Achieving Market Leadership by Effectively Managing Customer Loyalty and Advocacy

 

  • Do you know which of your customers is destroying your company and brand value via negative word-of-mouth comments?
  • Do you know which of your customers is on the verge on defecting from your company and brands to one of your competitors?
  • Do you know which of your customers is promoting your company and brands and generating positive company and brand value on your behalf?
  • Do you know which of your customers is as passionate about your company and brand as your CxOs and should be rewarded as such?

 

To find out the answer to these questions, read the rest of this informative blog article below.

Customer Loyalty & Advocacy

     Customer Loyalty & Advocacy

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Your customer base is almost always represented by the above spectrum of customers. What varies from business to business is the percentage in each segment group. The more well managed your business, the more skewed to the right your customers tend to be. Therefore a business must develop strategies to migrate customers continually from the left to the right from segment group to segment group in increasing numbers. The rest of this blog is dedicated to sharing best practices on how to migrate more of your customers to the right of the spectrum.

Customer Loyalty and Advocacy Framework

    Customer Loyalty and Advocacy Framework

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For any company to achieve world-class status, one must carefully map out a customer loyalty and advocacy framework including the following component steps from the chart above:

  1. Clearly articulated customer segment definitions based on customer satisfaction levels, in addition to customer buy/sell segment definitions (top independent seller, high volume digital seller, etc.)                                                     
  2. A clear customer segment strategy and detailed tactics on the customer treatment that should be employed for each customer satisfaction segment               
  3. Customer cross-segment best practices and processes to drive segment migrations from the far most left segment to the far most right segment (i.e. from dissenters to super advocates)
Customer Loyalty & Advocacy Framework Segments

   Customer Loyalty & Advocacy Framework Segments

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The above customer loyalty & advocacy framework includes the following segments:

  • Customer Brand Dissenters or Malcontents – Very negative and detrimental to the company’s brand(s)
  • Customer Company Defectors – Very likely to defect to a competitor
  • Customer Neutral or Indifferent – Neither brand supporters or detractors of the company’s brand(s)
  • Customer Brand Supporters – Slightly positive about the company’s brand(s)
  • Customer Brand Advocates – Very positive and generating positive value to the company brand image
  • Customer Brand Super Advocates or Delighted Customers – Active promoters of the company’s brands, adding continuous & tremendous value to the company brand image

A formal social and company/brand listening and tracking program is a best practice on how to identify which of your customers exist in each of the above segments (see my previous blog entry on the topic of Social listening programs).

Customer Dissenters & Defectors

Customer Dissenters & Defectors

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From this graphic above, we can see clearly that the strategy should be as follows:

  • Dissenters: Diffuse and redirect customer angst and anger and come to some sort of closure agreement on for the source of their angst/anger.
  • Defectors: Get the defectors to see the entire spectrum of value the company has to offer and get them back to the level of positive company engagement vs. disenfranchisement. Provide insights to how a more positive company relationship would reward them – loyalty programs and other rewards.

Unless the individuals in these segments are high value or high profitability customers, then you would want to minimize the financial rewards to these customer satisfaction segments.

In addition and based on my research and experience, you are wasting your marketing and sales $$ spend to these two segments as they are much more unlikely to respond to any marketing offers due to being so currently dissatisfied with the company and brands (think about it – why would they trust you and buy more of the same when their initial experiences were so terrible?). 

Customer Neutrals & Supporters

  Customer Neutrals & Supporters

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From this graphic above, we can see clearly that the strategy should be as follows:

  • Neutrals: Develop strategies to more of these customers to a net positive relationship by communicating more frequently and effectively with this segment group. The path toward becoming a company/brand supporter should be clearly and frequently communicated to these customers so that they are encouraged to become ever more value to the company and its brands. This group is likely to be lukewarm to your sales and marketing efforts so expenditures here should be highly selective. 
  • Supporters: Develop these supporters into more loyal and more committed customers by developing brand ‘stickiness’ through company loyalty rewards, referral programs, by making it easy (discounts) to buy additional company brands or products, etc. The path toward becoming a company/brand advocate should be clearly and frequently communicated so that these customers become ever more value to the company and its brands. You should have formal programs in place that amplifies their support of your company and brands via social media, forums, etc. 

 

Customers in these segments should be offered tiered financial rewards to incentivize them to want to contribute at even higher levels to brand value and to remain even more loyal to the company and its brands.

Customer Advocates & Super Advocates

 Customer Advocates & Super Advocates

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From this graphic above, we can see clearly that the strategy should be as follows:

 

  • Advocates: This group should be provided with an array of rewards and accolades for helping effectively spread the word about the company or value of the company’s brands, especially if the individual customer is of high value, profitability or influence. The path toward becoming a company/brand super-advocate should be clearly and frequently communicated to these customers so that they are encouraged to become ever more value to the company and its brands. You should have formal programs in place that amplifies their advocacy of your company and brands via social media, forums, etc. 
  • Super Advocates: This group should be provided with top tier rewards and accolades for helping effectively spread the word about the company or value of the company’s brands, especially if the individual customer is of high value, profitability or influence. You should have formal programs in place that, not only amplifies their super-advocacy of your company and brands via social media, forums, etc., but also provides significant rewards for helping increase your brand value (i.e. via a “brand ambassador” rewards program). 
Customer Loyalty & Advocacy Cross-Segment Best Practices

Customer Loyalty & Advocacy Cross-Segment Best Practices

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The graphic above highlights just a few of the cross-segment customer loyalty & advocacy best practices I recommend that companies continually practice to migrate customers from the negative segments that hurt the company’s brand value (dissenters, defectors) to positive segments (advocates and super advocates) that adds incredible value to a company’s brand.

 

Here are the brands for which I am a Dissenter, Defector, Neutralist, Advocate and Super-Advocate for based on my own personal experience and opinions:

 

  • Companies and Brands for which I am an official dissenter:
Companies For Which I am Dissenter

Companies For Which I am a Dissenter

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Sears

Sears

Sears – I received abject customer service back in the late 1980’s and don’t want anything to do with the retailer ever again. I have tried to give them a second chance and continue to have an unsatisfactory experience.  I pledge to never set foot in a Sears store again.

Target

Target

Target – I interviewed for a senior management position at Target a several years ago was treated so poorly that even the HR manager at the time said the treatment of me was ‘questionable’. She then shared with me that she asked upper management “are we really trying to hire the best candidate here?” before she left the company.  I vowed to never shop in Target again and have held true to my word. 

Empire Carpet Today

Empire Carpet Today

Empire Carpet – We had several issues with our carpet installation and follow up customer service.  They are very disorganized, non-customer friendly and do not seem to keep with the volume of sales that they generate.  I will never use this company ever again. We steer people away from this company if asked.

2) Companies and Brands I am likely to Defect from or have defected from and tell everybody about why I am about to leave (or have left) these company & brands:

Companies for which I am a (potential) Defector

Companies for which I am a (potential) Defector

Bank of America

Bank of America

Bank of America – Closed many of the local branches where I live and the abundance of local branches was the reason I opened an account with BOA in the first place. The remaining branches are now crowded and not staffed adequately. This tells me they care more about the bottom line than customer satisfaction.

Marriott

Marriott

Marriott – In my opinion Marriott has lost its way. I used to be a Platinum member at Marriott for many years. Their properties since that time have become worn as compared to their competitors and they seem to not listen well to their customers. An example of this myopia is when they converted the Courtyards to the Bistro concept. Every customer I speak to was disappointed by this change but they went ahead and did it anyway (presumably to save $$ on operations costs).

Frigidaire/Electrolux

Frigidaire/Electrolux

Frigidaire/Electrolux – Our dehumidifier stopped working after only 1 year.  We have been trying to get a credit from them for six months with no end in sight.  The return process is the most customer unfriendly I have ever encountered with no possibility of human interaction. We have been without a dehumidifier for an entire year due to their poor customer service process.

3) Companies and Brands I am Neutral about and don’t really have much to say about them:

Companies For Which I Have Neutral Sentiment
Companies For Which I Have Have Neutral Sentiment

Samsung, Sony, Direct TV, Time Warner Cable, Panasonic, Cuisinart, Hunter Fans, Home Depot, Lowes, Macy’s, Sunoco, US Air, Delta, Tractor Supply, Wal-Mart, McDonalds, Burger King, Chili’s, Pizzeria Uno, American Airlines, Holiday Inn and many more. This category contains the most number of brands due to the distribution across segment group being shaped like a bell curve

4) Companies and Brands I am an Advocate of and share positive stories with anybody who is willing to listen:

 

Companies For Which I am An Advocate
 Companies For Which I am An Advocate
American Express

American Express

American Express – I have worked with American Express as a consultant on several different strategic projects.  They are an extremely well run organization with some very smart people running the company. I have also been a Platinum card member for many years.  They provide excellent customer service and their fee structure is the only thing keeping me from being a super-advocate. I tell everyone I meet I consider American Express a world-class company.

Southwest Airlines

Southwest Airlines

 

Southwest Airlines – Southwest is just a great airline and makes the flying experience pleasurable. They are almost always on-time, the employees are friendly (some even humorous) and they try to be reasonable to their customers at every turn. I used to hate Southwest and am now a Southwest lover/advocate.

Hilton Hotels

Hilton Hotels

Hilton Hotels – Did you guess what hotel I become more loyal to after minimizing my Marriott loyalty? Guess no further. Hilton has been on a roll creating new and invigorating hotels and I am now an advocate/loyalist and stay at Hilton Hotels whenever possible.

Dooney & Bourke

Dooney & Bourke

Dooney & Burke – Dooney & Bourke creates high quality, classic and trendy handbags and accessories that last over long periods of time even with heavy usage.  Styles and collections are priced to reflect the consistent durability and attractiveness of this brand. If something goes wrong with their products, they stand behind them through high quality customer service.

5) Companies and Brands I am a Super – Advocate of and go out of my way to tell everyone how wonderful my experience has been with dealing with these companies:

 

Companies For Which I am a Super Advocate

Companies For Which I am a Super-Advocate

 

Cox Automotive

  Cox Automotive

Cox Automotive – Cox Automotive has a great company culture consisting of many top automotive brands that includes Kelly Blue Book, Autotrader, Manheim, NextGear, DealSheild to name a few. The company is one of the best places I have ever worked and includes an employee first culture that they actually adhere to and practice. The company is run by a world-class CEO named Sandy Schwartz that has a great vision for the company’s future and is very visible in his support for the employee oriented culture.

Toyota

Toyota

Toyota  – My family has owned Toyota vehicles for many years.  Toyotas are extremely reliable automobiles. I have a Tundra with 132,000 miles on it and have had zero major issues with it. I have such an affinity with my Tundra I have a hard time thinking about trading it in for another vehicle even though it would most definitely be another Toyota.

Ritz Carlton

Ritz Carlton

Ritz-Carlton – I love staying at Ritz-Carlton since the experience each and every time is truly memorable. I also worked as a consultant for Ritz-Carlton to help design the perfect customer experience for guests.  Ritz Carlton’s goal is to create an experience to remember and smile about and they live up to this promise every time.

 

The amazing (or sad) part about my sentiment rankings of the above companies is that, despite spending millions ($$$) on analytic systems and databases, I am willing to bet that very few, if any, actually were knowledgeable about my sentiment toward their brands prior to my writing this article.

This relates directly to a previous blog entry I developed on why CRM (Customer Relationship Management based on historical analytic insights) is dead and a new CRRM model is now a best practice. In this article I point out how world-class companies now query their customers how they feel about the company and brands on a periodic basis. Like me, many customers would be more than willing to share their sentiment and how they are feeling towards the company and their associated brands. Bottom Line: Analytic models provide minimal understand of true customer sentiment when it is primarily focused on historical purchases, spend, etc.

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Measuring Marketing ROI vs. Measuring Customer Value & Equity

Hierarchy of Marketing ROI Analysis (Levels 1-4)

Hierarchy of Marketing ROI Analysis (Levels 1-4)

In this blog we cover the following topics:

  1. The four (4) levels of sophistication in measuring marketing and customer ROI
  2. The three traditional levels of marketing ROI that focus on spend vs. return
  3. The calculations for measuring campaign ROI, Brand ROI and Customer Spend ROI
  4. Why measuring customer value and equity is a far better measure than traditional marketing ROI
  5. How Customer Value and Equity Covers the Measurement of ALL customer facing activity – marketing, PR, sales, customer service, community relations, etc.
  6. What your company needs to do to increase its sophistication of measuring market and customer insights

The following chart depicts the capability levels for measuring market ROI and customer value.

Level 1: Campaign centric ROI is the measurement, at a campaign level, of campaign costs vs. campaign return (customer spend vs. campaign return)

Level 2: Brand Centric ROI is the measurement, at a brand level, of brand return for all conducted campaigns (roll up of campaign ROI to a brand level)

Level 3: Customer Spend ROI is the sum of all brand and all brand campaign ROI at a customer level.

Levels of Marketing ROI Measurement (Levels 1-4)

Levels of Marketing ROI Measurement (Levels 1-4)

The following chart defines the first three levels of marketing ROI and points out the pros and cons for utilizing each method. The downfall for all three methods, as indicated at the bottom of the chart, is that they rely on historical spend vs. forward looking measures as are found in Level 4 – Customer Value and Equity Measures.

Traditional Marketing & Customer ROI Methods (Levels 1-3)

Traditional Marketing & Customer ROI Methods (Levels 1-3)

The following chart depicts the calculations for determining campaign level and brand level ROI that, if done correctly, should roll up to a customer level (Level 3 – Customer Spend ROI). The detailed definition of the highest level (Level 4 – Customer Value & Equity) is covered just below in this blog.

Levels 1 – 3 Focus on Spend vs. Customer Value and Equity

Levels 1 – 3 Focus on Spend vs. Customer Value and Equity

The following chart defines the components of Level 4 ROI analysis – “Customer Value and Equity”.  This level includes the roll-up for Customer Spend ROI, but also includes insights that predict customer future behavior as well as defining how valuable the customer is to the company beyond what they spend.

For example, a customer who is referring 2-3 customers to the company per week, participating in customer focus groups is a far more valuable customer than another customer with equal spend with your company.  

Similar to company stock value, the measurement of customer value and equity is a far more robust way to measure the value of the customer base, how likely they are to remain a loyal customer, etc. 

Customer Value & Equity Calculations, as shown below includes several different indices such as Customer Contribution Index (CCI), Customer Perception Index (CPI), Customer Referral Index (CRI) and Customer Loyalty Index (CLI). These indices help determine the overall health of the customer base vs. merely customer spend as is associated with levels 1-3 (spend focused).

Customer Value and equity calculations take into account the level 1-3 spend ROI measures, but utilizes a balanced scorecard approach in that the indices above are weighted against the spend vs. ROI measures. For example, if Brand A has a high ROI but also has a bunch of irate customers unwilling to partner and participate in brand activities, then this is indicative of a brand that, while doing well now, will experience a great deal of future customer churn, negative social comments, brand tarnishing, etc.

Level 4 Marketing ROI Analysis - Customer Value & Equity

Level 4 Marketing ROI Analysis – Customer Value & Equity

The following chart further defines the difference between focusing on spend ROI analysis vs. focusing on customer value and equity.

Value of Focusing on Customer Value & Equity

Value of Focusing on Customer Value & Equity

The last chart provides some real examples of the difference between focusing on spend ROI analysis vs. focusing on customer value and equity.

Examples of Differences Between Spend ROI  Focus vs. Customer Value & Equity Focus

Examples of Differences Between Spend ROI
Focus vs. Customer Value & Equity Focus

The bottom line here is that if you are focusing on Level 1-3 ROI calculations, you have a short-term and myopic view of the health and value of your customer base and are missing the strategic and longer-term insights that enable you to determine customer, company and brand future value and earnings.

Any company thinking about acquiring another should perform this robust customer diagnostic to determine if they are inheriting a group of angry/upset customers that will defect after a merger or a set of extremely valuable customers with positive customer equity who will take the stock value of the merged company to the stratosphere.

Contact me to find out how to move past traditional marketing ROI measurement and how to evolve into developing more robust customer value and equity insights for your company.  

Blow Away Your Competition by Replacing Your Old CRM Program with the New Customer Relevant Relationship Management (CRRM) Model – Part 2: The Necessary Components.

1) Introduction:

In my previous blog, I covered what the new Customer Relevant Relationship Model (CRRM) is and the benefits of adopting this new model. In this blog, I will cover the components of the new CRRM model and what you need to put in place to make this new model a reality.

Ever wonder why companies like ESPN, Apple, Google, Zynga, Amazon, and Marriott dominate their respective markets? The reason is that they are ‘Customer First’ organizations and are passionate about listening to, understanding and then delighting their customers based on leveraging true customer insights. They treat their customers as business partners vs. commodities and include them in many critical decision making processes. They get this new CRRM model. Why/how ? – Read the rest of this blog to find out…

The differences between the old CRM model and how these companies are embracing the newer CRRM model are depicted in the following chart:

The Old CRM Model vs. New CRRM Model – Customers as Business Partners

2) Customers are fed up with old Dictatorial Management Style & Want to be Empowered as Business Partners

Customers and stakeholders today are longing for a company to partner with them and include them in the corporate decision making process.  These same constituencies are sick and tired of political, corporate, and other organizations making unilateral decisions for them that are really not in-line with their needs,  wants, etc. The backlash from this unwanted dictatorial management style of some companies can be seen in the Bank of America fee customer rebellion, the customer backlash from Netflix deciding to  split their company without first consulting with their customers and HPs initial decision to exit the computer market.

3) Components of the New CRRM Model:

In order to progress your organization from the old CRM model to the new CRRM  model, a few key essentials must be put in place and are as follows:

A. New CRRM Model that includes the 360° Cultivation of Customer & Market Insights.  This model enables a 360° view of all customer and market insights including customer feedback, preferences, likes, dislikes, social sentiment, competitor activity, etc. This new model takes your insights to an entirely new level whereby you are now enabled to delight customers, stakeholders and stockholders by having insights that are light-years ahead of insights provided by a traditional CRM model.

B. Customer First Culture driven by management that is passionate about their customers including a set of customer first principles and guidelines developed by company leaders

C. Customer Ratings & Feedback Structure that will identify areas where you will collect customer 360° feedback from customer and stakeholder interactions

D. Customer Feedback & Preferences Cultivation Process and corresponding infrastructure in order to allow your customers to continually rate how well you are serving them

E. Customer Health Scorecard that provides real-time insights on how well the customers, stakeholders and stockholders perceives you as serving them as well as insights into a Continuous Customer Improvement Process (CCIP) that enables you to continually improve your customer perceptions, satisfaction, brand loyalty, etc.

These components can apply to large enterprises as well as Small to Medium Businesses (SMBs).

The following graphics are all sample components from the list above (A-D) that need to be put in place to enable this new CRRM Model.

New CRRM Model – 360° Cultivation of Customer & Market Insights

 3A) The above chart “New CRRM Model – 360 Cultivation of Customer & Market Insights” demonstrates the new insights model that must be put in place to deliver world-class stakeholder and customer programs.

These enhanced insights will enable you to deliver products and services that delight your customers, stakeholders and stockholders as well as enable you to leapfrog the competition in terms of market share if they continue to rely on their antiquated CRM data and analytics insights only model. 

For Small to Medium sized Businesses (SMBs), some of the insights do not apply, but the following charts (3B-3E) most certainly apply and can be tracked via simple Microsoft Excel spreadsheets.

CRRM Customer First Policies & Organizational Principles

3B) The above chart “CRRM Organizational Guiding Principles” demonstrates the principles that must be in-place to be customer first culture. This culture is driven by management that is passionate about their customers and governs the company around a set of customer first policies.

Sample Enterprise CRRM Customer Rating & Feedback Structure

3C) The above chart “Enterprise CRRM Customer Rating & Feedback Structure” illustrates a sample structure (will vary for each type of business) whereby customer feedback and preferences will be cultivated in order to develop 360° insights into customer needs, wants, likes, etc.

Enterprise CRRM Customer Feedback & Preferences Cultivation Process

3D) The above chart “CRRM Customer Ratings & Feedback Cultivation Process” illustrates a how customer feedback and preferences will be cultivated in order to develop 360° insights into customer needs, wants, likes, etc.

Sample Enterprise CRRM Customer Scorecard Ratings Visualization

3E) The above chart “Enterprise CRRM Customer Scorecard Ratings Visualization” illustrates a how customer feedback and preferences ratings will be visually represented in a scorecard. 

Sample Enterprise CRRM Customer Scorecard Metrics

3E-2) The above chart “Enterprise CRRM Customer Scorecard” illustrates a how customer feedback and preferences ratings will be rolled up into an analytical scorecard that provides insights into customer trends,  customer feedback, customer issues, core customer strengths and weaknesses, etc. 

This scorecard can also be used to manage a Continuous Customer Improvement Process (CCIP) that continually drives improvements to customer perceptions, ratings, satisfaction, etc. 

Sample Scorecard for “Shopping Experience”

The above depicts how analytics and metrics would be maintained for a business who had a retail or wholesale shopping function.

Sample Shopping Experience Scorecard – #2

Robust Scorecard Analytics and Metrics should support Customer Trend Identification and Root Cause Analysis for Customer Issues.

Sample Branding & Public Relations Scorecard

Sample Public Relations Scorecard Above gives you insights into how well your company and brands are perceived by customers, stakeholders, stockholders, etc.

Sample Customer Service Scorecard

Sample Customer Scorecard Above from Customer Service tells how well you are serving your customers.

Sample Marketing Scorecard

Sample Marketing Scorecard Above Gives you insights into how well your Marketing Efforts are resonating with your customers.

Sample Product Management Scorecard

The Sample Product Management Scorecard above gives you insights into how well perceived your products and services are with customers and prospects.

4) Company & Customer Benefits of Adopting the CRRM Model:

By treating customers as business partners (vs. commodities) and including them in the corporate decision making process, as well as allowing them to rate how well you are serving them from an array of customer facing areas, companies can reap huge rewards including the following:

1. Better insights into the types of products and services customers want & need

2. Fiercely loyal customers who feel part of the corporate team

3. Customers who are most likely to spend more, be retained longer and purchase at premium prices with higher profit margins

4. Customers who are very likely to be brand advocates and refer others to your company, brands, and services.

5. Customers who feel connected to the company and empowered to improve company operations

The following are actual customer comments from those who have participated in a customer feedback program to help shape products & services:

“I feel like xyz company cares about me since they ask my opinion”

“Finally a company that listens to us”

“It is so refreshing to have a company ask you your opinions on products and services vs. ramming something down our throats that we don’t like”

“Wow – this is fun. I enjoy providing my opinion”

“As silly as this might sound, xyz company is the only company that ever asked me what I wanted”

“In my opinion, xyz company is much more progressive than their competitors by seeking consumer opinions, what matters to them, etc.

 5) Conclusion:

More dynamic companies like Goodle, Zynga, Amazon, etc. are inviting customers to become part of the corporate decision making process and empowering them to provide feedback, insights and rate company operations in order to drive continous customer improvements. Companies who adopt this new CRRM model whereby company management is democratized by including stakeholders and customers into the decision making process will reap the rewards of ever higher customer acquisition, retention and spend – leading to ever higher profits and share price.

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