Keeping loyalty alive: Researching your customers

By Neil Davey, editor

Common business wisdom suggests that it costs up to ten times as much to attract a new customer as it does to retain an existing one – emphasis, if it were needed, of the importance of your clients' loyalty. The actual process of creating such a binding relationship, however, is littered with challenges. The matter is complicated by the fact that the modern customer is more demanding than ever before.

But that’s only part of the story, and if you could perform a post-mortem on most failed customer-company relationships you would find that the cause of death is a self-inflicted blow by the company itself. In many cases, businesses simply press the self-destruct button by failing to find out what their customers expect of them in the first place.

It sounds obvious. But how many companies can honestly say they know exactly what their clients expect of them? And if you don’t know the basic benchmark of what your customers expect of you (‘hygiene factors’) then it will be difficult for you to know how surpass these expectations with value over and above these factors (‘loyalty drivers’). Of course, the best way to find out what your clients expect and what is important is to ask them – and there are numerous ways in which firms can approach this.

One firm that has successfully explored customer reviews through a third party is IFS Defence. A joint venture established in 2000 between BAE Systems and IFS, IFS Defence combines military and defence knowledge and experience with ERP software expertise to meet defence industry needs for the likes of Lockheed Martin and General Dynamics. The market it operates within is aggressively competitive, and IFS Defence is pitched against two very large companies and a number of niche players. In a bid to improve competitiveness and customer loyalty, the company recently decided to puts its customers under the microscope.

“We had the classic issue of wanting a true understanding of what our clients believe,” says Harry Watson, business director and an executive director at IFS Defence. “Organisations have a perception of what clients believe but it is much more difficult to get a realistic picture of what clients think.” The company had previously pursued several customer analysis methods, including the classic combinations of questionnaires sent to customers and informal and ad hoc interviews with clients at the close of projects, but it never had total confidence that the information was of the best integrity.

“You need to get to the heart of what your customers think –whether you agree with them or not, a customer’s perception is your reality, and if that is what they think then you have to act upon it,” continues Watson. “The problem with a lot of customer surveys, whether done internally or with a third party, is that you send them to a client to fill out and you get a poor response because people are busy and those that do reply are not very well thought through.

"Furthermore, a lot of surveys that we tend to do are almost reinforcing our own prejudices about what we think our customers think. We were looking for a process whereby the interview took place on a face to face basis and therefore the information we could ask would be targeted in the areas that would be important to our customers.”

Voice of the customer

Meeting these criteria was Bsquared Consulting and its Customer Review process. Working together with Bsquared, a set of questions were tailored to ensure that respondents could provide the most important information and a team of around 20 interviewers were trained and deployed. As the project began, the data was analysed in depth to ensure that questions were getting the desired results. The end product yielded some fascinating findings, particularly where IFS Defence could add value to capture greater loyalty. Watson believes that the work has proved invaluable at refreshing the company’s approach to existing clients.

“As a supplier, you tend to have a perception of what your client wants from you and which is reinforced over time,” says Watson. “With a new client you take a fresh look to see what you can do whereas with existing firms you can sometimes neglect to take a fresh look every so often and you can fall into the trap of you perceiving that the type of service you offer is acceptable to the client because that is what you have done for them for a number of years. It was only when we carried out the reviews that we realised we could do more. But the process we went through allowed us, even with clients we have worked with for many years, to treat them with the respect of a new client.”

IFS Defence has now adopted the process as part of its overall business improvement process. “Financially we have felt the benefit,” concludes Watson. “It has opened doors for us and also caught issues with customers early enough so that we could do something about it cost-effectively and before it became more of an issue for the client.”

Such customer dialogue is proving so successful for some firms that the process has organically grown into a regular part of their operations. DSTi Output is a case in point. A critical mail specialist, DSTi Output has a range of clients including financial services, insurance, retail and communications companies including Orange. Operating in an industry that relies on customer loyalty, it closely monitors the challenges of their customers’ sectors and the activity of its key competitors to enable it to ensure its services always meets its customers’ needs – as well as surpasses their expectations. But it also undertakes its own customer research on a regular basis, which provides a much more accurate view of its clients’ opinions.

“We measure this on a monthly basis and on a quarterly basis because the more we know about our customers the closer we can become to them,” says Natasha Plant, manager at DSTi Output. “We can begin adding real value if we know what their perceptions of value are and where we can actually make a difference. And that means we can better service the customers.” The company undertakes regular service reviews and also has dedicated client teams facing off to its customers. In addition, it also conducts voice of the customer (VOC) surveys every quarter.

“It looks at all the areas of where we touch customers - relationship management, finance, the different product sets, letters, statements, design development and so on,” continues Plant. “We have used it as a vehicle to take back into our organisation and talk about where we feel we need changes - it elevates the customers’ positioning internally.” Cleverly, DSTi Output then works this customer feedback into tailor-made service level agreements for its clients, thereby building on previous service benchmarks to create a higher-quality proposition that it is bound to.

This has proven to be a successful strategy to build loyalty for DSTi Output, which has established itself as the fastest growing critical mail specialist in the UK. Capturing customer loyalty is no mean feat in the modern market, where the power rests with the consumer. Indeed, gaining loyalty in the modern market is, as an increasing number of firms are finding, an extremely challenging exercise. But by engaging them in dialogue, as DSTi Output and IFS Defence have shown, you greatly increase the odds of capturing loyalty – and keeping the customer-company relationship alive and kicking.

Read more features, practical case studies and white papers about customer loyalty and how to improve your customer value proposition.

Find out more about Neil Davey