I was talking with a new client the other day on the Central Coast, who had just been trying to work out what was going to happen in their business as a result of the economic downturn. I suggested "if you really want to predict how successful your business is going to be, just look at how you treat your customers."
In my experience, if you treat your customers well, provide services they need in a timely, cost-effective and friendly fashion you are likely to generate repeat business. It is this repeat business and client loyalty that has a major impact on business growth & profitability.
If your business strategy and its execution results in a high proportion of loyal clients who are also strong advocates or promoters of your business, then you can confidently predict a highly successful future for your business.
Looking for a low cost strategy that boosts your profits by up to 100%?
Sometime ago Bain & Co., a management consulting firm, revealed that a 5% increase in customer loyalty could yield an increase in profits of 25% to 100% and that companies with the highest level of loyalty grew revenue at a rate of twice that of their competitors.
Repeat business is obviously financially good for business, but how can you accurately predict how loyal your customers are to you? To do this for my clients I use what I call The Advocate Index (TAI).
To calculate the TAI, we start by conducting in-depth phone focus groups with clients of our clients, to gain feedback as to how they are going and also to understand what are their priorities.
During this process we ask a key question that provides us with the most valuable feedback of the focus group: “Would you give an unqualified endorsement (or recommendation) of this company to a business colleague or friend?”
With this question we ask for a rating of 0 to 10, where a score of zero indicates the respondent is not likely to recommend the company and a score of 10 indicates it is extremely likely.
Clients generally fall into one of three groups on this question.
There are 3 types of clients in your future ...
Advocates
These are people who are loyal enthusiasts who not only love dealing with the company but will urge their friends to do likewise. They are advocates and will generally give a score of 9 out 10 on the scale. They are your enthusiastic supporters.
Passives
These are the people who are satisfied but not overly enthusiastic who show subtle loyalty, yet could easily switch to a competitor if the right price came along or they built stronger relationships with your competitor. These people we call passives and generally will give a score of 7 or 8 on the scale.
Critics
The final group are called critics. These are people who are unhappy and are often feeling trapped in their relationship with the company and are what I call ‘C’ clients or ‘cash cows’ or ‘D’ clients for detractors. They generally give a score of 0 to 6.
Bill Gates said "Your most unhappy customers are your greatest source of learning". Listen to what they have to say and take their feedback on board.
The TAI is simply the difference between the percentage of people who give a score of 9-10 (advocates) and the percentage who score 6 and below (critics).
But what does that mean for your business? In our experience there is a strong correlation between those companies with a high TAI score and those with high profitability and high company value.
So, firstly, consider having independently asked 10 sample clients who will give good constructive feedback to the above questions and determine your current rating, then consider the following plan.
How to boost the number of your Advocates
If you suspect your TAI may not be as high as it could be, you need to seriously consider introducing client service standards, relationship marketing for referrals, client management systems and build the number and quality of your strategic alliance partners to help you boost the number of advocates for your company.
Introducing customer service strategies involves 3 specific actions:
1. Decide to take action to build and adhere to strong client service standards.
2. Deliver with superb service, strong relationship marketing for clients and strategic alliance partners.
3. Develop these processes through a simple structured client & alliance management program and reinforcement with your team of client service standards to ensure regular & reliable consistent high level service.
Building a team culture around continuous improvement in developing the client experience provides great internal focus and purpose for your entire company.
Incidentally another intrinsic benefit of having advocates is advocates tend to give more energy to your team, bring more fun and as a result you’re more likely to do your best work for them.
So consider taking stock of your TAI measurement index each 6 to 12 months to evaluate how far down the path to success you are.
By monitoring your TAI score you can see if your business is getting better or worse in the minds of your clients and what impact introducing customer service strategies are having on improving your score.
In the words of Mahatma Gandi:
A customer is the most important visitor on our premises; he is not dependent on
us. We are dependent on him. He is not an interruption in our work. He is the
purpose of it. He is not an outsider in our business. He is part of it. We are
not doing him a favour by serving him. He is doing us a favour by giving us an
opportunity to do so.
In these difficult economic times this low cost high return strategy is indispensable to give you a competitive advantage. To predict and make your future successful you don't need a psychic – just pay close attention to monitoring your client satisfaction.
