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Customer loyalty demands employee loyalty

Employee loyalty and faith in the product can be a leading indicator of customer loyalty. Yet most employees don't think they deserve customer loyalty.

Organizations know they need to differentiate their customers and foster loyalty -- they're just not following that up with action, according to a recent report from the Strativity Group Inc.

The Parsippany, N.J.-based consultancy recently published its annual Customer Experience Management Study. The survey of 309 global executives found a number of negative trends: Only 40% agreed their companies deserve their customers' loyalty; 66% said their company's executives do not meet with customers frequently; and 56% said their relationship with the customer is not well defined. This is the fourth year the Strativity Group has conducted the study, and it has found a continued decline in executives' confidence about their products or services.

"We're seeing that across the board," said Lior Arussy, founder and president of the Strativity Group. "They feel their product cannot effectively appeal to customers."

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Any effort to transform a company into a customer-centric organization will fail if front-line employees do not have faith in the product -- or faith in the company. And, according to the survey results, only 54% of respondents said the company deserves their loyalty.

"Which is a very dangerous trend," Arussy said. "If your employees don't believe in the value of a product or owe you any type of loyalty, trying to win the battle for customers' hearts, wallets and relationships is impaired."

This is coming at a time when products and services are becoming more commoditized, according to Arussy.

"In today's world of the customer experience, we are depending more and more on employees' attitude as a form of differentiation -- products and services cannot carry the weight of differentiation anymore," he said. "Our dependence on employees is growing, at the same time we are seeing a decline in employees' commitment to employers."

In addition, if senior executives are not showing a commitment to customers, they shouldn't be surprised if their pleas to improve the customer experience and customer-centricity fall on deaf ears. Yet nearly half of respondents said senior executives do not meet regularly with customers.

The study also found that while organizations are taking an interest in improving customer loyalty and making their business customer-centric, they are not backing those steps with tools and metrics.

"Two-thirds of employees go to battle solving customer problems armed with nothing more than an attitude and a smile," Arussy said. "What the study consistently demonstrates is that improvements are incremental and not transformational. Managers settle for small incremental progress that does not lead to a major change in the way customers perceive them and the way executives perceive their business."

For example, according to study respondents, 50% do not know their organizations annual customer retention rate, 70% do not know the annual average customer value, 81% do not know the cost of a complaint, and 75% do not know the cost of a new customer.

The solution is to take a hard look at your organization and make a real commitment to transformation, according to Arussy.

"Start by evaluating your core value proposition," he said. "Second, you can't just release a product or service without selling it to your own employees. You need an internal marketing campaign. In general, I think companies need to reinvestigate the authority of info they make available to employees."

In fact, employee loyalty and satisfaction with a product is more of a leading indicator of customer-centricity, while customer loyalty is a lagging indicator.

"They know what they have to represent to customers every day," Arussy said. "If your own employees are telling you, 'We're not that great,' don't rush to ask the customers."

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