|
It's the $64,000 question: What makes a customer loyal? In the
1980s, many business advisors would have said "satisfaction
with a product or service," but today we know that loyalty
goes way beyond simple satisfaction.
In customer surveys across industries and market segments, most
customers rate themselves as at least "satisfied" with
a product they are using. But that doesn't mean they plan to buy
that product again. Indeed, satisfaction alone does not give a
company a strategic advantage. Auto analyst J.D. Power said it
best: "A satisfied buyer is a repeat buyer -- maybe."
Customer loyalty is a much more reliable measure for predicting
sales and financial growth than customer satisfaction. Unlike
satisfaction, which is an attitude, loyalty can be defined in
terms of buying behavior. A loyal customer is one who:
- Makes regular repeat purchases.
- Purchases across product and service lines.
- Refers others, and
- Demonstrates an immunity to the pull of the competition.
There is a common denominator that runs through all these behaviors
and helps explain why loyalty and profitability are so inextricably
linked: Each behavior, either directly or indirectly, contributes
to sales.
How do these behaviors manifest themselves in the context of
a company-customer relationship? Harley-Davidson Inc., a company
with perhaps the most loyal customer base in the U.S., provides
an excellent example.
When Harley-Davidson reached its 90th birthday in June 1993,
it boasted 63 percent market share. That special day was celebrated
by 100,000 people, including 18,000 members of the Harley-Davidson
Owners Group (HOG). Harley's customer loyalty is legendary, but
it was not always so.
At the start of the 1980s, few people gave the company much chance
of surviving. The last American motorcycle manufacturer, Harley
was being run out of business by Japanese manufacturers. This
marked a turning point, when the company decided to correct a
host of quality problems on its product line. By 1987, Harley
had regained its market momentum.
The momentum came not so much from the improved products, but
from Harley's focus on its customers. Concurrently with its quality
program, Harley began identifying the typical Harley customer
(who spends $10,000 on a bike) and found ways to meet that person's
needs. Here's a look at the results, in terms of loyalty behavior:
Makes regular repeat purchases.
Attorney Richard Inzerillo and his wife, Deborah, went from zero
to five Harleys in 15 months, and with each purchase they traded
up. The reason? Harley has identified Richard and Deborah as part
of a Harley customer segment known as RUBs (Rich Urban Bikers).
These people enjoy having new bikes, having a bunch of different
bikes, and fixing up their bikes. They buy new models as they
are offered; they spend liberally on custom details. By learning
about this segment of their customer base, Harley is able to cater
products and services to meet their needs and drive sales.
Purchases across product and service lines. Not only do customers
buy one Harley after another, but they are constantly buying accessories
for their bikes. Some customers buy a $10,000 bike and add additional
items that raise their investment in the machine, doubling and
even tripling the original investment. Over the past decade, the
company's line of branded merchandise -- available only at Harley
dealers and promoted through a glossy catalog -- has taken off.
These products, which are only peripherally related to the bikes
themselves, are an important area for the company. The goods range
from $500 Harley black leather jackets to $65 fringed bras and
$12 shot glasses. The company has learned the value of targeted
brand extension and strategic brand image building to both customer
loyalty and the bottom line.
Refers others. Michelle Russo, a 25-year-old secretary from Long
Island, had a boyfriend. He had a Harley. Before long, she had
a Harley too. Although Michelle began with little interest in
owning a motorcycle, her boyfriend constantly reminded her what
a great machine his Harley was and what fun they could have if
she rode too. He convinced her to buy the Harley starter bike
and she quickly traded up to a Low Rider. She was struck with
Harley fever, and Harley people say there is no known cure for
it. Rather, it seems to be spreading.
Demonstrates immunity to the pull of the competition. Harley
owners refuse to admit that other kinds of bikes even exist. They
are sure that if someone owns another kind of motorcycle, he or
she must secretly be miserable. It isn't because Harleys are the
fastest or leanest bikes on the road either. They aren't. Many
Japanese models are faster, sleeker and perhaps more economical.
But Harleys are classics. Their owners consider them beautiful
machines that provide a sort of transcendental riding experience.
Getting there faster is not the point. Getting there on a Harley
is.
So how do you know when you've
got a loyal customer? People grow into loyal customers in stages.
The process is accomplished over time, with nurturing and attention
to each of the seven stages of growth. Each stage has a specific
need. By recognizing each stage and meeting the specific need,
a company has a greater chance of converting buyers into loyal
customers and clients.
Stage 1: Suspect. Suspects include
everyone who might possibly buy your product or service. We "suspect"
they might buy; we do not know enough yet to be sure. Tip: At
this stage, you conduct market research to get to know this group
better.
Stage 2: Prospect. A prospect is someone
who has a need for your product or service and has the ability
to buy. Although a prospect has not yet purchased from you, he
or she may have heard about you, read about you, or had someone
recommend you to him or her. Prospects know who you are, where
you are, and what you sell, but they still haven't bought from
you. Tip: Get to know them better still (i.e., market research)
and begin marketing your products and services to them, based
on what you learn about them.
Stage 3: Disqualified prospect. These
are prospects about whom you have learned enough to know that
they do not need or do not have the ability to buy your products.
Tip: Remove them from your prospect list, but keep them on file
for networking purposes.
Stage 4: First-time customer. First-time
customers are those who have purchased from you one time. They
can be customers of yours and still be customers of your competitor
as well. Tip: Find out more about them, zero in on their unmet
needs and then meet those needs.
Stage 5: Repeat customer. They have
purchased from you two or more times. They may have bought the
same product twice or bought two different products or services
on two or more occasions. Tip: Direct market to these people to
let them know of specials on the products they buy or to announce
new products and services.
Stage 6: Client. A client buys everything
you have to sell that he or she can possibly use. This person
purchases regularly. You have a strong, ongoing relationship that
makes him or her immune to the pull of the competition. Tip: Place
strategic emphasis on these individuals when you are determining
your marketing plans. Take special care to interact with these
people personally and nurture the relationship.
Stage 7: Advocate. Like a client, an
advocate buys everything you have to sell that he or she can possibly
use and purchases regularly.
In addition, an advocate encourages others to buy from you. An
advocate talks about you, does your marketing for you, and brings
customers to you. Tip: If it looks like loyalty and smells like
loyalty . . . just recognize it when you see it.
Getting from stage one to stage seven takes time, resources and
effort, but the payoff in terms of profitability and loyalty can
be huge. Just ask Harley.
JILL GRIFFIN is author of "Customer Loyalty:
How to Earn It, How to Keep It," and president of loyalty
research and training firm The Marketing Resource Center Inc.
of Austin
(http://www.loyaltysolutions.com).
Griffin can be reached at 512-469-1757 or mrci@eden.com.
|
