National Clothesline

What does it take to turn more of your regular customers into your ideal customers? What are the real components that connect loyalty to profitability?

The following is a three-dimensional look at your customers’ loyalty and its impact on your business.

There are four elements behind profitable customer loyalty. The first element is attitudinal loyalty.

We have to start by recognizing that mere satisfaction is not enough. It has been found that 50 percent or more of a company’s highly satisfied customers are not particularly loyal.

Is satisfaction necessary for loyalty? Of course it is. But satisfaction does not equal loyalty.

Attitudinal loyalty is about wanting to do business with your company. It is not about mere satisfaction, though satisfaction has a role.

It is critical, operationally, that companies understand the customer’s take away — their assessment of how well you did when they engage you in different touch points.

This is particularly important in drycleaning where front-line staff do their best to serve the customer according to your company’s standards.

The question is — are they doing it well? Does the customer perceive “following the standard” as being acceptable? Is it satisfactory enough to support a loyal relationship?

I agree that satisfaction has a place, but it is all about your operations and the customer’s perception of them. In other words, do they want to be loyal to you?

Basically, attitudinal loyalty is a measure of their wanting to do business with you.

The second element is behavioral loyalty.

Research shows that when customers have a choice in the market where they give you a share of their business and somebody else another share, how much they spend with you relative to other companies is critical to business performance. In fact there are several studies that identify it as a key indicator of business success and business performance.

Behavioral loyalty then goes beyond just wanting to do business with you. It’s literally about them spending more money with your company relative to what they spend with others with similar services.

Not all customers are equal. It’s commonly accepted that most companies’ profit comes from about 20 percent of their customers.

And if that’s true, another 40 to 60 percent are break-even customers, with the remaining 20 to 30 percent actually costing you money.

That is why loyalty efforts need to be directed to your most profitable customers. When you talk about what is an optimal level of loyalty, or a maximum level of loyalty that a company should strive for, the answer depends on profitability and retaining profitable loyal customers.

The last element that’s necessary in terms of measuring and managing customer loyalty is actionability. What makes this element critical is making sure you take into account the different segments that lie within your customer base.

Most programs only help you understand major segments as a whole. When we talk to clients about how they want to segment their customer base, they talk about small, medium and large customers. They talk about regions. They talk about elements that are organized or profile characteristics that they’re used to thinking about when they describe different types of customers.

When you do your analysis and you get data back and you’re doing key driver work on those, you are trying to optimize the findings across a fairly large heterogeneous group of customers and that limits the ability to which you can really drive improvement.

How can you use this information to drive and manage growth?

First we have to realize that customers can be high on behavioral loyalty and low on attitudinal loyalty, and vice versa.

It is not unusual to find differences and that might be because the person who makes the decision is not the person who actually engages with you and has no choice even though he prefers to use somebody else. The wife tells the husband where to take their cleaning.

By first charting attitudinal and behavioral drivers, and then adding a third dimension — customer value in terms of profitably loyalty — drycleaners can begin to get a clearer picture of their most profitable customers.

These are customers who want to do business with you. They give you more than your share of business, and they’re profitable.

If you think about it, the percentage of customers that fall into that space reflect the one number you need to measure and manage, because as that grows — as you turn more of your current customers into these ideal customers — you will see your business grow.

Moving customers from other areas into becoming ideal customers.

We need to be able to address the needs of identifiable customer segments. In other words, what are the drivers of your most important segment levels: convenience; quality; price; or a combination of these and other factors?

Most drycleaners have never taken the time to segment their customers. I recommend that you use a data-driven segmentation. It doesn’t have to be fancy, it just needs to be factual.

When you have data driven segmentation that’s developed to differentiate, in an addressable way, then you have the ability to act upon it and you get tremendous actionability.

Simply put, this approach really can help drycleaners take their satisfaction and loyalty programs to the next level, while also supplying management with the one number they need to monitor in order to achieve business growth.