Article

Maintaining Customer Loyalty During & After a Crisis

Posted July 22, 2020 in Business Technology & Digital Transformation Strategies, Data Analytics & Digital Technologies Cutter Business Technology Journal
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CUTTER BUSINESS TECHNOLOGY JOURNAL  VOL. 33, NO. 7
  
ABSTRACT

Through a series of equations, Dave Cherry outlines how to maintain customer loyalty before and after crises. He asserts that for technology and business leaders to count among the bold, deciphering how to capitalize on this opportunity requires a foundation of confidence, flexibility, and resiliency — all anchored and enabled by knowledge. Cherry provides specifics about how to manage customers at home, when they're ill, or when they're caring for others. The point? Crises change customer relationships and, therefore, customer relationship management. Crises require everyone to adapt if they want to survive and compete.

 

The COVID-19 pandemic has created uncertainty and challenging times for all businesses, now and for the foreseeable future. We are experiencing dramatic changes in how and where we work, how our children are educated, how we shop, and how we engage with friends, families, colleagues, and service providers. Nobody knows how long these conditions will keep changing and when (or if) they will morph into what we can collectively call the “new normal.” Companies are rightfully concerned about the changing behaviors among their customers. Will purchases decline (and if so, by how much)? How significantly will the mix between in-store and online purchasing shift? Will loyalty and profitability shift between segments? How will this affect new customer acquisition? This unprecedented degree of uncertainty and ambiguity is both a major cause of anxiety for many and a significant window of opportunity for those bold enough to see it.

The Foundation

For technology and business leaders to count among the bold, deciphering how to capitalize on this opportunity requires a foundation of confidence, flexibility, and resilience — all anchored and enabled by knowledge (see Figure 1).

Figure 1 — The foundation for successful engagement with customers.
Figure 1 — The foundation for successful engagement with customers.
 

Confidence has always been a hallmark of great leadership, especially in times of crisis. It demonstrates trust in yourself, in your team, and in the value that you provide. Great leaders leverage their confidence to create differentiating capabilities and unique value propositions for their customers. They rely on their experience and the input of trusted advisors to make difficult decisions that create the opportunity for success. Though some colleagues, customers, or experts may doubt them, confident leaders remain steadfast in their convictions and aspirations. As early 19th-century English writer William Hazlitt aptly noted, “As is our confidence, so is our capacity.”1 Don’t simply fall back on a safe, simple, or expected solution that mimics others. Stand out. Stand apart. Set yourself apart from your competition and use your confidence to create a greater capacity for success.

Flexibility acknowledges the lasting truth spoken by ancient Greek philosopher Heraclitus, who was quoted as saying, “Change is the only constant in life.” Change requires quick adaptations in approaches to product, service, and delivery — not only to be responsive to, but to anticipate these new realities, even before your customers or competitors know about them. Flexibility balanced with confidence enables bold decision making. But it is essential to do so in a manner that creates options. Understand and evaluate multiple scenarios and plan for adjustments. In more recent times, the less accomplished philosopher (though equally accurate) Mike Tyson stated, “Everybody has a plan until they get punched in the mouth.”2 As technology and busi­ness leaders, we know that we will get hit. Campaigns will not resonate with customers, systems will go down, data will become compromised. We know that these things will happen, we just don’t know when. Getting punched in round one requires a different response to getting punched in round 15. But these are responses that we can anticipate and around which we can plan multiple scenarios to achieve success.

Resilience comes from experience, mindset, and failure. It also relies heavily upon confidence and flexibility. To become resilient, people must experience setbacks. If we achieve positive outcomes consistently and easily, we may be very successful, but we may lack resilience. As we all remember from learning to ride our bicycles, falls and skinned knees were important learning oppor­tunities that ultimately helped us become better riders. We learned why we fell. Perhaps our balance was off, or perhaps we ran into a curb. While that skinned knee hurt, the pain didn’t last and was minor compared to the thrill of finally riding for the first time without those training wheels. Very few of us rode our bikes successfully on the first try. Still, resilience led to success.

The biggest factors in developing resilience are a positive mindset and the confidence that you will succeed. Perhaps no one has embodied this better than arguably the most confident athlete in history, Michael Jordan, who said, “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”3

Knowledge guides us as leaders in decision making. It ensures that we’ve sought to optimize the level of understanding needed before we determine our course of action. It means that we’ve consulted with experts in a specific field when we ourselves lack the necessary information to improve our confidence. Few leaders would ever openly admit to an intentional approach lacking knowledge.

As we think about knowledge in light of the COVID-19 pandemic, we have the juxtaposition of what knowl­edge is versus what we actually know. A body of knowl­­edge typically has wide application; is empir­ically proven (through observable and measurable results); and is seen as trustworthy, objective, reliable, and predictable. The current crisis, with its ambiguity, does not possess these desirable attributes. As leaders, where can we find knowledge that is trustworthy, truths that are proven, and outcomes that we expect to be reliable and predictable? As French writer Jean-Baptiste Alphonse Karr once wrote, “Plus ça change, plus c’est la même chose” (“The more things change, the more they stay the same”).4 To find this necessary body of knowledge, focus on what is stable, what is known, and what is proven. Loyalty is derived from customers. Customers are people. People trust and rely on relationships. Maintaining loyalty relies on deepening your relationships with your most valuable customers. This has not and will not change.

Equations to Strengthen Customer Loyalty

In my work, I often share three critical equations to strengthen customer loyalty. These equations are best viewed as sitting atop this foundation of confidence, flexibility, resilience, and knowledge. Executing with the equations in mind creates a regenerative effect to further strengthen the foundation. As I explore them further within the context of COVID-19, I have added a fourth overarching and, perhaps, most important, equation.

The Customer Experience Equation

The goal of the customer experience equation (see Figure 2) is to develop a connection. Connection is achieved through two factors. The first is content and represents the product or service that you sell. In the short term, content is relatively static, as you’ve planned it months before and it represents your current inventory or service offering. As a restaurant, your content is essentially your menu, pricing, and atmosphere. As a retailer, your content is your assortment and inventory. It is what you sell and how you sell it — your brand position and purpose. It is essential that your content fulfill a want or need of your customer. But content alone cannot create a connection. It needs help.

Figure 2 — The customer experience equation.
Figure 2 — The customer experience equation.
 

The second factor is context, which represents everything surrounding both your content and your cus­tomer. In the pre-COVID-19 environment, context depended on understanding the customer’s primary buying motivation (e.g., service, quality, value, con­venience) and meeting that need at the appropriate time and place. Using a simple example, a delicious bowl of ice cream (content) on a particularly hot summer day (context) is especially refreshing and satisfying (connection) — typically more so than on a frigid January afternoon (though I recognize that one could argue that ice cream is perfect in any context). But the point is clear. When the appropriate content is delivered to your customer with the perfect context, you achieve higher degrees of satisfaction and connection.

The new, challenging environment in which we find ourselves has placed an even higher premium on better understanding the context in which our customers are operating. How is staying at home affecting their needs and wants and, hence, behavior and purchasing intentions? Has their job status changed significantly (e.g., furlough, pay reduction)? Are they sick or caring for a loved one and now have much more important priorities than shopping with us? What else has changed about our customers that is independent of our content? All these changes will impact our ability as technology and business leaders to deliver our con­tent within the right context and, hence, our ability to achieve connection. Companies that invest in understanding the very specific contextual changes of each customer will then be able to provide a matching level of service that is appreciated. Those that do not will come across as tone-deaf, lose sales, and lose customers.

But let’s not forget about content. Remember, this equation is addition, so improvements in content or context will yield improved levels of connection. However, expanded content cannot simply be what is expected or common across the business landscape. Though important to our health, I doubt that many customers feel a deeper connection to retailers who have added protective masks to their assortments. In fact, some could argue that profiting from these new table stakes may even reduce connection. Product (content) extensions that are authentic to our brand, bold, and unique will deepen those connections.

As an example, an artisan ice cream shop in Columbus, Ohio, USA, recently released a new flavor (expanded content) called “Sunshine.” The product release stated, “[T]he color is muted and as gray as a rain cloud, but it tastes like a ray of sunshine on your tongue. We created this flavor as a reminder — for ourselves and each other — that when gray clouds descend on our lives, the sun always shines again.”5 Talk about bold and unique; I’ve never seen gray ice cream before. And although, as I write this, it is 30°F in May (hardly the perfect context for ice cream), I’m sure that this brand’s customers feel a deeper connection today and are more likely to make a purchase now and to purchase more in the future. 

Connection is about how you make your customer feel. Whether in times of crisis or stability, by getting content and context right, companies will deepen their connection with customers, which will benefit them not only in the present but for many years to come.

The Technology and Innovation Equation

The technology and innovation equation (see Figure 3) delivers what we all seek: value. But it uses multiplication and that tricky little rule that states that anything multiplied by zero equals zero. So, whenever we encounter a situation without any ideas, we get no value. Likewise, even when we might have the best and largest cache of ideas around, without execution, they cannot generate any value. But when both ideation and execution are present, the value derived can be significant.

Figure 3 — The technology and innovation equation.
Figure 3 — The technology and innovation equation.
 

Let’s return to the pre-COVID-19 state for a moment. Many companies have been effective at embedding technology and innovation capabilities into their businesses, benefiting their associates and customers. Indeed, many have adopted artificial intelligence, augmented reality, and/or geolocation and have delivered these and many other Internet of Things advances to the marketplace. However, it’s been more commonplace to see companies struggle to innovate and deliver, at best falling into the “fast-follower” category, but more often into the ”slow-follower” group, and, unfortu­nately, many drop to the “need to catch up; we’re way behind” group. The biggest impediments to delivery are usually internally perceived — and self-fulfilling — deficiencies. Some companies and industries simply don’t have the skills or creativity to innovate, so they leave that up to Silicon Valley giants, consultants, or new, nimble startups. In addition, they struggle to believe that they can operate with the needed speed to deliver these capabilities to market in a timely manner. The navigation of too many internal meetings, required approvals, and undue bureaucracy slows everything down.

Enter COVID-19. Although we all saw it coming from across the globe, when it arrived in our communities it felt sudden and very impactful. Changes came seemingly overnight as schools, offices, and businesses closed their doors. Companies needed to react fast. The symbolic “burning platform6 for change became an inferno. Many did not have time to call in the big consultancies or other experts (firefighters). They needed to act on their own and do so quickly, and they did. Capabilities like curbside pickup, financial protection measures, same or one-day delivery, and more were implemented within days or weeks of ideation. Latent capabilities around speed and execution were uncovered; capabilities many didn’t think they had. While value (revenue) certainly has been reduced during this time frame, for many it did not hit zero. Some essential brands even experienced an increase in revenue during this time, with limited competition. The key for them will now be how to retain those new customers. These companies leveraged ideation to determine how to proceed, and got the job done with execution. It may not always have been perfect, but more value was delivered than had either of those elements been reduced to zero.

While it has been and remains critical for individuals to follow government instructions to “shelter in place” to flatten the curve, many companies have erroneously followed the same orders, and are hoping to ride out the situation. They’ve cancelled or deferred key proj­ects, reduced their capacities, and may even have furloughed some of their most valuable resources (e.g., the VP of innovation, a role that I’d argue is even more critical in these times).

Those companies that will come out of this crisis the strongest, however, are embodying the creed, “Never let a good crisis go to waste.” They are using this time as an opportunity to break the myth that they cannot innovate and execute quickly. They were forced to demonstrate that they did indeed have the capability to execute swiftly, something many of them did not think that they possessed. So now as ideation increases, combined with the ability to execute, they are delivering more value. This value creation won’t necessarily make companies whole, but it can very well enable them to survive until the economy recovers more fully. 

The Analytics Equation

The analytics equation (see Figure 4) simplifies what many perceive to be a very complex topic by clearly outlining the primary objective of data and analytics: better decision making. Few would argue against better decision making as an important business capability that every organization should always seek to improve. However, the approach to doing so has historically been driven by two primary drivers: experience and data.

Figure 4 — The analytics equation.
Figure 4 — The analytics equation.
 

Those in the experience-driven camp espouse the value of years in an industry or function and personal histories with projects, products, and customers that provide them with great gut instincts. These gut-driven decisions often rely on a feeling or a hunch, and, many times, the outcomes are very good. However, these types of decisions are very difficult to repeat and scale. Too often, past experiences create a bias that prevents us from seeing the value of new ideas or approaches — the “we’ve never done it that way here” mentality that is so limiting.

The data-driven faction rides the more recent wave of data and analytics, relying on algorithms and models to evaluate their alternatives. Accompanied by probabilities or confidence intervals, decisions made with this mindset are often accompanied by statements like, “The data model said that we should pursue this action.” These types of decisions are often correct but, in many cases, lack the specific context around the business decision and, hence, can result in regretful decisions. (Perhaps the most widely known example of such a misstep was when Target became aware of a teen’s pregnancy before her father did.7) Just because the data suggests something, or says that “we can,” does not mean that “we should.” Data must also be representative of multiple perspectives, internal and external (i.e., market research, customer). Failing to consider these different viewpoints can lead to sub­optimal data-driven decisions.

A better approach — one that will always produce better decisions than either of the above — is the data-informed approach, which balances insight (i.e., data, algorithms, models) with intuition (i.e., experience, instincts, risk, context). This balance is especially important when we consider something like the COVID-19 pandemic, which we hope is a “once in a lifetime” event. Data scientists are challenged to develop accurate predictive models given ever-changing data and, often, the lack of historical or current data. This situation has led to varying predictions around our common goal of “flattening the curve,” with different models often coming from equally respected sources. As a result, many are forced to do the best that they can, qualifying their analytics with larger ranges of potential outcomes or reduced confidence levels. This creates an even stronger need to adopt the approach of being data-informed, which means using the available data and adding intuition, a combination of experience, risk tolerance, and knowing the “right thing to do.” As an example, analytics may demonstrate a huge demand for masks and, subsequently, a huge profit opportunity. However, intuition likely suggests that for the greater public good, perhaps masks should be donated or provided at low or no cost. Another complication to good decision making is that few experts today have any personal experience with a global pandemic of this scale. Some lessons can certainly be applied from past events, such as 9/11 or recent recessions, but, at best, they are simply inputs — an added perspective on an important decision.

Especially during this crisis, but also extremely applicable in prosperous and more stable times, balancing insight and intuition will lead to better decision making. It cannot ever guarantee the best outcome, as life happens. But it will ensure that the decision-making process is thoughtful and compre­hensive and does the best possible job of ensuring that the decision maker is well informed.

The Loyalty Equation

Now let’s explore the fourth and final equation: the loyalty equation (see Figure 5). Combining the experience, innovation, and analytics equations with con­fidence, flexibility, resilience, and knowledge will produce positive outcomes. But the combination is not enough to maintain customer loyalty in the long term. There is one additional missing ingredient: consistency.

Figure 5 — The loyalty equation.
Figure 5 — The loyalty equation.
 

Customers deepen their loyalty to brands that serve them well time and time again and regularly deliver engaging and valuable experiences. Brands that do well start by identifying their customers’ expectations, then strive to exceed them through upgrades and new versions, features, services, or experiences. And they do so consistently, even as customer expectations continue to rise. As Professor Noriaki Kano’s model suggests, to achieve exponential levels of customer satisfaction (and loyalty), one must significantly exceed the customer’s expectations.8 Doing this consistently will develop and maintain loyalty and competitive advantage over time.

This applies in good times and bad but is amplified in these challenging times as rising expectations are accelerated. Customers now expect companies to treat their employees well and to donate their product to healthcare or other frontline heroes, or shift their manufacturing capabilities to personal protection equipment (PPE) production. They also expect a level of “health assuredness” from their favorite brands, as their desire to make purchases is balanced by a higher need to stay healthy. Delivering on these new expectations is now a baseline requirement; that is, it simply meets the customers’ current expectations. But it falls short of the key to loyalty: exceeding the customers’ expectations.

Final Thoughts

What can your company do that the customer did not expect? What can your company do that your competitors aren’t doing or even thinking about? How can you deliver these baseline expectations, but also take them further by expanding the value of your content and your understanding of your customers’ context? What ideas and capabilities can you execute to deliver unexpected value to your customers? How can you leverage a data-informed approach to balance the science and art in decision making? How can you close the expectations gap and leapfrog your competition?

Delivering on the answers to these questions consistently will develop loyalty, deepen lasting relationships with your customers, and position your company to both survive and thrive as we enter and navigate the new normal.

References

1Hazlitt, William. “Characteristics.” In Selected Essays of William Hazlitt 1778-1830, edited by Geoffrey Keynes, Nonsuch Press, 1930.

2Bernardino, Mike. “Mike Tyson Explains One of His Most Famous Quotes.” Sun Sentinel, 9 November 2012.

3Zorn, Eric. “Without Failure, Jordan Would Be a False Idol.” Chicago Tribune, 19 May 1997.

4See Wiktionary’s “Plus ça change, plus c’est la même chose.”

5Sunshine.” Jeni’s Splendid Ice Creams, 2020.

6Hoopes, Linda. “Change Management Classics: Burning Platform.” Resilience Alliance, 2019.

7Hill, Kashmir. “How Target Figured Out a Teen Girl Was Pregnant Before Her Father Did.” Forbes, 16 February 2012.

8Kano Model Analysis.” Mind Tools, 2020.

About The Author
Dave Cherry
Dave Cherry is Principal of Cherry Advisory, LLC. As a thought leader, executive strategist, and speaker, he helps clients in the customer experience (CX) industry (that's everyone with customers!) define a CX strategy, enabled by innovation and measured/informed by analytics that drive deep relationships and connections with customers. Mr. Cherry is a member of the International Institute of Analytics Expert Panel, serves on three advisory… Read More