According to a recent study, many big consumer brands are losing their loyal customers. It revealed that 52% of highly loyal consumers either reduced their loyalty or defected completely from the brands in the study. Further, only 4 out 10 brands in the study retained 50% or more of their highly loyal customers from year to year.
A big reason for this, according to the study is the recession. The economic downturn has caused customers to re-evaluate what they're getting for their money. Our priorities have changed so what we look for in products has changed too. Many customers are looking for more value in the products they buy. And if the big brands have not changed, at least in the eyes of their customers, then customers will defect. They'll try other brands that appear offer more value.
A way to look at this is by using what I call the Customer Loyalty Formula. Here's how it works:
Customer Loyalty = Connection * Value * Experience
(Or CL=C*V*E for short.)
In this formula, Connection means, as a customer, how connected you are with the brand? Can you easily and conveniently communicate with people who represent the brand? Value means your perception of what the brand offers you in the context of what you want and expect. Are you getting what you want or more? Do you feel the brand offers you the best combination of features and benefits for the price?
Finally, Experience here means how have you experienced this brand? Have you been treated well by the people involved? Do you have a positive emotional feeling associated with the brand?
This formula tells us where many big brands have failed in this recession. They have failed to redefine their value. For a brand to keep our loyalty it has to change with us. It needs to show us it offers more value than before.
But the Customer Loyalty Formula offers help to more than just the big brands. Any product or service can use it to increase customer loyalty. If your product or service is suffering customer defections because of the recession, it might be because the customer's value perception of your product has changed. If so you need to change what you offer, change your price or change how you communicate what you offer. You need to help your customers see that you offer the value they want.
You can also improve your customer service to improve customer loyalty. This changes the experience part of the equation. Give your customers a better experience and you'll keep them coming back. And you can improve your customer service by understanding what your customers want and then giving it to them better than anyone else.
Talk to your customers and employees. Find out what's important to them. Do they want to talk a real person on the phone? Would they like to get customer service via email or chat? Do they want your staff to work faster or slower? Ask customers what's most important to them. Ask employees what customers complain about and how they compliment you. Complaints and compliments will tell you a lot about what your customers want.
Knowing what experience your customers want and giving it to them will increase customer loyalty. And you don't have to lower your prices to do it.
Comments
I love this formula. I'm a great believer in the power of compelling brand experience; and this formula helps put experience in a meaningful context.
Hi Andrew - thanks for your feedback on my formula. It's nice to know it actually makes sense to someone else! Thanks for reading!
Kevin Stirtz
Kevin, your insights and way of explaining things so simply, yet powerfully, are refreshing. Thank you for this formulaic way of assessing a business's branding process.
It will soon be on my Recommended List.
Paul Elliott
Shreveport Small Business Marketer
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