I recently read an interesting article in the Harvard Business Review called “Customer Loyalty is Overrated.” The essence of the well-received piece is that over time, brand and customer loyalty become so strong that companies selling products / services to customers don’t have to try as hard over to retain their customers because customers become so accustomed to buying their products / services that any marketing investments spent on creating and maintaining loyalty are “wasted” and could be used in other parts of the organization.
As a lead Consultant for the design, development, and delivery of hundreds of sophisticated business simulations that teach business professionals the Business Acumen skills needed for success, I couldn’t disagree more. Over the past 25 years I have refined our core simulation algorithms to reflect the practical realities of competitive markets and the skills needed to execute the chosen strategy that will yield the desired business results.
As we all know, customers can be fickle and can change their minds at a moment’s notice. However, we also know that every customer makes buying decisions based on a concept we call the Value Dashboard™ which is basically a combinations of reasons and factors that drive the decision making process. In most free-market systems, it is the perception of the elements of the value dashboard –relative to competitors – that drive decisions and are the foundation for customer loyalty. Based on our work, I am pleased to share three Business Acumen skills that drive customer loyalty and are needed by your organization:
Determining the Complete Customer Experience Relative to Price
Every customer going through a purchasing process is buying an experience. That experience is essentially the use of a product / service to provide value to make something better or to satisfy a need that can’t be met any other way. As a simple example, we buy cold medication to relieve the symptoms of a cold. If you are suffering from a nasty cold and you need to get better quickly, there are an assortment of different cold remedy solutions to choose from or you simply don’t spend any money and stay in bed suffering until you get better. Most of the time, a person with a bad cold will purchase the product that gives them the best perceived relief at the most reasonable price. The Business Acumen skill needed to do this is the ability to determine the best price for the value provided relative to the competition. That price has to be consistent with the overall strategy and create the appropriate margin for that overall strategy.
Determining the Complete Customer Experience Relative to Quality
In addition to price, every customer is going to make a buying decision based on their perception of the quality embedded into the complete customer experience. Continuing with my earlier example, the customer with a bad cold can buy a branded product, a generic product, or no product. The branded product has the perception of quality and in most cases real ingredient-driven quality to offer a strong solution to the customer. The generic (low cost) product offers the perception of acceptable quality at a lower cost. Either of these approaches requires a strict discipline of Business Acumen to help determine the best levels of quality at the right price supported by brand awareness to create the ultimate value proposition to customers.
Determining the Connection Between the Company and the Customer
The third element is a relatively new one, but very important in todays’ digital world of marketing. Companies must now have the skills and tools to create connections between themselves and their customers; connections in terms of information, the ongoing reinforcement of the value proposition, and potentially additional and unexpected value. Imagine for a moment that after your bad cold was over you went to the cold product’s web page and signed up for more information about their product, tips on cold prevention, and opportunities for new product testing. Then one day you walk into your large drug store and as you are approaching the cold products section you get a text message on your smartphone with a limited coupon to try the new cherry vanilla flavor of the product at 50% off. Business Acumen today is having a sophisticated skill set to help understand, determine, and build the connection your company has with your customers. I believe the more investment made here, the more loyalty you can build.
In summary, I feel strongly that customer loyalty is more important now than ever before. It is critical for organizations to invest in the skill building and training needed to develop the skills required to build strong relationships which will in return yield more revenue and hopefully more profit.
