Measuring Loyalty

Since loyalty (customer, employee, partner, member, etc.,) is so important to the profitability and longevity of your organization, it must be measured. The good news is that measuring loyalty is relatively easy, but the question is how to use the results to your advantage. Check out Reicheld's standard loyalty acid test which asks key questions especially useful to help to pinpoint problem areas. It is important, however, that upon surveying you thoroughly analyze the results, report, and then communicate what was learned and what actions must be taken to improve and drive loyalty. The most progressive organizations will incorporate the results as a key metric to be correlated and measured within their Business Intelligence and CRM systems. In this way, they can identify those who are loyal and the specific qualities that make them loyal. With this information, it is possible to develop specific programs and initiatives to encourage loyalty across the ideal customer base.

There are a few key components to capturing loyal customers and it all starts with the integrity of senior management. In fact, research shows that companies with loyal customers have employees who feel their leadership deserves their loyalty. So like most aspects of corporate culture, loyalty seeking flows from the top down. Prime examples of what Reicheld calls "Loyalty Leaders" include: Southwest Airlines, Vanguard, Dell, Harley-Davidson, and Intuit.

Here are the "Six Principles of Loyalty" he also describes:

• Play to win/win: Profiting at the expense of partners is a short cut to a dead end.
• Be picky: Membership is a privilege.
• Keep it simple: Complexity is the enemy of speed and responsiveness.
• Reward the right results: Worthy partners deserve worthy goals.
• Listen hard, talk straight: Long-term relationships require honest, two-way communication and learning.
• Preach what you practice: Actions often speak louder than words, but together they are unbeatable.

Of these elements, the concept of "being picky" is most fascinating because it means that you choose who is worthy of being your customer. While this may sound a bit controversial, it makes a great deal of sense when you consider the economics. Next, I'll explore how seeking out only those customers who demonstrate loyal tendencies pays off considerably over time.