Customer loyalty isn't dead, it’s just being redefined

Customer loyalty isn't dead, it’s just being redefined
Comment E-mail Print Share
First Published: Mon, Aug 06 2007. 01 27 AM IST
Updated: Mon, Aug 06 2007. 01 27 AM IST
At my old company, we did everything to retain customers: built dedicated facilities, designed innovative packaging, offered aggressive pricing and delivered quality second-to-none. Still, a few major accounts dumped us. Is customer loyalty dead? —Carl Warren, Ridgefield, CT
Not dead, but different.
Time was, you could “earn”a customer’s loyalty with tickets to a big game, a Disney World vacation or even a nice dinner a few times a year. And you could pretty much keep that loyalty with what used to be called elly-to-belly selling or, put less graphically, relationship building.
You’d listen to your customers’ dreams and worries, visit them to see how your product fit their needs and troubleshoot their problems. In more competitive situations, you’d add the sort of extra manufacturing and design services you mention. And, usually, such partnering was enough to keep customers in the fold.
Yes, price mattered in those halcyon days. Sometimes, it mattered a lot. We’re only talking about, say, 10 years ago. But it never mattered like it matters in today’s fierce economy. The Internet, in particular, has made pricing transparent and purchasing global. And, as a result, as you have so painfully discovered, it is increasingly becoming a buyer’s world.
But we’re not ready to bury customer loyalty, only to redefine it from a transaction to a two-way street.
With the transaction approach to loyalty, you give your customers competitive pricing, high quality and excellent service. They give you repeat business in return. It’s a nice deal... until someone comes along with slightly better pricing, quality or service. Then it’s ground zero again as you try to win your customer back, almost as if you’ve never met before.
With the two-way-street approach to loyalty, you and your customers don’t have a deal as much as you have mutual dedication. Because you, the seller, are not delivering on just price, quality and service. You are demonstrating intense loyalty to your customer by giving him a comprehensive, inimitable way to win. Better productivity. Faster throughput. Lower inventory. More innovative products.
You are delivering something —anything—that makes you indispensable to your customer’s success in the marketplace. Then, and only then, will you get complete loyalty in return.
Now, you may be thinking: “We did that! We built dedicated plants. We designed special packaging.”
To which we’d ask: But did those services—no doubt costly to you—fundamentally change the game for your customers? Did they allow your customers, for instance, to expand into profitable new markets or catapult old competitors? It seems unlikely; how could they have walked away?
They couldn’t have.
Modern loyalty, then, ultimately comes down to that old saying: “What goes around comes around”. The more fervently committed you are to making your customers win big in the long haul—not just meeting their immediate demands—the more fervently committed they will be to you. That’s a hard order, of course.
But given the direction of the ever more competitive global economy, a two-way street approach to customer loyalty is the only road to take.
What are the characteristics of a good company “university”?—Vladamir Glazunov, Moscow
Your question, of course, mainly applies to large companies, as most other organizations do not have the luxury of affording an in-house learning centre.
And what a luxury it is, too, as effective management development programmes can provide a real competitive advantage. They tend to attract the best kind of people during hiring and, for those already on board, can turn high-potentials into high performers.
Note the word “effective”, however. Because corporate universities, too, often are not.
The most common reason is that companies bring in outside “actors” to do the teaching—typically, business school professors and consultants.
Talk about undermining the process. You want your own managers in front of every class, demonstrating for employees what “success” thinks and acts like in your organization. That’s motivating—and it can also provide a heck of a lot of growth (not to mention fun) for the managers temporarily donning professorial robes.
In-house universities also fail for a more insidious reason: They become warehouses—a polite word for “dumping grounds”—for employees who can be spared for a few weeks.
That happens, of course, because few managers like being parted from their most productive employees. The antidote is to make sure managers understand, and abide by the fact, that the in-house development programme is a reward for superior performance. Only the best get selected to go—and the company’s leaders and HR people pick them.
Look, in-house universities are pretty rare, and well-run ones don’t come easy. But when done right, they can be a potent force for change. Your question suggests you may be lucky enough to seize that opportunity.
Write to Jack & Suzy
Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Campaign readers can email them questions at winning@livemint.com. Please include your name, occupation and city. Only select questions will be answered.
Comment E-mail Print Share
First Published: Mon, Aug 06 2007. 01 27 AM IST