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1.2 Defining "Customer Loyalty"

There is a very persistent barrier that comes up time and again whenever groups of people and organizations attempt to adopt new ideas or change the way they do business. This barrier is the simple fact that often there is no universal understanding of or common language for describing the issue and identifying the goals you want to achieve. People frequently use exactly the same words to describe very different ideas. And they use different words to describe the same idea. Generally the result is that no one really knows what has been agreed. This situation is even more common when the ideas are fairly new and not widely understood. Meetings are concluded with great good feeling and nods of agreement all around, followed by months of conflict and rework because everyone thought they'd agreed to something different.

We are not going to accept this state of affairs. We're going to fight this barrier by developing a common language that we agree to use throughout this book. I'll present definitions of the critical terms that we'll be using, and ask that you agree with that definition while you're reading. Remember that when you're finished reading, you are back in control. For your own purposes or your own organization, you may want or need to create your own concepts and definitions. Just be sure that if you do so, you make your definitions very clear and very visible to those with whom you're working. And be sure that you get their agreement that they will use your definition for the duration of the time you're working together. Most important, watch for people using inconsistent terms or definitions, and educate these people right away. Don't let these inconsistent concepts take root.

So, for the duration of the time that we're working together (that is, while you're reading this book), I will ask you to suspend any current definitions you may have and use mine instead. This will ensure that for this time period, we're speaking the same language.

1.2.1 What Is a Customer?

To understand what is meant by customer loyalty, we first must define what a customer is.

  1. A customer is a human being. Only human beings can make decisions and use products. I know this seems terribly obvious, but many companies that sell to businesses instead of consumers forget this.

  2. A customer is a person who has acquired or is considering the acquisition of one of our products. Anyone who is involved in making a decision, from the financial decision maker to the decision influencer to the end user (and often they are one in the same), is a customer.

Note that people who are considering but have not yet acquired one of your products are included. You may not have gathered much information about these prospects, but the relationship starts as soon as you become aware of each other. What you do with this knowledge is a topic for future consideration as we discuss "valuing" potential customers. Also, product "acquisition" may be the result of a purchase, a lease, a gift, or any other means of getting a product into the customer's hands. After a customer has begun using or even considering one of your products or services, he has started a relationship with you. It's your job to be sure you know about each customer and to take care of those relationships.

For business-to-business (B2B) sellers, the concept of a "customer company" is also important. But its importance is as a label for and a set of facts about a group of customer people. The company represents additional interesting information about the set of customers who are employed there. Companies do not make decisions to buy things. Companies do play an important role in that they have certain cultures, certain sets of needs, certain standards and processes, and certain styles, all of which influence how the people who work there make decisions. We can identify a group of customers with characteristics in common by knowing that they work for the same company. We often identify the "value" of this group of customers by knowing the aggregate sales to their entire company. As discussed in the preface, a dictionary sitting beside a box of text will indicate these definitions. All the definitions will be summarized in the glossary in Appendix A.

DEFINITIONS

A customer is a person (or a group of persons) who influences or decides on the acquisition of one of our products or services, or who uses one of these products or services.

A customer company is an organization (public, private, non-profit, or governmental) that has characteristics that influence the group of people who work there.

Through the remainder of this book, when you see the word customer, it will refer to people. If we're talking about a company as a whole organization, we will use the term customer company.

1.2.2 What Is Loyalty?

Loyalty is an emotion; it isn't rational. Loyalty occurs when an individual has a vested interest in maintaining a close relationship, usually resulting from a series of positive experiences that have occurred over time. These experiences can be either tangible (product quality, ease of use, prompt and effective service) or intangible (respectful communications, trustworthy company image).

Customer Loyalty, for our purposes, leads to the behavior we hope our customers will demonstrate. We hope our customers will continue to choose to purchase our products instead of our competitors' just because they would rather do business with us.

DEFINITIONS

Customer Loyalty is a behavior, built on positive experiences and value. This behavior is buying our products, even when that may not appear to be the most rational decision.

Once established, there is momentum for a customer to remain loyal. All things being equal (or only slightly unequal), the loyal customer continues to buy our products. But if we stop delivering the tangible and intangible positive experiences to customers, their loyalty will be lost and they will surely disappear.

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