Friday, September 19, 2008

Strategies That Keep Profitable Customers Coming Back

Amid the impersonal busyness of the airport, I feel drawn to his warm oasis. My shoes don’t need shining, I think as I take a seat to have my polished shoes shined at Nacho’s shoeshine stand in Terminal 1 at the LA airport. Nacho (his real name) looks up and smiles. I rationalize my decision, Well; my shoes can’t be TOO polished as I fly out to work with the Federal Reserve Bank.

Why would I choose to spend money at Nacho’s getting my shoes shined when they didn’t need it? Because he delivers what scientists tell us are the keys to profitable repeat customers. Do you?

Researcher Timothy Keiningham and collaborators followed 8,000 customers for two years to explore the relationships among survey responses, loyalty behavior, and company growth. (1) They concluded that there is no single metric that links customer loyalty to company growth. However, these investigators did review several strategies that you can customize if you want to draw profitable customers back to you. Many of these compelled me to have my polished shoes shined at Nacho’s stand:

1. Reliability - provide dependable and accurate service.

2. Assurance - convey trust and confidence.

3. Responsiveness - deliver prompt service, especially when customers need help.

4. Empathy - offer personalized experienced with a caring attitude.

5. Delight Customers - investigate and measure what “high level of satisfaction” means to your customers. Then, create systems to consistently deliver that delightFULL experience.

6. Calculate the Net Promoter Score (NPS). The NPS is derived by measuring your customer’s response to this question: “How likely is it that you would recommend this company to a friend or colleague?” Those who rate you as a 9 or 10 are classified as “promoters,” those who rate you 6 or lower are your “detractors.” Your NPS score is calculated based on the difference: the percent promoters minus the percent detractors. Although the NPS has been touted as “the one number that you need to grow,” Keiningham’s follow-up study of 15,000 customers from 21 companies revealed the connection modest. (1, 2)

In our search for simplicity, we sometimes see simplistic solutions to complex issues. Yet Einstein warned us to “make things as simple as possible, but no simpler.” Linking customer loyalty to growth is neither simpler nor easy. Nacho’s secret recipe for success is magical mix of all six of these strategies. For example, in the past year he has changed my shoelaces (without being asked) and given me a new canister of shoe polish (when I merely asked about it) - all without charging me. That’s what keeps us, his profitable customers, coming back, even when our shoes don’t need shinning. Professor Snow at Harvard thinks the American car companies have learned their lesson and are back on track ( ) What do you think? How are you going to adapt these ideas to polish your customer loyalty program?

See you at the airport,


1. Timothy Keiningham and colleagues; Linking Customer Loyalty to Growth, ‘MIT Sloan Management Review,’ Summer 2008, 51 - 57.

2. F. F. Reichheld; The One Number You Need To Grow, ‘Harvard Business Review,’ December 2003, 46 - 54.

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