Understanding Customer Loyalty and the Scale Curve

If you have ever wondered how you can gain more customers, first start with the ones that you already have. Most customers will fall into one of three categories; vulnerable, neutral, or loyal.

If you have ever wondered how you can gain more customers, first start with the ones that you already have. Most customers will fall into one of three categories; vulnerable, neutral, or loyal.

By focusing on increasing the loyalty with the clients or customers that are currently ‘on the fence’ or worse – dissatisfied – you can secure more reliable business. The problem is that most organizations don’t actually understand their customer or know exactly what creates a loyal, neutral, or vulnerable customer.

Did you know that customer research and loyalty can predict and guide scale?

In this article, we’ll share how to identify customer loyalty and how we can predict and guide a successful strategy and tactics. Before you read this, we suggest taking a minute to experiment with the Loyalty Calculator. This will give you context and insight into how valuable customer loyalty can be to your business.

Loyalty Value Calculator

What is the Customer Loyalty Process and how can it be calculated?

The customer loyalty process identifies your high-value customers and helps your organization to:

• Extract more from those customers
• Migrate weaker customers to stronger
• Focus on better prospects – those more likely to be Loyal

In short, by focusing on how to create more value for customers and prospects, it adds significant value to the organization. Use our analysis to help guide your organization on the path to acquiring and developing customers, eventually leading to category domination.

Customer loyalty explores:

1. How do customers differ in behaviors that are critical to the organization? This effort produces segments of customers of different values.
2. Why do those customers exist? What’s different between them? Why does a customer “hire” your company and how do they evaluate your performance?
3. What are the gaps that the customer recognizes that they want to bridge (reasons that a company would hire you)?
4. Where are the value gaps that the customer doesn’t recognize – but when pointed out prompts the response, “You can do that? Wow! That would make perfect sense!”

Now how many of those questions do you actively explore in your current business development process and have the answers for? Probably not as many you might hope.

In fact, most organizations don’t have that deep insight into their prospect and customer bases (what we refer to as “the audience”) and this is the problem to consistent business growth. You need to understand those questions in order to effectively guide your organization’s strategy and the specific actions and tactics that flow from it.

Why use our method to improve customer loyalty?

Even if you think you’re implementing the right methodology to improve customer satisfaction, it might be the very reason you’re losing business.

Case Example:

ScaleWerks were working with a company that made plastic products for the finishing industry, helping them grow their revenue and value. Their current efforts focused on customer satisfaction research – distinct from customer loyalty research/analysis – gathered by using their sales team to periodically interview customers. This research kept delivering high marks, but only around the dimensions that were being measured, such as price and service.

What they thought they needed to build stronger customers:

The information pointed to a strong interest in having more features on existing products, a lower price point, and easier access to online ordering and order tracking information. Product management took that information and looked for ways to reduce costs and improve service features.

Their reward for following the insight they’d gained? Customers shared the same insight with competitors – and “a race to the bottom” was triggered. They actually lost share, revenue, and customers!

What they actually needed to build stronger customers:

We suggested a different approach –customer loyalty measurement and analysis.

As the graph shows, there is a process that can be used to navigate the difficult process of corporate transformation and price is not a factor. Our approach focuses on driving quality, authority, and eventually community.

The Do’s and Don’t’s of corporate transformation:

Loyalty research is a guidepost to the difficult process of corporate transformation. Here are a few pointers we’ve picked up along the way:

• If your company is managing people instead of processes (SmartScaling companies manage processes and lead people) – you’re in for a cultural and business transformation. Don’t skip the culture part.
• This is about owning a category, not winning the niche wars. If you are looking to be faster, better, and or cheaper – there are programs for that. This is a process approach that will make you different – and being different is a category strategy.
• According to studies by strategy firms only 8.0% of companies that undertake strategy initiatives actually achieve measurable results. This is not a strategy initiative – this is a full-on process – so be sure whoever you work with is in the execution business!

Next Steps

Take a look at the Loyalty Value Calculator and assess the value of loyalty to you and your organization. Imagine using that loyalty “dividend” to drive scale at your business!

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