5 Reasons Companies Fail to Earn Customer Loyalty

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Your business may say it’s committed to cultivating customer loyalty, but are your actions backing up those words? According to Bain & Company’s Rob Markey, many companies make five key mistakes that keep them from building a more profitable network of loyal customers and promoters.

Intuitively, most tech founders know that happy customers generally equate to passionate, loyal customers. Those clients typically buy more, stay longer, cost less to serve, and they often passionately encourage new customers to use your product, too.

But just how valuable is that loyalty? Quantifiably, it can be hard to assess. Unless, of course, you’ve implemented a clear system for gauging what Bain & Company partner Rob Markey calls the “economics of loyalty.”

“With careful analysis, companies can not only estimate the relative profitability of their most loyal customers, they can also estimate the impact of proposed actions and initiatives on company performance,” Markey explains. “Each category of a company’s customers tends to exhibit different patterns of behavior, and those patterns can have corresponding effects on profitability that can be precisely quantified.”

Markey, who co-authored the New York Times bestseller, The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World, sat down with OpenView to talk about the power of loyal promoters, and share five reasons why many companies botch customer loyalty programs.

5 Reasons Companies Fail to Earn Customer Loyalty

1) Earning customer loyalty isn’t central to your company’s mission

In order to leverage promoters to build your brand and increase profitability, businesses must fully embrace the importance of customer loyalty. It needs to be a company-wide priority that guides every part of the organization.

Unfortunately, Markey says, too few businesses actually make that commitment. Instead, they implement a perfunctory program that falls short, or they believe that management buy-in alone will ensure that everyone puts their energy behind identifying passionate customers and cultivating stronger relationships with them.

“Business leaders often think about the levers they can pull to achieve a given set of results — focusing on metrics, incentives and initiatives,” Markey says. “Instituting a successful Net Promoter System involves plenty of all three. But the mindset that underlies it is quite different.”

Greatness doesn’t come just from getting managerial levers right, Markey says. It comes from inspiring every person at every level of the organization to get excited about doing things that delight customers.

2) You aren’t using a reliable metric

For years, companies have used many different methods for gauging customer behavior, some of which have worked better than others at capturing relevant customer insight.

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Markey says he believes so strongly in Bain’s Net Promoter System as a reliable customer loyalty metric because of its simplicity and adaptability.

“Net Promoter surveys typically require just two or three questions, which keeps the burden on the customer low,” Markey explains. “There are no complex indices or correlation coefficients, and the Net Promoter score is a single number that can be tracked from week-to-week and month-to-month, just like net profit, and broken down however you wish — by target market, product line, or even individual employee contributions.”

3) You aren’t ready to close the loop

Most businesses collect customer feedback in some form. Too often, however, that feedback disappears into a vacuum, never to be implemented or acted on.

That’s a problem, Markey says, because for customer loyalty programs to really work, businesses must close the loop on the feedback they receive. If a customer registers a complaint and has communicated a willingness to engage in a conversation about it, someone needs to respond to that customer as quickly as possible. Similarly, if customer surveys reveal a blind spot or weakness in your product, it’s critical to fix that bug immediately.

“Customers need to know that their voice is being heard, or they’ll begin to tune out your outreach,” Markey says. “Likewise, businesses need to empower their employees to quickly and confidently take action. The beauty of a program like Net Promoter is that it allows individuals to accelerate the pace at which they create better products, processes, policies, and experiences. It gives them the information they need to take action.”

4) Your account teams think they know better

While it might seem like getting everyone in your organization to happily buy into customer loyalty would be easy, the reality is that you’ll likely experience some push-back from customer-facing roles.

Markey says those people often fool themselves into thinking they know everything there is to know about their accounts, and they become protective of them.

“Salespeople sometimes see customer satisfaction surveys as an annoyance or a waste of their customers’ time, and they notoriously operate from a glass-half-full perspective — they think they’re in total control of the situation,” Markey says. “The problem with that is you get lulled you into a false sense of control, and then get blindsided when a client suddenly cancels their account. The Net Promoter System provides a stream of feedback that your sales team might not pick up, and dramatically reduces the incidences of surprise.”

5) You’re making it too complicated

All too often, businesses try to over-engineer their customer loyalty programs. They develop lengthy surveys that touch on every possible issue, and then layer heavy analytics and drive analysis on top of that.

While that added insight can be helpful, Markey says it can also be unnecessarily burdensome.

“The ultimate goal here is to make your feedback loop only as complicated as it really needs to be,” Markey explains. “You want the flow of information to be direct and unedited, and you want to ensure that customers are willingly transparent about their experiences. That’s really the only way to acquire the type of information that gives you the confidence to take bold action.”

Key Takeaway: Weave Customer Loyalty into the Fabric of Your Business

Many customer loyalty programs are fueled by incentives — rewards (financial or otherwise) for delivering a certain number of surveys, or acquiring a specific amount of feedback. While those incentives can be effective means for influencing activity, Markey says they’re often misguided.

The reason? Incentives are nice, but unless your organization truly believes that customer feedback is critical to learning, improvement, and action, then your efforts won’t move the needle.

“Incentives spawn action, but they do nothing to cultivate passion,” Markey says. “If customer loyalty and success isn’t a strategically critical component of your business and a key part of your mission, then you may as well not bother with it.”

Photo by: Jackie

Head of Customer Strategy & Marketing Practice