Developing customer loyalty in the digital age

To sustain growth, organizations must know their customers. There's no way around it: embrace their complaints.

Developing customer loyalty in the digital age

“One-time customer, lifelong customer” is Toyota’s motto. The assumption is that customers will be fully satisfied and remain loyal to the brand if we provide them with innovative products of the highest quality, within the shortest lead-time, and at a reasonable price, while showing the utmost respect for society and the environment.

Maintaining a stable customer base over time will guarantee sustainable growth. In order to make this possible, Toyota incessantly works on 1) making sure each customer is treated as an individual with a specific "job to be done" and emotion and 2) removing waste from their activities so they can keep costs down and provide the highest possible value to their customers, while remaining profitable. All this can only be achieved if the people creating the value in the field are given the authority and the space to pursue their own kaizen and find their own solutions to problems. These principles lie at the heart of lean thinking practice, and it’s certainly no coincidence that today Toyota is still the company with the highest customer retention rate in its industry, as well as the most profitable.

Over the past few years, the lean movement has found that these principles are not only applicable to carmaking. In fact, by now they have been applied to pretty much any human endeavor – including those taking place in the digital world. Lean principles are extremely relevant to digital products, because the market evolves more quickly, with a myriad of new offerings emerging every day to distract our customers with cheaper, faster, and more innovative solutions to their problems. Most businesses have learned (often at a high cost) how volatile customers can be these days: indeed, it takes a huge amount of effort and creativity to keep them happy and engaged with your brand.

Many CEOs of digital companies claim their organizations are “customer-centric”, as evidenced by the large, flashy posters hanging to walls all around their office or on their websites. And yet, they still spend huge amounts of hard-earned money on expensive new customer acquisition strategies, product roadmaps, and external partnerships rather than finding new ways to please their existing customers and get them excited about the innovative features of their products. This is a shame, considering that a mere 5% increase in customer retention can boost sales by 25% to 95%, according to a Harvard Business School study on e-loyalty.

So how does one go about developing customer loyalty in the digital age?

Well, first you need to earn their trust. People need to trust that your product will always help them do their “job” at the moment they need it, without compromise. They need to trust that your organization will take care of unexpected “snafus” in the best possible way (i.e., quickly, respectfully and without side effects), and that the problem will never happen again. Another element of customer trust is the belief that your products will remain exciting and fun to use over time. A fully satisfied customer is more likely to talk to their friends, colleagues and family about your brand and products. A customer who does not trust you will certainly not, and may become an active detractor.

This phenomenon is well known, but grows all out of proportion in the digital world. A single mistake can have a huge impact on your brand’s reputation, because each unhappy customer can share their opinion instantly with dozens, hundreds, or thousands of people. Hence, keeping your current customers interested and happy is not only key to increasing revenues rapidly and over time, it is your best (and cheapest) tool for attracting new customers. Brian Chesky, Airbnb’s CEO, built his company on this concept. To start a company, he suggests finding your first 100 customers and then doing everything possible to make them perfectly satisfied with your products and services. Assume that each fully satisfied customer recommends you to ten people. Then make the same effort to satisfy the next batch of new customers, and so on. Very soon, you’ll have 10,000, 100,000, or even 1 million customers. You can listen to him talk about this approach during his latest visit to “Station F” in France, the biggest startup incubator in the world.

Interview of Brian Chesky, founder of Airbnb

So, if sustained growth comes from customer loyalty and loyalty comes from trust, we can now ask: what is the best path to winning a customer’s complete trust? In his letter to Amazon shareholders, Jeff Bezos said that “customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great.” Like Jeff, you need to become (positively) obsessed with understanding all the ways that you are failing to fully satisfy your customers. The first thing to do is to look at how customers perceive the quality of your products and services. Develop a habit of reviewing and analyzing individual customer complaints. These can take the form of support tickets, formal complaints, or online reviews. For each customer who complained, try to understand the following:

  • Where did your internal processes fail to deliver the expected value? In other words, where is the waste that you must get rid of? For instance, if your customer discovered a bug as they were trying to buy or use your product, this is a signal that something’s not functioning well inside your organization. Don’t just fix the bug and move on, find the root cause that explains how the bug reached the customer in the first place, and eliminate it!
  • How did we handle the complaint? Did we bend over backward to help the customer complete her task quickly and easily? Did we show respect and kindness? Did we provide compensation for her troubles? Each time a customer reaches out to complain, you have a great opportunity to train your employees to become more customer-centric and to continuously seek new ways to create value for their customers.
  • How was the customer trying to use your product, and how did their experience differ from what you expected? If the complaint is about the product itself, you have a perfect opportunity to find use cases that you never anticipated. This may also be a sign that the market is changing, especially if similar complaints continue to pop up. Here you have an early warning to continue innovating, keeping your product interesting so that your customers remain loyal.

Let me tell you the story of Jack, the head of a small digital firm, who came across some very interesting cases when he started following these simple steps. Challenged by his sensei over wanting to reduce the number of direct interactions with customers, Jack agreed to start a new routine of reviewing several customer support tickets each day. One customer had sent an email to complain that she couldn’t complete her online transaction. She provided all of the necessary information in her email, hoping that someone would call to help her complete the purchase, or even do it for her. When Jack and his customer support leader read the email history together, they felt that her request had not been handled in the best possible way by the agent in charge; even worse, the customer had never followed through with her purchase. This single lost sale amounted to several hundred euros. This may seem like a drop in the bucket for a business making millions in revenues, but the impact is much bigger than one might think. Jack tried to contact the customer to apologize for the trouble, but she never responded. He realized that not only would this customer never come back, but she might also have become an active detractor of the brand.

To evaluate the extent of the problem, they looked for similar support tickets. Jack was shocked to find out that five more customers had experienced a similar problem that same morning! Each complaint had been handled differently, but all of them had been handled inefficiently, and none of the customers who complained about the website had purchased. So in just one day, they counted close to €2,000 in lost sales. And how many more customers had just cancelled their transaction without even bothering to contact customer support?

These findings led Jack to conduct experiments with the customer support team, to ensure that every sale was closed and every customer was fully happy. For example, one customer support agent decided to ask customers who couldn’t complete their transaction if they would like to be called back, and if so to provide their phone number in an email. Within a couple of minutes, the customer responded accepting the help. The agent called her immediately, and took it upon himself to offer her a discount as he helped her complete the transaction. In the end, the customer decided to purchase more services, and showed her gratitude by sending a thank you message to the agent. Based on Brian Chesky’s theory, this happy customer will bring in 10 new customers.

The agent who closed the sale so brilliantly over the phone had never before dared take this type of initiative, because the company had an objective to reduce phone interactions with customers. When he set this objective, Jack’s assumption was that more phone calls meant that the application was not providing customers with the expected value and autonomy, which defeated the purpose of having a digital business in the first place. Although it is true that support calls are an indicator of non-quality in the digital product, the objective created unexpected behaviors from employees – such as never calling a customer who runs into problems. The implicit rule was to hold conversations over email until some countermeasure was found or the customer stopped responding. At some point, the ticket would be closed even if the customer gave up. Customer issues with the website and applications were shared on a regular basis with the product team, in the hope that they would get fixed as soon as possible. But not once had anyone in the company seriously considered that failed client interactions are a major source of lost opportunities for growth.

Reviewing customer tickets daily is also a perfect opportunity to develop a culture of creating more and more value for customers across the whole company. In Jack’s case, the customers who ran into technical or usage issues were actually signaling several problems in the firm’s product development process and practices. This is not to say that Jack and his product teams never fixed the bugs raised by customer support, but these bugs were prioritized in parallel with new development tasks. In other words, bugs never got resolved fast enough to avoid impacting more customers, especially since every functional team lead was lobbying for their own features and improvements to be completed first. The product team was overwhelmed with all sorts of requests, and prioritized them as best they could. Jack gathered his functional team leads and discussed ways to improve this process while making customer problems a priority. This simple collaborative step eased the product team’s burden and helped them refocus efforts on the client experience.

There is a third major benefit in analyzing complaints daily: it helps us gain a deeper understanding of our customers so we can better anticipate their evolving tastes. This way, we can set the right pace for innovation and take fewer losing bets. In Jack’s case, analyzing support tickets also opened the door to a privileged relationship with customers and a gold mine of information: who they are, what they needed the product for, what circumstances made them decide to buy the product, what the alternatives were and why they chose that product instead, etc. This information is essential for understanding how different customers use the product to create value and for developing the firm’s unique competitive advantage. One customer told the support agent that the product fulfilled a need that was totally unexpected by Jack and his teams. Many firms pay big bucks to obtain this type of information via market surveys or similar activities.

I hope you now see how a simple practice – the daily analysis of customer complaints – can help you in your pursuit of customer loyalty. It may seem trivial, but it will put you on the lean path to 1) engaging your employees in finding their own solutions to better serve customers; 2) seeking opportunities for internal improvement to create more value for customers; and 3) finding innovation opportunities to keep customers excited about your products, which will strengthen your firm’s competitive advantage.

In short, it is a great starting point for (re)initiating your company’s growth. Don’t wait any longer: embrace your customer complaints!

This story was originally published on by Sandrine.