So, why may a satisfied customer not be loyal? Well, firstly they may not be that satisfied. On a scale from 1 to 10, most companies achieve a score of around 8 – right in the middle of what we call a “corridor of average satisfaction” spanning from 7 to 9. Eight out of 10 might sound good, but it is only OK. If you want your customers to stay loyal, you have to have scores of 9 out of 10 on the things that really matter.

The Zones Of Customer Satisfaction
We should also recognise that for some customers it is not that difficult to switch suppliers. A tempting offer from a competitor could easily turn the head of a non-committed customer. That’s without acknowledging that there may, of course, be shortfalls in your own offering that encourage people to seek another supplier.

A search on the internet will yield estimates of it being between five and 20 times more costly to acquire new customers than retain existing ones. The most profitable firms are believed to enjoy customer retention rates of around 95%, compared to 80% for the average firm. A defecting customer is thought to tell on average 8 to 10 people about their negative experiences. We hardly need these statistics to tell us the obvious: customer loyalty is important for both growth and profitability, and achieving loyal customers should be a vital aim of any company.

Don’t confuse loyalty with inertia
Our customer loyalty research has shown that in most business-to-business markets 40% to 50% of companies have not introduced any new suppliers of a product in the last five years. At face value it appears that many customers remain loyal to their incumbent supplier and are not inclined to bring new ones in.

This apparent loyalty may, however, be no more than inertia on the part of the buyer. For many buyers it is simply easier to carry on dealing with their existing suppliers than to make a switch, but inertia can quickly change if something goes dramatically wrong or a series of small failures cause the buying company’s patience to snap, or if a competitor knocks on the door with a tempting offer.

So what engenders loyalty?
One of the most important factors that builds loyalty is high quality. There is absolutely no substitute for this and any compromise on quality carries a huge risk.

Also key are the relationships that are built up between the sales/service teams and the customer. It is very difficult to sack somebody you like and who does a good job for you!

However, the most important point about customer loyalty is that it is not driven by the hygiene factors that every major player has to get right to serve the market; rather it is driven by small things, the softer things that are harder to measure and which, in isolation, seem inconsequential. The secret is finding little things to do that go beyond the customer’s expectation and, as a result, make a big impact. It is these small, unexpected actions that build and strengthen relationships and engender customer loyalty.

How do we measure loyalty?
There is a strong correlation between high satisfaction scores on issues that really matter and loyalty, but there is an even stronger correlation between “likelihood to recommend” and customer loyalty. There can be no greater measure of loyalty than a satisfied customer who says “I strongly recommend you do business with this supplier; I wouldn’t go anywhere else”. It is reported that a referral from a loyal customer has a 92% retention rate compared with 68% for a customer acquired from advertising.

In conclusion, there are three important steps to achieving devotion from your customers:

1. Make sure the basics are right
You cannot build loyalty if there are any failings in the basics of your offer. Quality in particular has to be unquestioned. Deliveries must be on time, in full, every time. The price needn’t necessarily be the cheapest, but it must represent good value.

2. Work on the softer issues
Loyalty is based on the strength of the relationships that are built. It is the result of many little things that often go beyond the expectations of the customer. It is the accumulation of these little things that creates trust. Recognise that from time to time things will go wrong and when they do, fix them quickly – and, where possible, give something extra to make up for the failing.

3. Measure and control
Finally, measure everything. Measure customer churn, complaints, customer satisfaction, the frequency of introducing new suppliers, and the likelihood of recommending. Through measurement will come an understanding of the degree of loyalty of your customers and the tools to ensure that it is driven to the highest possible levels.