CUSTOMER STICKINESS – CORNERSTONE FOR SUCCESS IN THE MODERN, COMPETITIVE WORLD

Let me begin by quoting Mahatma Gandhi : “A Customer is the most important visitor on our premises. He is not dependent on us, we are dependent on him. He is not an interruption of our work, he is the purpose it.He is not an outsider of our business, he is part of it. We are not doing him a favour by serving him, He is doing us a favour by giving us the opportunity to do so”.

This Talisman of the Mahatma is probably an extrapolation of the Indian psyche of “Athithi Devo Bhava” (Guests are equivalent to God) though I haven’t heard of an Indian guest who pays for his stay & services consumed !! That the Mahatma realized the value of customers several decades before India Inc woke up to this business tenet is a testimony of the Mahatma’s vision for independent India. Hang on, I am not an ardent follower of Gandhian principles, neither do I support all his actions during & after the freedom struggle. But this talisman of the Mahatma struck a cord.

The lifeline for businesses around the world is, top line growth, which translates into bottom line growth(assuming all other management funda of economies of scale, reduction of NVA activities, cost cutting blah blah are taken care of). Top line growth is fuelled by new customers & retention of existing ones. While the Business development heads are aggressive enough to hunt of newer customers in new geographies, businesses increasingly tend to loose focus of existing customers (or rather take them for granted !) This folly of businesses failing to nurture existing customer relationships often spells doomsday. Why ? Read on for answers..

The world is increasingly interconnected than ever before. One disgruntled customer is no longer  confined to his country/industry. There are several avenues available for angry customers to begin what is called “VIRAL” marketing with a caustic tongue, a.k.a “bad mouthing”. A customer who indulges in such uncalled for marketing has potential to break all future growth for companies. For companies relying only on new customers, viral marketing is the NEMESIS.

On the flip side, happy customers can add value to your business as well ! This brings us to the big question of how to convert our existing customers into our virtual salesforce ? This conversion can take place only when companies intentionally develop a strong bond with customers & ensure to have “top of the mind” recall (perceptual mapping) when customers face their next business problem.

Customers of large corporations can be classified into 4 major strata within a Customer Stickiness Pyramid. The customer “stickinesss” pyramid is a framework for measuring success of companies in converting existing customers into positive viral marketers (brand ambassadors) for the products/services they consume. The parameter used to measure success of this conversion process is called a “Stickiness Score” (on a scale of 10). Higher the Stickiness Score, the better it is for you!

The Customer stickiness pyramid primarily has 4 strata :

Strata 1 – Satisfaction

At the bottom of the Stickiness pyramid is the “Satisfied” customer. A product or service well delivered creates such a customer. But the satisfied customer does have a few heartburns while adopting or consuming the new product/service. A satisfied customer is one whose expectations have been largely met but falling short of the 100 % mark.

The stickiness score for such customers is very low – ranging from 0 to 1. Primarily these customers have grudges against the solution/product consumed & have been restrained from voicing their complaints due to a large set of requirements being met. These grudges get inflated over a period of time. Hence, at the drop of a hat, customers in this strata do not hesitate to jump the ship & partner with your competitor. Once lost to competition, it is impossible to bring them back on board. The base of the pyramid shrinks if such customers are not attended to.

Strata 2 – Delight

The second strata from the bottom is a delighted customer. Such a customer is a result of sustained delivery of good service & product quality at every touch point. This includes meeting business objectives & technical requirements, mutually enriching people-people interactions, customer support/service etc. A long term relationship can be easily built with these customers as they are keen on sharing unsolved business problems (which generates business opportunities) which in turn  enhances the “trust” capital & reduces the “trust” deficit.

The stickiness score for customers in this strata would be around 5. Nevertheless, the delighted customer needs nurturing as the foundations of a strong & mutually beneficial relationship are being laid. The relationship is yet to mature & has the potential of slipping. However a slip or a downgrade of such customers will not result in your competitor’s gain. At worst, one would end up with a Satisfied customer – far better than NO Customer at all!

Strata 3 – Astonishment

The third strata from the bottom of the Customer Stickiness pyramid is a customer who is “astonished” through your product/service delivery. This customer is a result of non linear benefits realised in their businesses through the product/service consumed. A long term relationship built has reaped rich rewards & unlocked value for the customer. Example of such situations could be, a sustainable solution for reduction of operating costs, drastic increase in return on investment (qualitative & quantitative), product/service has been an enabler for quick turnaround in responding to market needs thus helping develop new businesses etc..Such customers are built over a period of time  ( prolonged period of spending time in Strata 2 – Delighted customers) This is primarily because it is time consuming to establish rapports with more than one power center within the customer’s organization.

The stickiness score for such customers would be 7.5. These customers are close to ideal brand ambassadors for you. They speak for you in international forums & industry conferences. Their depth of understanding of your company provides valuable feedback on how we can be better & target new customers. It is safe to assume that these customers are life long partners unless disaster strikes (Murphy’s law)

Strata 4 – Ecstasy

The topmost strata of the Customer stickiness pyramid in the Ecstatic customer who has chosen you as the partner of choice (& not compulsion as in Strata 1 & 2). For such customers the world begins & ends at your doorstep. Such customers develop a strong sense of brand loyalty for your company & act as evangelists in promoting your brand. Though there is very little difference between an astonished customer & a ecstatic customer it is worthwhile to note that an ecstatic customer will not be lost even if disaster strikes.  What about the Customer stickiness score ?? 10 on 10 !

Conclusion :  It is important for companies to classify their customers into these buckets to help them strategise better in the art of customer retention. All companies would have a stereotypical pyramid structure (wide at the base, narrowest at the top) once done with this classification, i.e more customers who are merely satisfied & very less who are ecstatic. (Though it was stated in a different context – Fortune at the bottom of the pyramid – hats off to the Management Guru, Late CK Prahalad, this funda applies here too) Classifying customers in these strata alone would not suffice. Conscious efforts must be made to upgrade customers from a lower strata to the higher strata with significant contributions from all employees (not just the CRMs or Marketing Heads). Strata 2,3 & 4 would be fed with constant upgrades from their lower strata. Feeding customers into Strata 1 is best left to the Sales force !! The Sales force of companies must continuously target new customers to feed into the base of the customer stickiness pyramid making it wider. Relationship managers must focus on increasing the pyramid’s width bottoms up from Strata 2. This promotes healthy competition in obtaining new businesses(growth) between sales teams & relationship teams.

Such a model will see your company through  thick & thin with new customers boosting your revenues in upturn & existing customers helping you stay afloat & grow marginally even during downturns !