Developing a Passion for Customer Loyalty and Moving Beyond Customer Satisfaction


Any successful business will satisfy its customers. The truly successful - the growth companies - also will gain customer loyalty. At Reynolds, we have developed a passion for customer loyalty as a critical business and performance benchmark, which moves us beyond customer satisfaction. Customer satisfaction is still necessary, it's the ante to compete and the antecedent to loyalty, but customer satisfaction alone is no longer sufficient to sustain profitable customer relationships.

Customers can be satisfied with your product and service, yet be willing to switch to another provider who offers the next product iteration, the next feature, the next price reduction. A loyal customer has made a business judgment - a value determination - and concludes: I would choose Reynolds again. That's the key for us. A loyal customer makes a brand decision; a satisfied customer makes a product decision.

Among the customer data we collect is a focus on loyalty and specific measures on a customer's willingness to recommend Reynolds to another company and the customer's intention to continue with Reynolds. We plot "willingness to recommend" and "intention to continue" data points that create a Loyalty Index. The Loyalty Index has several advantages. It is future-oriented and predictive; that is in contrast to most customer satisfaction data, which is backward-looking. "Did the product we delivered six months ago meet your needs?" "Did we respond quickly to the last service call?" Measures that look back are useful but limited. The Loyalty Index suggests what the customer will do in the future - and, therefore, can be combined with sales data around the actual net new business closed with the dealership in order to gauge how well our business is performing.

We map the Loyalty Index score and measure that score against our sales efforts to introduce new technology solutions to this customer. If the customer carries a high Loyalty Index score - meaning they will recommend Reynolds to another company and they intend to continue with Reynolds - then what new business have we created with that customer? We plot where the data suggests we should be on these measures and then plot the actual data. If there is a gap, we ask ourselves, why? Is our incentive compensation not aligned with what we are trying to accomplish in customer loyalty? Are we not identifying the customer's needs correctly and, therefore, not offering solutions that match the true needs? Ultimately, a focus on customer loyalty has caused us to examine our business and organization more critically and to change our economic model.

Our new economic formula (our Hedgehog, to borrow a phrase from Tim Collins's wonderful book From Good to Great) is E = A + NS. The E is the economic driver for the company. The A is application penetration, which means the number of applications used by a single customer. For example, if Reynolds offers 200 applications, how many are being used by any particular customer? If the answer is one application, then how do we get 199 more? We'll never get all 200, because some of them are simply different alternatives, but we certainly expect to see the number of applications in our most loyal customers continue to rise. The final variable is NS, which stands for New Start. How do we get new dealerships, new car companies, new heavy equipment dealers, and new sports retailers signed up as customers? This economic model forces a dual focus and balance on increasing penetration with our most loyal customers and creating new starts with new customers. And it provides the framework within which to track the data. Simple, but powerful.

In the ideal life cycle with a customer, to build loyalty we begin with a vision of the way automotive retailing can be done - the future of automobile retailing - and illustrate how our technology and software applications can move the retailer into that future. Our value propositions to these customers are precise and driven by metrics. "Our technology and software solutions will increase your customer retention, your service capture rate, downstream revenue and profit opportunity, and improve your average repair order by x percent." Those become the business metrics the customer uses to evaluate our solutions and the metrics we use to demonstrate the return on the customer's investment in Reynolds technology. And they're not hollow claims. Each metric is tracked with automated tools and reported to the individual customer and, in aggregate, to other prospects.

In this life cycle with a customer, typically we begin with a series of base applications that demonstrate Return on Investment and the impact on the customer's business. From there, we identify additional applications - additional return opportunities - and continue to move with the customer up the value chain, from automating simple operational processes, such as payroll and accounts payable, through all of the enterprise-wide processing applications and then to more sophisticated applications and services focused on customer loyalty, retention, and Customer Relationship Management.

Finally, the other change a Loyalty Index can drive in an organization is a new look at the allocation of resources. With Reynolds' economic model and loyalty metrics, we are forced to get real clear - real fast -on where to put resources to increase business penetration with a customer, to move a customer up the value chain, to gain a new customer, or to focus on customers who are wavering on using us in the future. At Reynolds, we have realigned our organization, literally, so that the full breath of resources from across the organization - technical, human, and financial - can be brought to bear on any customer at any time to support our economic formula. That means fewer silos. Fewer artificial department lines. Fewer divisions internally. And it's driven by our economic formula. One result is, today, Reynolds has built the largest customer-facing organization in our industry. It is one more investment in long-term, profitable customer relationships, built on customer loyalty.




The CTO Handbook. The Indispensable Technology Leadership Resource for Chief Technology Officers
The CTO Handbook/Job Manual: A Wealth of Reference Material and Thought Leadership on What Every Manager Needs to Know to Lead Their Technology Team
ISBN: 1587623676
EAN: 2147483647
Year: 2003
Pages: 213

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