As I write these words today, many businesses are spending enormous amounts of money on customer relationship management (CRM) projects. Customer relationship management is the tracking and collection of customer data and it provides demographic information about customers and their buying habits. Companies hope their customer relationship management project will help them create customer loyalty because they want their customers to buy from them on a repeat basis. For the most part, customer relationship projects are not working.
At the end of 2002, Lexmark, a printer company, issued a revised earnings report. The report included an "asset impairment" related to the "abandonment of a customer relationship management software project." Lexmark said it would write off $15.8 million for the failed project. Lexmark is not alone; many large businesses experience dismal results from their customer relationship management projects.
The underlying problem isn't the lack of a need to manage customer relationships. The problem is that no software or machine or any kind of equipment can take the place of personal interactive skills in developing customer loyalty. The typical actions that come about as a result of customer relationship management projects are telephone solicitations and direct-mail advertising. The material results of these efforts are no greater than telephone solicitation and advertising to non-customers. Customer relationship management programs and projects have become just another way of offering customers an additional opportunity to buy products. People aren't loyal because you are persistent in asking them to buy; loyalty is a response to the applications of interpersonal skills.
Customer relationship management projects can't produce results unless they are based on the activities that support the five principles that create loyalty. When companies put the same amount of effort into teaching, training, and equipping their employees with critical interpersonal skills that they have put into customer relationship management projects, then they will see results.
Loyal customers are the single most important asset of every company. Loyal customers are more important than land, buildings, patents, or anything else. It's the customers that bring the money. Because of the three advantages of cost of attraction, predictability, and ease of doing business only loyal customers can produce profits for your business. Land, buildings, patents, and everything else are liabilities until customers bring their money. Companies with a loyal customer base enjoy greater profit in good economic times and can depend on their loyal customers to help them survive difficult financial conditions.
It's not just about profit. The purpose of every company should be to provide value—not just for the owners but the employees and customers as well. Nearly 40 percent of all the companies on the 1990 Fortune 1000 list did not make the 2000 Fortune 1000 list. All of the companies on the 1990 Fortune 1000 list were profitable, but not all of these companies continued to provide value. Creating a loyal customer base is a demonstration of providing value.
As we discuss the five principles, you will notice that they are interrelated. For example, effective communication recognizes that people do business with people, and value and assurance is a differentiator. Each one of the principles is women into the others.
This is the story of why some businesses enjoy tremendous success while other businesses never reach their potential. This is the story of customer loyalty and, more importantly, what you can do to develop loyal customers.
Loyalty is not an emotion, nor is it a feeling or an opinion. Customer loyalty is not dependent on customer satisfaction. Customer loyalty is an activity: The activity of your customers buying from you again and again while they encourage their family and friends to do the same.
Every business depends on repeat customers for profit. The number one question for every company doing business today should be, "How do I get my customers to keep coming back?" The answer to that question is what this book is all about. The way to keep customers coming back is simple. It's not easy, but it is simple.
Before we examine the principles that create customer loyalty in more detail, let me introduce you to the cast of characters that build customer loyalty in this book: you. The person that develops customer loyalty is the salesperson, the customer service representative, the clerk, and the delivery person. It is anyone and everyone that has any contact with the person buying, renting, leasing, or otherwise doing business with your company. When you're one-on-one with your customer, you have the opportunity and power to create customer loyalty. It is also important to note that everyone has contact with customers. An internal customer might be your boss or someone else you work with. Your customer is anyone who relies on you for a product or a service.