Achieving Market Leadership by Effectively Managing Customer Loyalty and Advocacy

Customer Loyalty Program Best Practices

• 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?

Customer Loyalty Best Practice Components

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

     Customer Loyalty & Advocacy

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Customer Loyalty Framework

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

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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

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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

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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

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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

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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

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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.

Customer Loyalty Dissenters

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 a Dissenter

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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 – 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 – 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

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 – 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 – 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 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

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 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 – 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 & 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

 

  Cox Automotive

Cox Automotive Customer Loyalty Program

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  – 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 – 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.

For Additional Information on The Topic of Customer Loyalty Programs

Customer loyalty and customer advocacy are among the most powerful drivers of sustainable growth and market leadership. While many organizations focus heavily on customer acquisition, market leaders recognize that retaining existing customers and transforming them into active advocates often produces greater long-term value. Loyal customers tend to purchase more frequently, remain customers longer, and are more likely to recommend a company to friends, colleagues, and business associates.

Organizations that successfully manage customer loyalty and advocacy typically invest in delivering consistent customer experiences, building trust, and creating meaningful customer relationships. By measuring customer satisfaction, loyalty, advocacy, and referral behavior, companies can identify opportunities to strengthen customer relationships and improve long-term business performance.

For additional information on customer loyalty and advocacy, review these resources:

• The Value of Customer Experience, Quantified
  https://hbr.org/2014/08/the-value-of-customer-experience-quantified
• Customer Loyalty: What It Is and How to Build It
  Qualtrics Customer Loyalty Guide

Organizations that consistently create loyal customers and passionate advocates are often better positioned to increase retention, strengthen their competitive advantage, and achieve long-term market leadership.