How to efficiently measure customer loyalty

How often to measure

Imagine you were asked to play a game of ten pin bowling, but the rules of the game were very unusual. Once you'd had a chance to look down the lane, to judge its length and width and see where the pins were, a curtain would be drawn across the lane, so you could not see where your balls were going or what pins you may have hit. You could, however, see the scoreboard. But occasionally, say once every few games, the curtain would be drawn back so you could have another look at the lane and the pins. That would obviously make it almost impossible to judge the accuracy of your bowling and make the necessary adjustments along the way.

That's the way most organizations go about gathering customer feedback. They do not do it as regularly as they should. Once a year is typical, a few do it once every six months, and I even know of some that only do it once every two years or more. So for the rest of the time the curtain is drawn and they are blind to the effect that what they are doing is having on customer loyalty. Imagine gathering financial information or product quality statistics the same way. The company would soon go bust! But for some reason, although customer feedback provides a glimpse into the future health of any organization, it is widely not viewed as warranting an equivalent investment and rigour. In my view, that's nuts!

I once heard this described as driving a car where the windscreen is not glass but is a large mirror, showing what's behind the vehicle, like the historic financial information that's churned out on a regular basis by most organizations. However, occasionally the driver gets a chance to have a look ahead to see what's there, like the occasional customer feedback surveys done by most organizations. I would not wish to be a passenger in that vehicle. Yet it's the way many organizations are managed.

If you are serious about building an organization with a brand that earns intense customer loyalty, then you need to be continually seeking to learn what customers think about all your activities. That means making full use of all the appropriate measuring and monitoring tools and techniques outlined above, and then quickly analysing the results, so that they may be communicated to the people who can improve the good ones and do whatever is required to reduce or remove the bad ones.

Rewarding what matters

Some years ago, I was involved in a project with a housebuilder. They were mid-sized and were improving and expanding the business with a view, within about two years, to selling the business to a larger housebuilder. They decided that having a reputation for service excellence would not only boost short-term profits, by enabling them to charge a premium for their houses, but also make them more attractive to potential buyers of the business. This was therefore the part of their core strategy that I was working on with them.

The CEO was totally convinced of the value that the service reputation we were working on would create and therefore prepared to do anything practical that would help create it. I suggested that a worthwhile step would be to link a noticeable percentage of the bonuses every director and manager could earn, including his own, to the service excellence targets and measures we had established for the overall business. We knew there would be protests from some, who felt they had little or no influence over this, but I convinced him that if every director and manager knew that these results were linked to their rewards, they would then take a keen interest in making sure this key part of the strategy succeeded. He therefore agreed to do it and gave them all notice that in just three months' time, 33 per cent of all directors and managers bonuses would be so linked.

This proved to be a great success. Very quickly all directors and managers began to display a great interest in the ongoing service measures and were prepared to ensure they and their department did all they could to support this initiative. They also became extremely interested in the presentations the newly appointed customer service director made at board meetings. The outcome was that this, along with other improvement programmes that ran concurrently, had a big positive influence on their reputation. It enabled them to increase the prices for the homes they built, which also became easier to sell. This resulted in them growing quickly and becoming more profitable. The final outcome was that they were able to find a buyer for the business much quicker than they thought possible, and they also achieved a price that was much higher than they had anticipated.

The point of this example is that what is chosen for rewards has a big influence on people's focus, performance and results. The rewards need not be financial as in this example; it could be recognition and praise, which are equally as influential, but the linking is key. There is little point in claiming that service excellence and customer loyalty are critical to future success if the rewards for performance are heavily biased towards short-term sales and profits, as they are in most organizations.

An example of this comes from one of the UK's large car dealers. I was working on a service improvement with Toyota UK, and we had developed a new approach to service that we were rolling out by inviting dealer principals from across the country to attend the launch sessions, with a view to them then taking the ideas back to implement in their dealerships. Following these launch sessions, I visited some of the dealer principals back in their dealerships to see how it was working.

During one of these visits, I was sat in the office of the dealer principal when he received a call from their group financial director. I heard him mention the Toyota launch session he had attended and how he was focusing on what we had presented. He later told me that the group financial director had then responded by telling him to ignore what we had presented, and to just get some cars sold quickly, no matter what condition they were in, because he needed the numbers for month-end targets and bonuses. I was not surprised to later learn that this particular group never achieved the service goals others were achieving.

What about your organization? If creating customer loyalty is a key strategic goal, are the recognition and rewards that people can earn directly and substantively linked to success in achieving this? If not, what can you do to make sure they are?

Conclusion

I am convinced that a flow of regular, accurate customer feedback is an essential element of business success. But I'm also convinced that simply asking trite questions about customer satisfaction is not the way to gather the worthwhile actionable feedback that is needed. There are many other tools and techniques, of the type I have recommended in this chapter, that will help you do that far more effectively.

Also remember that people learn that what matters in any business are the things that leaders focus their attention on and build rewards around. So make sure that you are rewarding the right things -- those things that matters for success in creating customer loyalty.