Read an Excerpt
CHAPTER 1
LOYALTY LEADER MINDSET
"IT'S NOT ENOUGH FOR YOUR CUSTOMERS TO LIKE YOU — THEY HAVE TO LOVE YOU."
— CATHERINE NELSON, EXECUTIVE LEADERSHIP CONSULTANT
The paradigm we choose greatly influences how we see and react to the world around us. The Loyalty Leader Mindset can be expressed as:
I earn the fierce loyalty of others by having empathy for them, taking responsibility for their needs, and being generous.
Our mindset relative to loyalty is profoundly influenced by our understanding of the answers to these questions:
• Do you believe fierce loyalty is essential to your success?
• Who do you feel is most responsible for creating fierce loyalty?
• How can you earn fierce loyalty from your customers and colleagues?
WHY DOES FIERCE LOYALTY MATTER?
Our team at FranklinCovey joined with the Coca-Cola Retailing Research Councils to do a major study asking this question: Why do seemingly similar retail stores produce such different results?
We collected data from a cross-section of more than 300,000 employees in 5,000 work teams from 1,100 chain stores. We took the competitive environment of each store into account. We combined this data with customer- and employee-loyalty data and financial data, looking to identify the "great performers" among these stores.
What did we find? We found great performers, all right. Just not very many of them. It was like looking out over a campground at night. It's pitch dark, but here and there a campfire dots the landscape. Our findings were like that. We did see bright patches — stores that stood out from the rest in terms of revenues, profitability, and customer and employee loyalty — but they were few and far between. We called these "campfire" stores. Something was burning there that we didn't find in the average stores.
And we found something else: The customers of those campfire stores were incredibly loyal.
Stores with high customer-loyalty scores — both in general and especially relative to their toughest competitors — are rewarded handsomely. In fact, if the average stores in a chain could raise their loyalty scores just a quarter of the way toward those of the campfire stores, overall profitability would rise a stunning 20 to 30 percent!
So, do campfire stores just happen? Does lightning unexpectedly hit in those stores? No, of course not. We found that the top-performing campfire stores earn a lot more loyalty because they deliberately focus on earning loyalty — not by chance, but by choice. We'll explain how they do that throughout the rest of this book. But you can be sure they start with clarity about exactly what a great customer experience looks and feels like.
Because here's the irony: In a Bain survey of 362 top executives, 85 percent believed their companies delivered "a superior customer experience." The really astonishing part? Only 8 percent of their customers agreed with them.
Are corporate executives really that out of touch? Maybe, but perhaps they don't define "superior customer experience" the way their customers do. The execs are probably looking at satisfaction metrics, which are more about "lack of dissatisfaction" than about experiences that earn fierce loyalty.
Of course, all good managers work to satisfy customers, and many do this pretty well. But at the same time, they frequently make a bad assumption — they figure that if customers aren't dissatisfied, they must be getting a "superior experience"; they must be happy, loyal fans. But just because your kid doesn't get Ds and Fs doesn't mean he or she is a great student. Likewise, there's a big difference between not disappointing customers and earning their loyalty.
For example, one hotel company was always saying they got "94 percent guest satisfaction," but when they started to measure true loyalty, they found that 94 percent guest satisfaction really meant "94 percent non-dissatisfaction." Only 18 percent of their customers were truly loyal. This hotel chain was claiming victory on the customer-service front, while a few competitor hotels that were deliberately focused on creating fierce loyalty were eating their lunch.
Even your regular customers are not necessarily loyal. The relationship between regular customers and profitability is weaker than most of us believe, according to a four-year Harvard research study involving 16,000 people: "About half of those customers who made regular purchases for at least two years — and were therefore designated as 'loyal' — barely generated a profit."
However, customers with the attitude of loyalty are incredibly profitable. "Customers who scored high on both actual and attitudinal measures of loyalty generated 120 percent more profit than those whose loyalty was observed through transactions alone." This is not just a business-to-consumer phenomena; it's true in the business-to-business world as well.
Patrons with fierce loyalty glow when they talk about you. And they are not just your customers — they're advocates, believers, activists, campaigners, sponsors, friends, and fans. One of our associates told us, "When Costco announced they were opening a store in my town, I literally cried with joy." That is the attitude we're talking about. When these people go out to dinner with friends and loved ones, they excitedly tell stories about their experiences with organizations they love.
As Bain & Company's Fred Reichheld wrote, "Loyal customers come back more often, buy more products, refer their friends, provide valuable feedback, cost less to serve, and are less price-sensitive." Think of the impact to your work and your organization if more of your customers behaved in these ways. But just how much does fierce loyalty matter to the bottom line? Reichheld calls fiercely loyal customers "promoters" — they not only purchase a lot from you, but they enthusiastically send other customers your way, too. By contrast, he calls habitual customers "passives" and your least loyal customers "detractors." In his detailed research, Reichheld found that promoters are about four times more profitable to your bottom line. So if we're discussing your profits, then, yes, fierce loyalty really matters. And earning fierce loyalty starts by adopting the Loyalty Leader Mindset and living the Three Core Loyalty Principles.
WHO IS MOST RESPONSIBLE FOR CREATING FIERCE LOYALTY?
The CEO, right? Well, certainly he or she plays an important role. Don Ross, vice chairman of the company that owns the Enterprise, National, and Alamo car-rental brands, says the "CEO should set the example, create the environment for loyalty, and extend trust to all leaders of customer-facing staff." A commitment to promoting people whose love for customers is contagious has certainly served Enterprise Rent-A-Car well. And love for customers is expressed not only through personal interactions, but also through the creation of policies, processes, and technology that make it easy for customers to do business with the organization. The CEO plants the fertile field that nourishes these activities and outcomes for customers.
But the CEO is not the primary driver of the fierce loyalty we are talking about in this book. It's all of us — the people who serve customers inside and outside the organization every day. A major study by the Corporate Executive Board concludes that "the brilliant battle plans created by the generals at company headquarters will either succeed or fail based on the actions of hundreds or even thousands of foot soldiers."
Bain and Gallup have found that, in most organizations, the further you move down the hierarchy from the CEO to the front line, the lower the employee engagement and loyalty to the organization. And people who are customer-facing — the very ones who have the biggest impact on the customer experience — are usually the lowest paid, least trained, and least-engaged employees.
Turnover among these employees is more than 150 percent per year in some organizations. Needless to say, with one foot out the door, a frontline employee may not be riveted on building long-term customer relationships. As our friend Shep Hyken frequently says, "The customer experience rarely exceeds the employee experience."
Over the years, Fred Reichheld's work has shown that companies with a lot of "promoter" customers have their "promoter" employees to thank for it. Like promoter customers, promoter employees love you, talk you up, and recommend you to their friends. They stay with you and serve your customers with zeal and energy. They are by far the most important factor in gaining customer loyalty. Many experts recommend that "one focus of your company's marketing strategy should be developing brand ambassadors and making sure they are involved in social conversations. ... Most of the time when you think of a brand ambassador, you probably think of someone with huge influence or name recognition, like a celebrity, who is paid for their efforts to promote a brand. While influencer marketing like this is still popular, brand ambassadors can also be customers and, just as importantly, employees." While there are many complex variables that produce your bottom-line profits, there's no question that your customer-facing employees play a critically important role.
In our work at FranklinCovey, we found that fiercely loyal customers are rarely found in places without strongly committed employees, and the behavior of employees directly serving customers is often the deciding factor in whether customers are loyal. Again and again, customers of the great-performing chain locations we studied talked about helpful and friendly employees. They also mentioned things that were the result of frontline employees who care — cleanliness, no waiting, items on the shelf.
There's a difference, however, between being "happy" with your job and having a Loyalty Leader Mindset. We asked the employees in thousands of stores about their job satisfaction, and correlated the results with their store customer-loyalty scores. To our surprise, we initially found little connection. In fact, some of the stores where the employees were happiest were actually floundering when it came to customer loyalty.
Then our partner Dick Rennecamp suggested we add a question to the next employee survey to learn whether the employees in each store knew their customer-loyalty score. Dick's hypothesis was that if employees don't know their customer-loyalty score, they're probably not very engaged in improving it. As anyone can observe on a basketball court in a city park, people play harder when they're keeping score.
Dick's theory proved correct. In the 41 percent of the 3,500 stores where the team members knew their customer-loyalty score, there was a direct correlation between the store's employee-loyalty score and their customer-loyalty score. But in the 59 percent of stores where the team did not know the customer-loyalty score, there was no relationship. We learned that employees must not only love their job, but be engaged in making customers happy, too. Employees may love their job because they like the benefits and can chitchat with friends all day, but that doesn't bode well for the customer experience.
So, whose job is it to inspire employees to do a great job for customers? You may say, "The manager, of course." No question, the team leader is the linchpin — the leverage point — in building team culture and inspiring everyone to do their best for customers. But what if you don't have an inspiring team leader? Can you make a real difference in your team's ability to earn customer loyalty? The answer is most definitely yes. And not just in your own engagement with customers, but also, and perhaps even more important, in your interactions with your fellow team members.
"Leadership is a choice, not a position," the cofounder of our company, Stephen R. Covey, was fond of saying. The company can give you a title, but that doesn't make you a leader. As one of our clients once said: "You are not the leader you think you are. You're the leader your people think you are."
Anyone can adopt a Loyalty Leader Mindset. You don't need a formal title. You can be the most experienced executive in the company or the cashier who was just hired yesterday. It doesn't matter. A loyalty leader earns loyalty from others by living the principles that acknowledge their worth and limitless potential. An assistant to an assistant hairdresser in a barbershop can be true to the Loyalty Leader Mindset if he is trustworthy, responsible, and generous in dealing with customers. Likewise, the CEO can be a loyalty leader if she practices empathy and takes ownership of customers' issues. After his son Bill became CEO of Marriott, J. Willard Marriott, the founder and chairman, spent his time personally responding to customers who had a disappointing experience at a Marriott Hotel. He was a loyalty leader.
But in all cases, leaders have to choose to adopt this mindset. In fact, too many formally designated leaders operate through an ineffective or even harmful paradigm. You may have heard that "people don't quit companies; they quit their manager." The research bears this out. According to Gallup, "Managers account for at least 70 percent of variance in employee-engagement scores across business units. This variation is in turn responsible for severely low worldwide employee engagement."
If you are a manager, how are you doing as a loyalty leader? Using a 0 to 10 scale (10 indicates "extremely likely"), how likely would your employees be to recommend you? Using the same scale, how likely would your customers be to recommend you? Would more than 60 percent give you a score of 9 or 10? More than 80 percent? Ultimately, your financial results and your performance reviews will depend on the answer to this question: Are you a leader who earns fierce loyalty from your employees and customers?
To change the behavior, engagement, and loyalty of employees, the leader's mindset and resulting behaviors need to change. Many managers get their jobs because they're technically skilled, but they may not have learned how to model, teach, and reinforce the behaviors needed to earn the loyalty of others. Employee loyalty comes from genuinely caring about their thoughts and ideas, sincerely wanting to understand their goals, then helping employees achieve them. It comes from a willingness to appreciate employees' contributions.
Just as fierce loyalty comes from feelings deep inside you, the power to inspire loyalty comes from deep inside as well. It's fundamentally a question of the kind of person you choose to be.
You'll find that winning the heart of every customer and colleague begins with you. At FranklinCovey, we teach that "as long as you think the problem is out there, that very thought is the problem." Too often we blame the team or the strategic hand we're dealt or the higher-ups or the weather for problems that actually have their origins in ourselves. Remember the store with the empty parking lot next to Costco? That is exactly what those store employees were telling themselves: The problem was out there, not in here.
The damaging paradigm that earning loyalty requires others to change is self-defeating. But once you shift to a mindset that loyalty requires you to change first — well, it's liberating. It's in your control. You have the exciting challenge of becoming a person who inspires loyalty. You have it in your power to build a team of loyal employees, no matter what kind of leaders you have or what kind of fate the company's recruiters have dealt you.
You might already be that 1-in-10 leader who naturally inspires the loyalty of other people, but most of us are not. It doesn't mean we're bad people — it just means we haven't necessarily focused on the principles that drive loyalty. We might be very talented operationally. We might be strategic, organized, disciplined, and highly productive. But unless we live by the principles that kindle loyalty in the hearts of others, we are unlikely to enrich the lives of our customers and employees, or our own life for that matter.
(Continues…)
Excerpted from "Fierce Loyalty"
by .
Copyright © 2018 Franklin Covey Co..
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