The standard and measure of success in this millennium are loyal customers.” The Gallop Organization’s research also concludes that no matter how satisfied an organization thinks its customers are, if they haven’t made an emotional connection with their customers to develop a long-term relationship, satisfaction will ultimately be worthless. Satisfaction alone does not build a strong loyal customer relationship.

It is difficult to focus on loyalty when, as standard practice, most organizations seem to settle for satisfied customers. Satisfaction is a measurement of mediocrity. When a customer indicates, “I am satisfied”, it can usually be translated to mean the service experience wasn’t bad, however, it also was not exceptional. Satisfied customers are certainly better than disgruntled customers, but, building a loyal relationship is a must for long-term success. The key difference between loyalty and satisfaction is that customer satisfaction scores fail to predict how customers will actually behave relative to future purchases of your product or service. They may or may not return. On the other hand, loyal customers will consistently buy from you. By definition, loyal customers always come back to purchase repeatedly, which in turn produces a much longer and stronger income stream. The larger the loyal customer base, the greater your organization’s long- term success.

Economically, the best strategy for your organization is to pursue the creation and retention of loyal customers. This strategic initiative can and will separate your organization from the competition. Let’s face it, service today is mediocre in most organizations. Your organization can achieve a competitive distinction by developing a strategy of creating loyal customers. It has been proven that organizations with high levels of loyal customers typically grow revenues at twice the rate of their competition. However, the strategy of developing loyal customers must become a part of the organization’s culture and ingrained throughout. Since the culture of an organization will always drive the behavior of the people who work within the organization, people will behave differently if the culture is entirely profit driven. In this culture, people will do whatever they have to in order to produce profit, often times at the expense of the customer. This short-term thinking is an organizational disaster waiting to happen.

If the culture and strategy of the organization is to develop and retain loyal customers, then the contributors within the organization will focus on what they need to do to create loyal customers. Needless to say, in a culture that promotes customer loyalty, the entire organization must be devoted to valuing both customers and fellow employees who are often referred to as internal customers. Bill Marriott Sr.­ was noted for saying, “The way you treat your employees is the way they will treat the guest.”

When implementing a competitive strategy that deals with loyalty also take note that the customer experience needs to be aligned with organizational promises. When the customer’s experience is not reflective of what has been advertised, promised, or expected, the customer’s trust in the organization is undermined resulting in many lost revenue opportunities. Therefore, there is an urgent need to create strong relationships through frequent points of connection, and deliver unique service experiences as expected and promised by the organization’s marketing and advertising. The immediate impact of delivering an exceptional experience based on what is promised is a winning combination and a powerful weapon against your competition.

Tammy A.S. Kohl is President of Resource Associates Corporation. For over 30 years, RAC has specialized in helping businesses achieve high levels of excellence and success by adopting customer loyalty strategies as a critical success factor of organizational success. Learn how at www.resourceassociatescorp.com or contact RAC directly at 800.799.6227.

The value you provide to your customers is always compared to the value your competitors provide: therefore, value is your customers’ perception relative to similar products or services in the marketplace—your competitors.

Perceived value occurs at the intersection of what customers want and what they get from you versus what they could get from your competition. You can only sustain customer loyalty by continually meeting your customers’ product/service qualifications, specifications, or expectations. You also need to meet their needs in the order that customers deem important while maintaining a favorable comparison between you and your competition. In your marketplace, your competitors are the alternative suppliers your customers use to form their comparative value perceptions. How would your customer define perceived value?

For example if your customers expect your product to perform error free, to be delivered on time, to be supported by timely and personal technical support, and to be properly billed at a fair price, you must be good in all categories to get an “A,” and you must be at least as good as your competitors. If you deliver a product that meets all of their design specifications but are unable to provide personal technical support, you failed in meeting an important criteria; therefore, the perceived value will decrease. For every mark you miss, the value as defined by your customers decreases and you slowly lose the ability to develop a loyal customer relationship. To create and sustain loyal customers it is necessary to consider every contact with each customer as an opportunity for you to provide value—every time. Every service point is critical and every service point has a level of expectation from the customer that must be understood and managed. We call these contact points—points of connection.

Every point of connection gives your organization the opportunity to emotionally connect with your customers. Your customers will judge your value and their emotional tie at every point. Developing and implementing a strategy of creating a consistent emotional connection with your customer creates value, which creates loyal customer relationships.

We know that loyal customers will always return to purchase your product or service, which create a long-term stream of revenue. Another advantage of loyal customers is that they will consistently boast about your product or service creating the most effective and least expensive form of advertising for your organization. Additional advantages of developing a loyal customer base is their willingness to pay more for your product or service, and they are also more forgiving when your organization makes a mistake. Why? As loyal customers, they trust your organization and have faith that you are fair.

Making the strategic decision to create a loyal customer base is one of the most important commitments you can make to the success of your organization. Your individual contribution is also a large part of that success.

Tammy A.S. Kohl is President of Resource Associates Corporation. For over 30 years, RAC has specialized in business and management consulting, strategic planning, leadership development, executive coaching, and youth leadership. For more information visit www.resourceassociatescorp.com or contact RAC directly at 800.799.6227.

Based on our experience with all types of organizations including traditional businesses as well as non-profits, we would add in order to make a profit or to be financially viable or best serve their community. Therefore, if the reason for organizations to be in business centers on their customers or the community they serve, as your organization’s leadership team, managing and measuring your customer interface becomes one of your most important functions.

Making certain that your customers get what they want and come back for more is of critical importance to the long-term success of any organization. All factors that impact negatively on the customer must be identified and corrected if you wish to compete effectively and profitably now and in the future. To a successful business, customers are the most important ingredients, and it is quite challenging to conduct a business without them. Your organization’s leadership team has several critical functions as it relates to your customers. The leadership team must develop appropriate customer-oriented strategies, design and implement customer-friendly policies/processes, develop your employees as it relates to creating and sustaining customer relationships, and constantly monitor and continuously improve your progress on the issues that are defined as most important to your customers. What does your organization do to attract customers, and what are the costs associated with attracting and maintaining loyal customers?

There are two measurements that will help you understand and manage your customer relationships: customer satisfaction and customer loyalty. Currently, it seems the majority of leadership teams are focusing on customer satisfaction to determine their customer service measurements, therefore their level of success. This measurement is flawed and often falls short of actionable expectations. Satisfaction surveys are unable to predict customer behaviors because they are built on faulty foundations. Many organizations assume that high levels of satisfaction translate into customer loyalty when, in fact, customer satisfaction ratings are more closely linked to your customers’ perceptions of your products or services. Satisfaction is a measurement of, “I expected it and got it.” therefore, “I’m satisfied.” If this were translated into any grading system, satisfaction could easily translate into a grade of “C” on any report card. The desired score is obviously an “A” and A’s always equate to loyal customers. A’s imply that customers got more than they expected and their expectations were exceeded in some way. Based on what is truly important to customers, they received more value from you than from your competitors. Which measurement does your organization use?

Why do you want loyal customers? Often, the challenge that organizations face is one of focus. Ancient civilizations viewed our earth as the center of the universe—they believed everything rotated around us. Today, most executives focus on profitability as the most important factor to the survival of business. Is it possible that modern business theories like ancient natural science theories are built around an equally false center? The notion that there is no linkage between customer retention and profitability is being proven false. Recent studies that sought to find linkage between customer retention and profits have supported the fact that the old notion is indeed false. There is a direct linkage between customer retention and profitability.

Checkout future blog posts on how customers define perceived value.

Tammy A.S. Kohl is President of Resource Associates Corporation. For over 30 years, RAC has specialized in business and management consulting, strategic planning, leadership development, executive coaching, and youth leadership. For more information visit www.resourceassociatescorp.com or contact RAC directly at 800.799.6227.

After my early gym routine this morning, I had a window of time to run across the street to the grocery store. It was approximately 7:20 a.m. and my goal was to pick up some necessities for the week. Based on how the store is laid out, my first stop was the deli. As I waited, because there was no one currently staffing the deli, I observed five staff members in the bakery, the produce section, and the floral department taking inventory, stocking produce, rearranging displays, and discussing certain NFL teams and their playoff status based on yesterday’s games. As I stood there patiently waiting to be helped, none of the five folks who could physically see me thought it important to go find someone to fill my deli order. Their priority was stocking and rearranging. After about five minutes a young lady appeared. She did not say good morning, Happy New Year, or make eye contact. She proceeded to put on her sanitary gloves and asked, “What can I get for you?” She filled my order and sent me on my way with a thank you.

The essence of customer loyalty is all about the points of connection—every single touch point your employees have with every customer. In my seven-minute deli experience there were at least 15 points of connection that were missed or poorly executed. Five staff members watched me wait in front of the deli counter and none of them took the time to acknowledge my existence or offer to find someone to assist me. In my opinion, this earns double demerits because they could clearly see I wanted something from the deli and did nothing about it. (10 points of connection missed). The lady working in the floral area took the time to talk with a bread vendor in lieu of offering assistance (1 point missed).

When the young deli worker appeared there was no eye contact and there was no greeting (2 points missed). Her attitude was lackluster at best. She really did not appear pleased to be at work serving a customer (1 point missed). As she was completing my order another customer appeared and her opening line was “What can I get for you?” with no additional pleasantries (another point missed).

Points of connection define the customer experience and determine how a customer rates their service and how they ultimately rate your business. Your business is dead without customers. Adopting customer loyalty as a management strategy is critical to the success of business and industry in our ever-growing service environment. If you want to make a significant difference in the results of your business for 2010, I would strongly encourage you look how customer loyalty is defined in your organization. I am confident that the five staff people watching me wait for assistance are not bad employees and they were genuinely “doing their job.” However, I am also confident store management does not embrace customer loyalty practices or my early morning shopping experience would have been quite different. Unfortunately, my experience with the deli that morning is not my first.

Why do I continue to shop there? It is the closest store to my home and office. However, next closest store is only about 3 miles further and I have decided to break my habit and investigate the other store. If their services prove to be better my current store will lose a 5-year, weekly customer. By my conservative calculations that nets approximately $20,800 worth of business.

Take a serious look at your organization’s customer loyalty standards, practices, and measurements. No business in today’s ever changing economic world can afford to lose a customer because of non-existent or inappropriate points of connection.

Tammy A.S. Kohl is President of Resource Associates Corporation. For over 30 years, RAC has specialized in business and management consulting, strategic planning, leadership development, executive coaching, and youth leadership. For more information visit www.resourceassociatescorp.com or contact RAC directly at 800.799.6227.