Leadership and
Loyalty
By STEVE COATS |
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Loyalty is always a hot topic in tough economic
times. We all know how difficult it is to pick up new business during
downturns, and the cost of obtaining a new customer at any time
is usually very high. Constantly churning employees also produces
an ongoing drain on productivity and skyrocketing recruiting costs.
Think about the implications of needing to shop for new long term
banking relationship every six months. Business and profit growth
is simply easier, when all your key stakeholders stay with you.
So take a moment and thoughtfully answer this
question, "Do you (or your company) deserve the loyalty of
customers, employees, partners and share owners?" Think about
your answer from their perspective.
There is a difference between loyalty and "locked
in." Many companies have customers that appear loyal because
of continuing business, but nothing could be further from the truth.
Sometimes customers may feel like they have no other options, so
they continue doing business with a company, while perhaps almost
despising the relationship. Talk to some of the business people
in Cincinnati who frequently complain about their local airline.
With over 90% of the gates at the airport, Delta owns Cincinnati.
So flyers either use them, (and pay excessive fares) or drive two
hours to another airport, (which many of their frequent flyers are
now doing). It would be interesting to see just how loyal Delta's
customers actually were, if they had a few more choices.
Customers will also continue doing business with
a company simply for the sake of convenience or habit. To be sure,
convenience can be a source of strategic advantage that does build
loyalty. It can also be a feature that customers will value just
some of the time. The key question is this: if customers pay a premium
for the convenience, which is usually the case, will they continue
to do so in tougher times, or when a lesser cost, equal alternative
is available?
The relationship your employees have with you
is no different. Many will stay with you if they have no other reasonable
options, or if working with you has become a comfortable routine.
But how can you be assured they are giving themselves fully to your
cause.
I remember a few years back talking with a manager
about his team. When I asked how many people he had working for
him, his answer surprised me. He said, "about half!" In
talking with some of the employees, one said something like, "I
am working hard enough not to get fired, and making enough so I
don't want to quit." For some reason, this did not sound like
(or prove to be) the success formula for high performance or loyalty.
There are similar examples for all the various
relationships you have in business. So rather than assuming loyalty
is the sole reason for an ongoing relationship, you need to be clear
on how you would answer the question posed at the beginning. Do
you deserve the loyalty of others?
Loyalty Factors
Contemporary research has cited three factors
that must be alive and well for customers (and we believe other
relationships as well) to be considered loyal. 1) They must be very
satisfied with you (just satisfied is not enough), 2) they express
a strong desire to continue doing business with you, and 3) they
actively tell other people about you. They become great advocates
or salespeople for you. The important point is this: loyalty requires
all three of these.
For others to be loyal, they must feel "emotionally
committed" to you. They must feel that the value of the relationship
is more than just the sum of the business transactions they have
with you. They most know that you and your company are genuinely
interested and invested in their needs. When it comes to customer
loyalty, remember this: the number one factor in developing committed
customers is having committed employees taking care of them.
The role employees play in creating customer loyalty is up to four
times more powerful than that of products, services, brands and
so forth.
This brings us to the loyalty conundrum. In tough
times, companies aspire to ensure their customers remain emotionally
committed to them. For this to occur, we know that businesses must
have deeply committed employees, who are devoted to their own companies,
as well as to the customers they serve. But what is one of the most
frequent strategies many companies take when business gets soft?
They initiate downsizings and layoffs. And many times, those most
affected are the direct customer interface people, who are most
responsible for building customer loyalty.
Points to Remember
So what is the bottom line on loyalty?
1) Loyalty cannot be just a strategy, it must
be a fundamental principle. You are either devoted to it or not.
Trying to substitute committed people with an occasional new marketing
program or technology enhancement will not cut it. Therefore, increasing
your efforts on building loyalty during only the tough times is
too little, too late.
2) Trust and credibility are cornerstones. Your
words and actions must be aligned. If your constituents do not believe
in you, they will not remain with you. At some time, you may find
yourself having to decide between suffering a loss of either profitability
or credibility. Experience tells us it is much harder to earn back
credibility, and without the trust and loyalty of your customers,
employees and others, you're dead!
3) You get people emotionally committed to you,
by helping them find greater meaning and purpose in their relationship
with you. You may be one of the many who are deeply committed to
your company, even though you could make more money elsewhere. You
may feel that same level of attachment to people (or organizations)
with whom you do business, or companies in which you own stock.
4) Don't believe it when you hear that people,
especially your employees, do not care about loyalty. You just have
to remember that you have to act in ways that deserve it. That is
true in all relationships, business or personal.
5) Think deeply about whether your messages and
actions communicate loyalty. Why would customers remain loyal if
your primary views of them are statistics, or accounts listed on
a monthly sales report? How committed are employees likely to be,
when they are referred to with such esteemed terms as headcount,
or my favorite, full time equivalent. Like the old Monster.com commercial,
is that what you want to be - an FTE?
In closing, be reminded
that loyalty must be earned. Back in the early '80's, Tylenol literally
flushed their entire market share down the toilet, and proved through
their actions (expensive as they were) that people (doctors, patients,
mothers, employees, share owners, etc.) could still trust them.
They rebounded to become the strongest brand in their category,
and a source of heartfelt pride for employees. Contrast that with
the reported actions today of some of the executives at Enron. Should
these people find their ways into executive positions in different
companies, would you want to work for them, lend to them, or invest
in them for the long haul?
Copyright 2002 International Leadership Associates
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