valuable, detrimental or could they be reengineered in such a way as to promote a loyalty inducing experience.

By Colin Shaw
Beyond Philosophy

Research Reference

Frederick Reicheld
Trends in the Experience and Service Economy, Professor Voss, 2004,
www.dictionary.com
Evoking Emotion, Barsky and Nash, 2002
The Price of Loyalty, National Petroleum News, March 2005
Schneider and Bowen, Sloan Management Review, 1999

Colin Shaw

is the Founding Partner of Beyond Philosophy and guru of the Customer Experience Management. He has also produced two most successful books on customer experience which are now available in market. His first book, Building Great Customer Experiences sold out within just eight weeks, is on a third reprint and available in paperback. Colin's second book, Revolutionize Your Customer Experience released in September 2004 and considered as Bible in Customer managment business world.

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