The 1 Way to Improve Customer Loyalty and Satisfaction

Michael Brenner on May 17, 2010 in Marketing Strategy

I have stated many times that the role of marketing is to help our companies gain and keep customers. This is a unifying principle for both marketing and sales teams and should act as the starting point for all of our discussions. Next the question becomes- how do we do it? And who does which piece?

In B2B marketing organizations, the single most important way to keep customers is to build satisfaction and loyalty. The best way to get new customers is through positive referrals from existing customers. So, how do we build customer satisfaction and loyalty?  By cultivating satisfied and engaged employees.

This is not my idea.  It is not highly complex. It makes sense to anyone who hears it. Yet, how many of us measure it, take steps to improve it, and hold ourselves accountable for ensuring this feedback loop is active, constructive and ultimately effective?

What is the Service Profit Chain? Wikipedia and the Harvard Business Review describe it in these simple terms:

The Service Profit Chain is a theory and business model evolved by a group of researchers from Harvard University in the nineties (among others James L. Heskett and Leonard Schlesinger). In their book The Service Profit Chain – How Leading Companies Link Profit and Growth To Loyalty, Satisfaction and Value they have proved that there is a direct financial link between superior service experiences, customer loyalty, and financial performance (profit and growth).

In short, happy employees create happy customers and happy customers buy more stuff and stay with you for a longer period of time. James L. Haskett, in his post Putting The Service Profit Chain to Work argues that companies can create significant competitive advantage by focusing on these key links. He also states that along with employee and customer satisfaction measures, customer lifetime value then becomes the performance metric senior executives must focus on:

For example, the lifetime revenue stream from a loyal pizza eater can be $8,000, a Cadillac owner $332,000, and a corporate purchaser of commercial aircraft literally billions of dollars.

Haskett also argues that leaders must focus on each link in the chain (pictured below).

Companies that achieve these high levels of satisfied employees and customers see clear benefits in the form of increased loyalty for both employees and customers, higher retention (again of both), and significantly higher profits. So the focus is really on a new kind of leadership. One that is engaged. One that sees value in each customer and employee and makes an effort to listen, interact and resolve the important issues.

One of the main reasons I began to utilize social media tools like LinkedIn and Twitter was because it provided me with direct access to other employees within my company and across our ecosystem. It also gave me the ability to directly measure analyst, media, blogger, and customer sentiments and comments about our company, our products, and our employees. This is one reason why I evangelize the use of social media for all leaders – so they can begin to reflect upon the needs of all constituents in the decisions they make every day.

And how does a leader take accountability for employee satisfaction? The best way to change behavior and impact the culture of an organization is through its system of rewards. Make employee satisfaction part of every managers objectives and a determining factor in their bonus payments and reviews. I have seen this in practice and it literally changed a company overnight.

This is the single most important way to drive higher profit and increase customer loyalty and retention through more satisfied and engaged employees.

So what is a leader to do? Here are my B2B Marketing Insider steps to increasing customer satisfaction and loyalty:

  1. Understand how each link in the value chain impacts the next one (See chart below)
  2. Measure employee and customer satisfaction. Measure satisfaction through surveys, track retention, and calculate customer lifetime values.
  3. Enact programs to address the biggest areas of dissatisfaction for employees. Managers need to create action plans.
  4. Demonstrate accountability for improvement by changing manager’s compensation plans.
  5. Communicate progress against key actions on a regular basis.

One more tip for managers: get a candy jar! By inviting your employees to engage in regular and meaningful conversation, you establish trust, build credibility, and show that you are interested in keeping them happy, engaged, and productive. Even this small investment can go a long way to improving company profits.

Michael Brenner
Michael Brenner
Michael Brenner is a globally-recognized keynote speaker, author of The Content Formula and the CEO of Marketing Insider Group. He has worked in leadership positions in sales and marketing for global brands like SAP and Nielsen, as well as for thriving startups. Today, Michael shares his passion on leadership and marketing strategies that deliver customer value and business impact. He is recognized by the Huffington Post as a Top Business Keynote Speaker and a top CMO influencer by Forbes. Please follow him on LinkedIn, Twitter, or Facebook and Subscribe here for regular updates.