Thursday, May 31, 2012: 09:36:10 AM

Machinist Guest Column

Fourteen signals to customer loyalty in manufacturing - Ravi Teja, Nihilent Technologies

Although customer loyalty is often achieved through offers, discount coupons, rebates and the likes, long-term customer loyalty can only be created by making customers feel that you are their number one priority

Customer loyalty is when an organisation receives the ultimate reward for the way it interacts with its customers. Loyal customers buy more, buy longer and tell more people- that's true customer loyalty.

 
Many companies struggle to create loyal customers. Even companies with very active customer experience efforts can have a hard time building loyalty. One of the reasons for this difficulty is a fundamental misunderstanding of how loyalty and satisfaction are connected. ‘Loyalty is not the opposite of dissatisfaction’. Eliminating dissatisfaction is often a necessary, but not sufficient step for creating loyalty.
 
Now take the example of the manufacturing sector in the country; the industrial sector of India with its future opportunities and high employment potential embraces the path to the economic development of the country. India has attained a realistically sufficient level of self-sufficiency in manufacturing with a range of basic and capital goods. The Indian manufacturing sector, which accounts for nearly 80% of the Index of Industrial Promotion (IIP), witnessed a growth of 7.9% in March 2011, which was relatively higher than the 3.6% growth that was recorded for the months of January and February 2011.
 
But with this growth and globalisation, the sector is today squandering for customers. To compete and succeed in a price-driven market, manufacturers must create a business edge by offering something that their competitors do not. Shorter lead times, faster turnaround times and better service are key “customer-centric” competitive advantages that can make the difference in attracting new business and retaining existing business.
 
It is indeed a well known fact that the key to a successful business is a steady customer base. After all, successful businesses typically see 80% of their business come from 20% of their customers. Too many businesses neglect this loyal customer base in pursuit of new customers. As a result, brands are constantly imposing themselves on customers to gain their attention through various mediums. With the extensive assortment available, consumers find it difficult to stick to one brand and are always moving on to a new one. The brand world is thus always on a constant customer loyalty war. In such situations, where every brand is trying to stay prominent in people’s memory, measuring customer loyalty and developing a retention strategy are critical to an organisation's success.
 
In the information era we all live in today, the brands are increasingly being judged by a global consumer that has been fed on an incessant diet of Internet news, of televised images, of cell phone videos, of email gossip. In other words, all sorts of communication devices who are sending different signals of their expectations and experiences they have had with the brands and services which they are proposing to be engaged with or are currently engaged. The need of the hour for brands today is to dig deeper into the online and offline Cultural Zeitgeist and catch right Signals that the consumers are sending out through various mediums. Signals that not necessarily points only towards monetary benefits but also psychological, emotional, safety, health, security, biological and the like Signals that are inherently been given out by consumers in present and sought after by the prospective buyer.
 
Conventional customer loyalty surveys invariably have captured the superficial and on-the-moment mindset of the consumer without attempting to uncover facets of the promised experience or the insight into what the customer is really expecting. With these surveys, it is practically impossible to predict the future course of action of the customer. This calls for the requirement of a simple yet exhaustive framework-a framework that not only helps in gauging the efforts spent on achieving customer loyalty but also understanding the Signals given out by the consumer, specifically in terms of the ‘experience’ of the customers in comparison with their ‘expectations’ for a service/product.
 
While trying to understand the psychographics of the consumers favouring a particular brand, our research has pointed out that loyalty is a function of the actual experience of the consumer against the expectations that the consumer had while making the purchase. It has pointed out to 14 such Signals that a consumer emits focusing on the value accrual as against the cost incurred, both direct and indirect.
 
The Signals-
 
1) Value accrual
This is the value purely in terms of money; an individual feels he will gain after fulfilling his/her need by using the product/service. This aspect depicts the situation of getting value for money.
 
2) Helpful towards survival, health and safety
If the need in monetary terms is well gratified, then emerges a new set of needs, which may be categorised roughly as the survival, health and safety needs (security, stability, dependency, protection, freedom from fear, need for structure, order, law, limits, strength in the protector, and so on). These needs may include:
  • Personal security from crime
  • Financial security
  • Health and well-being
  • Safety net against accidents/illness and the adverse impacts
 
3) Constitutes a part of basic necessity
These include the most basic needs that are vital to survival, including the need for water, air, food, shelter, clothing and the like. These needs are the most basic and instinctive needs in the hierarchy because all needs become secondary until these physiological needs are met.
 
A mobile phone does not satisfy a basic need such as food, shelter and clothing directly. But a basic need may be considered with respect to a particular product/service.
 
4) Feeling of Good/ High
If both the physiological and safety needs are fairly well gratified, then emerges the need to have a feel good factor, convenience, a problem free life.
 
5) Related to love, romance, sex, child
These needs form a part of physiological and psychological needs.
 
6) Adds to stature, recognition and brand
All people in our society have a need or desire for self-respect or self-esteem. This need may therefore be classified into two subsidiary sets. These are, first, the desire for strength, for achievement, adequacy, mastery and competence, confidence in the face of the world, independence and freedom. Second, may be called the desire for reputation or prestige, status, fame and glory, dominance, recognition, attention, importance, dignity, or appreciation. This forms a part of the mental needs of a human being.
 
7) Retained Value
This is the value that one obtains after using a product/service for a certain amount of time. For some products this value can be considered as the resale value.
 
8) Sense of Peace
This is a spiritual need of a human being. It refers to man’s desire for self-fulfilment, namely, to the tendency for him to become actualised in what he is potentially. This tendency might be phrased as the desire to become more and more what one idiosyncratically is, to become everything that one is capable of becoming.
 
9) Monetary cost of fulfilling the need
This is the cost purely in terms of money; this not only involves the actual price paid for the product/service but also the secondary monetary expenditure in terms of travel cost to the store, phone call cost for enquiry. 
 
10) Physical Inconvenience/disruption/uncertainty
This is a feeling of facing difficulties in getting access to a product/service, facing abrupt disruptions in services, uncertainty about when you can get assured service/product.
 
11) Unpleasantness
This is a feeling of getting no feel good factor. It may be due to the kind of service, the product packaging, the environment, ambience and problem resolution in a nasty or displeasing manner, unfriendly support.
 
12) Ethical conflicts
These are feelings experienced when there is a conflict between one’s value system and a company’s ways of business. These can be due to various reasons- advertisements of a product, internal working of the company, tainted image of an employee and the like.
 
13) Legal/statutory costs
This is related to the costs incurred because of any legal actions involved in using the product or in availing the services.
 
14) Continuation costs
This is the cost incurred if you continue with the same product/service. This cost is the opportunity cost in terms of the loss on the benefits provided by other products/services.
 
The key is to have a scientific method that can conduct a more exhaustive research and scientifically analyse the results to predict the loyalty index of the consumers towards a particular brand. A framework that can scientifically indicate key elements like:
  • Successfully identify key loyalty drivers
  • Successfully evaluate the affectability of the existing strategies, thus helping to align future communication strategies
  • Forecast trends and preferences of the consumers over a period based on demographics and geography 
  • Predict the future course of action and make the right pitch to the target audience
  • Help the brands make the right offers to the right audience at the right time
 
While it is great to see cohesive efforts to see innovative products and channels being used to increase the client base, it has become imperative to invest in understanding the science behind customer retention and loyalty. As we must always remember that loyal customers do not leave even for an attractive offer elsewhere. At the very minimum they will give you the opportunity to meet or beat the other offer. Thus, evaluating and maintaining a loyal customer is an integral part for the sustained growth of any business.
 
 
Ravi Teja is the vice president (Global Consulting Businesses) at Nihilent Technologies
 

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