The Science of Loyalty™
As a young consultant I spent much of my time conducting qualitative and quantitative customer research for my clients, and while we could always weave together the best information possible, it became clear that our traditional tools (e.g., customer satisfaction surveys) were no longer doing an adequate job of predicting the key buyer behavior –will they call us first when they have a need, with they keep buying, and will they be” loyal? We needed to figure out The Science of Loyalty™.
The Need for a Better Tool
While it is true that DIS-satisfaction is a strong predictor of DIS-loyalty, converse doesn’t hold: Satisfaction is not a good predictor of Loyalty, especially in complex, high-value relationships. The simple fact is the world is too competitive for customers to settle for mere satisfaction. To create loyalty you must motivate your buyers to want to do business with you.
Measuring Motivation Rather than Satisfaction.
I had a theory that motivation, rather than satisfaction, would it be a better predictor of future buyer behavior – retention, cross selling and loyalty. A decade of work later we have years of cross-industry, longitudinal field research, several international patents, and what we believe to be the best approach available for measuring and managing loyal client relationships. We have built these models and approaches into The Science of Loyalty™.
Key Concepts behind The Science of Loyalty™
- Treat buyers as individuals, not averages, to the extent it is economically appropriate to do so.
- Buyers have an existing perception of working with you, those perceptions can best be measured using Relationship Climate™. High Relationship Climate™ scores lead to high loyal behaviors, and the behaviors of your account team is what creates high/low climate scores
- Account teams have “blind spots” – they don’t understand their buyer’s perceptions.
1. Treat buyers as individuals, not averages, to the extent it is economically appropriate to do so
Each of your buyers has a certain value to you – measured as annual revenue, account profitability, lifetime value, etc. Regardless of how you measure that value, buyers should be treated as individuals – true 1:1 relationships – if the expected return from treating them as individuals is greater than the cost of modifying your actions to do so.
For most of our B2B clients, their client value is so high that asking an account team to tailor their behavior to each buyer’s needs is a given. The actual results from one of our clients (below) demonstrate how focusing on an average can be quite misleading. Each “dot” represents an individual buyer (typically multiple buyers at a given client account).
2a. Buyers have a perception of you and those perceptions can be measured using Relationship Climate™
At any point in time, each buyer has some perception of what it is like to work with you – that perception is created by firsthand experience working with your teams and by comparing that experience to other strategic relationships (both inside and outside your industry), as well as listening to their peers talk about you and your competitors, reading about you, reviewing your invoices, etc., etc., etc.
A key point is that buyers assess your actions relative to what they think they should get from a strategic partner. A given buyer may be comparing you to your competitors or to relationships they have outside your industry. Our Relationship Climate™ survey captures these perceptions relative to other strategic partners.
Leveraging the concept of measuring aroused motivation – the extent to which a buyer wants to/is motivated to invest in a relationship with you – we measure six dimensions of Relationship Climate™:
2b. High Climate Scores Lead to High Loyal Behaviors
The following recent data from a Brookeside B2B client illustrate the science behind our approach. To begin with, our Relationship Climate™ survey instrument asks a series of motivation questions across three parts:
- Part I – Loyalty Items: Questions about the buyer’s initial impression and future intentions (e.g., “You have a reputation for excellence”).
- Part II – Relationship Climate™: Questions across the six dimensions that measure the buyer’s perception of working with you relative to working with other strategic partners. We have found that high Relationship Climate™ accurately predicts future buyer Loyal Behaviors –high revenue, high share of spending, long tenure – both unweighted (e.g., each Dimension carries equal weight) and weighted (e.g., each Dimension carries different weight). You’ll note that our predictive abilities increase as we begin to apply our patented algorithms and models noted above.
The responses to those questions are weighted using the appropriate algorithm and a Loyalty Index™ is calculated to help us separate “At Risk” buyers from those who consider you to be their “Trusted Advisor.” For one large client we used our Loyalty Index™ to accurately predict (six months in advance) over 80% of the clients who subsequently left them.
2c. Your Teams’ Behaviors Lead to High Climate Scores
- Part III – Account Team Practices: Questions across the 6 dimensions that measure the buyer’s perception of how effectively your account teams perform certain practices/behaviors that are proven to improve each Relationship Climate™ dimension. As mentioned above, a buyer’s perception of what it is like to work with you is the result of everything your team does relative to everything the external world does (competitors’ actions, the economic environment, the actions of buyer’s peers, etc.). And while your account teams cannot manage what the external world does, they must deal with the impact of external actions. The client data below illustrates how our Integrity Practices predict Integrity Climate :
In Summary… The Science of Loyalty™
Our Loyalty Index™ predicts buyer behavior, and the cross-industry results speak for themselves…