Photo: iStockphoto
Photo: iStockphoto

What successful companies do to win customer loyalty

Progressive enterprises do not wait for scandals to hit them; they take corrective actions even before the event has happened

The admired enterprises of today do not wait for trouble to raise its ugly head; they pick up issues at a nascent stage and proactively take actions to ensure that trouble does not arise at all. As a result, the cost of rectifying a problem is smaller and the damage is limited. And such companies go one step further to win customer loyalty by anticipating their needs.

Take e-tailers. They use predictive algorithms that take into account your past behaviour—your browsing history, actual purchases and wish list history—to predict your future purchase behaviour. Powered by this algorithm, they are able to personalize every page, every recommendation for each one of us.

Amazon.com implements this strategy successfully by offering personalized recommendations under multiple headings whenever you visit the site: News for you, Recommended for you, Inspired by your shopping trend.

Should you miss such a big hint, it presents you with a short list of what “people like you" bought. This de-risks the buying decision—people are reassured, believing that if so many people are buying it, all of them cannot be wrong.

If even this big hint is ignored, Amazon introduces urgency by sharing what other customers are looking at right now.

Every one of these initiatives proactively undertaken by the company has the potential to generate greater business.

These strategies are based on behavioural economics and address the fear of regret (where we fear missing out on an opportunity) and conformity bias (taking cues from others’ behaviours).

Amazon is now going a step further with “anticipatory shopping". Based on your purchase history and wish list, it starts shipping items that you are likely to purchase in future to its warehousing hub closest to your delivery address. If you do order the items it has anticipated, they will reach you faster.

Through these proactive steps, Amazon seeks to amaze you by providing lightning quick service. If, over a period of time, you do not order the item, the Smart Anticipatory Algorithm will move it closer to another customer whose demand for that item is being anticipated.

Amazon has extended this proactive strategy to its employees too. In April 2014, it launched a Pay to Quit offer to its employees who are dissatisfied.

Amazon’s CEO Jeff Bezos explained the offer in his annual letter to shareholders: “The headline on the offer is ‘Please Don’t Take This Offer.’ We hope they don’t take the offer; we want them to stay. Why do we make this offer? The goal is to encourage folks to take a moment and think about what they really want. In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company."

Underlining the offer is the hope that those who are unhappy and, therefore, a drag on the company, will leave and the brand will have only those who are committed to assisting Amazon deliver on its mission.

From Amazon, let us visit Ikea.

Ikea designs do-it-yourself furniture and home accessories. The firm is known to keep an eagle eye on cost and, according to a Harvard Business School case study, has been successful in keeping its price lower by an average of 30-50% over its competitors.

It proactively ensures that every element that impacts cost is kept in control. For instance, there are few staff in its stores. But before a customer can become frustrated at not finding a salesperson to help her, Ikea proactively announces over the public address system that there are fewer salespersons because of cost-cutting and that the benefit of this is being passed on to the customer—the “evidence" is in the amazingly competitive price tags of Ikea products.

Ritz-Carlton also uses proactive strategy—not to convert dissatisfied guests into satisfied ones, but to ensure through its service that satisfied guests turn into delighted guests and go on to become life-long brand advocates.

Every staff member is entrusted with $2,000 to spend at their discretion on every guest, per incident, without seeking approval from higher authorities.

This strategy is not based on the assumption that there could be a problem and the $2,000 will help resolve it quickly. Instead, Ritz-Carlton wishes to empower the employee to delight an already satisfied guest. For instance, if a guest is waiting for a taxi and it is taking inordinately long, a complementary hotel car is made available. The list is as endless as the employee’s imagination to anticipate unsaid needs of guests.

Surprisingly, this initiative does not cost the hotel much. It displays that Ritz-Carlton trusts its employees to exercise their good judgement and discretion to ensure that the sterling reputation of the hotel is not only upheld, but enhanced.

Now let us step into the world of scandals—and enterprises are increasingly being confronted with it.

Progressive enterprises do not wait for scandals to hit them; they take corrective actions even before the event has happened. They do so by counting on the power of Big Data analysis, where data is gathered from seemingly unrelated and widely dispersed sources to establish correlations between people, places, events and time. It tries to identify and establish intention and flags them off for further probing by humans.

To do this, Big Data trawls through every bit of data generated in a company and in the outside world. For instance, it picks up a trend where an employee, say a marketing person, has started emailing another employee—an internal auditor, maybe—with whom she may not have any reason to be in touch with during the normal course of business. Once this deepening relation is identified by Big Data, humans enter the picture to probe whether there is any nefarious intention. If they do discover an unholy alliance to, perhaps, defraud the company, proactive steps can be taken to nip this partnership in the bud and prevent a potential scam.

Companies that embrace proactive strategies enjoy numerous advantages. A partial list includes:

•Deepening the relationship with their customers and converting them into brand advocates.

•Ensuring ties with customers do not sour, and are repaired promptly in the unlikely event that they occur, incurring the least dissonance and cost possible.

•Undertaking improvements before circumstances force them to change.

•First-mover advantage over competition by seizing opportunities before others can spot them.

Go ahead and embrace this winning strategy and experience the benefits flowing your way.

Rajesh Srivastava is a corporate consultant, entrepreneur and academic.

The unabridged version of this column can be read on www.foundingfuel.com

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