Nurturing and Growing True Customer Loyalty:  Like The Rings Of A Tree

By Michael Lowenstein

  Michael Lowenstein, CPCM, is managing director of Customer Retention Associates, a customer and staff loyalty program development, research, and consulting firm located in Collingswood, New Jersey (www.customerloyalty.org).

  With over thirty years’ management and consulting experience in customer and staff loyalty research, CRM, loyalty program development and refinement, customer win-back, service quality, customer-driven corporate culture, and strategic marketing and planning to draw on, he is an active speaker, workshop facilitator, and trainer, and he is a regular featured contributor to three customer loyalty newsletters.  His keynote, general session speaking, and workshop facilitation assignments have been in the United States and Canada, Europe, South America, and Africa.  He also provides expert customer loyalty commentary and articles for several professional CRM sites on the Internet.  

   Michael is the author of two widely-regarded books:  Customer Retention: Keeping Your Best Customers (1995), and The Customer Loyalty Pyramid (1997).  He is also co-author of Customer WinBack: How to Recapture Lost Customers – and Keep Them Loyal (2001).   Additionally, he is a contributing author to Redefining Consumer Affairs (Society of Consumer Affairs Professionals, 1995), The Answer Book for Customer Service Managers (Bureau of Business Practice/International Customer Service Association, 2000), and Customer.Community: Unleashing the Power of Your Customer Base (Jossey-Bass, 2002)

   He has been a customer loyalty instructor for Pennsylvania State University and the American Management Association; and he holds an M.B.A. degree in marketing from the University of Pittsburgh, and a B.S. degree in economics and marketing from Villanova University.  He is listed in several international, national, and professional Who’s Who directories.  His clients include First Union, Toyota, Prudential, Westvaco, Cigna, Charles Schwab, Borg-Warner, Sygma, Comcast, Baptist Health Care, Metropolitan Life, Microsoft, Alliance of Community Health Plans (ACHP), Daimler-Chrysler, and Georgia-Pacific.  

   Customer Retention Associates specializes in helping clients optimize customer loyalty and value through customer and staff loyalty research, loyalty program development and refinement, loyalty action training for front-line staff and management, and customer save and win-back protocol development.  The company is a founding member of the CRM International Consortium (CRMIC), an affiliation of independent CRM and customer loyalty practitioners from around the world, which is based in Europe.  The mission of CRMIC is to offer leading-edge customer loyalty and value solutions.

  Everyone who has ever taken a marketing course, or been exposed to marketing literature, is probably familiar with Abraham Maslow.  In the late 1960’s, it was Maslow who developed a hierarchical, or layered theory of human needs and values.  Maslow focused on human potential, believing that humans go through stages to reach their highest levels of individual capabilities.

  For me, and I believe for every CRM practitioner, there are parallels to Maslow’s ideas of moving through basic needs to the highest level and what we are endeavoring to achieve with customer loyalty.  The metaphor is easiest to see in the rings and layered composition of a tree.

The Bark – Most Recent Product or Service Experiences/Transactions

  A supplier is the most exposed during the latest encounter or transaction with a customer.  If customer-supplier involvement could be ‘viewed’ the same way people watch soap operas or sitcoms, this would be the impact of the latest episode.  Whether that encounter is a purchase, service experience, or communication isn’t particularly important.  What is important is that the customer’s top-of-mind, tactical attitude about a supplier will certainly be affected by the most recent involvement.  As a result, the positive or negative impression left with a customer has both tactical and strategic implications.  Tactical, because the attitude tends to be short-term.  Strategic, because if not either reinforced (positive transaction) or proactively and quickly addressed (negative transaction), the impression is likely to have deeper, longer-term implications for a supplier. 

  Without reinforcing a positive transaction, this can create a vacuum in the relationship; and the customer may be left to feel taken for granted, especially if an assertive competitor is working to create a relationship.  If the negative transaction isn’t quickly and sensitively addressed, the customer may be looking for, or at least may be willing to consider, an alternative supplier. 

   Those of us in the CRM industry who measure the loyalty effect of transactions find that we must look at them from both tactical and strategic perspectives.  Tactical, because our research can help groups like customer services or sales identify areas of process and relationship management ‘trigger points’ or ‘moments of truth’ which can be improved.  Strategic, because there is often direct linkage between these encounters and real loyalty.  The strength of that linkage must be determined if a supplier is to optimize CRM.

   So, if endeavoring to understand the impact of the last, or most recent, transactions, both current and former customers should be debriefed.

Middle Layers – Building the Relationship/Creating Long-Term Perceived Value

   Here, once the relationship has been established, we are concerned with the supplier’s ability to deliver and provide perceived customer value within specific products and services.  We are also focused on understanding the strength and vitality of the relationship.

   When addressing measurement protocols in the Middle Layers, we’re principally interested in brand preferences and choices.  Consequently, we ask current customers about:

1. Perception of supplier (and key competitor) performance in key areas, and importance of those areas, also including elements of reputation and image.
2. Likelihood to use the supplier’s products or services in the future
3. Likelihood to consider the supplier as the primary source for a product or service, or exclusive source
4. Likelihood to recommend the supplier
5. Evidence of expressed and unexpressed complaints

   In the Middle Layers, we can identify both improvement priorities and potential program initiatives for enhancing ties with these customers.

Heartwood – Perceived Supplier Reputation/Trust Level

   In looking deep into the core of supplier reputation and trust, all customer groups and stakeholders – including staff, investors, and the financial community – must be considered.  To understand how the supplier is perceived at this level, in addition to finding out about top-of-mine awareness and salience, familiarity with/comprehension of various offerings of the supplier, and predisposition to purchase or recommend the supplier’s products or services (as would also be done at the Middle Layers), it’s vital to determine:

1. How business practices, i.e.ethics, are regarded
2. How the supplier is seen as an ‘employer of choice’ by staff and/or whether they

would be recommended as an employer

1. The supplier’s image in such areas as community involvement, public issues, the

environment, etc.

1. Deep feelings and emotional attachment to the company of various stakeholders

   Many companies don’t delve into customer, staff, and community perception at the Heartwood depth; but, deeply held emotional involvement has a great deal of loyalty-leveraging impact.

   There’s one last thing to remember about the tree growth – customer loyalty analogy, which applies equally to CRM:  It takes a long time, and a lot of effort, for a tree to grow and mature, but it can be cut down very quickly or slowly decay without nourishment.  Keeping the tree healthy and protected, from the Bark to the Heartwood, is in every supplier’s best interest.