The Financial Impact of Customer Loyalty
©Jan Andersen 2003
(This article was written for Certification International (UK) Ltd: www.cionline.net)
The release of ISO 9001:2000 has driven companies towards improving long-term performance by focusing on customers. Ensuring that customer needs and expectations are fulfilled, or exceeded, will boost customer loyalty, attract new business and enhance an organisation's image.
Some company bosses might be satisfied that they are gaining new customers at the same rate as losing old customers, without realising the enormous benefit of investing time and effort on retaining existing customers. Customer loyalty is worth much more than the price of a one-off purchase, since satisfied customers will return to make further purchases. By retaining a solid customer base, you will spend less on marketing your services, since word-of-mouth and customer loyalty is the best testimonial to any organisation's products and services. Additionally, you will inevitably discover that if a customer is happy with a product or service, he will tell a few people, but if he is unhappy he will tell many more, which can do untold damage to a company's reputation.
The worldwide acceptance of ISO standards has almost certainly been motivated by the belief that in order to produce quality goods and services to customers and encourage repeat business, an organisation requires established and approved processes.
ISO 9001:2000 will assist companies in their goal of encouraging customer loyalty through:
· Top management communicating the importance of meeting customer requirements
· Determining customer needs and requirements, rather than relying on contract requirements
· Identifying and implementing communications with the customer
· Determining requirements not specified by the customer, but which are necessary during the transaction process
· Monitoring customer satisfaction
In Michael LeBoeuf's book, "How to Win Customers and Keep Them For Life", he explains how customer loyalty has a financial impact on an organisation. He says, "A typical business hears from only 4% of its dissatisfied customers. The other 96% silently go away and 91% will never come back. The average business spends six times more to attract new customers than it does to keep old ones."
Customer retention creates a powerful competitive advantage in the battle for market share and customer loyalty is built when customers' expectations are exceeded in the areas that are most important to them. However, loyalty has to be earned and sustained and implementing ISO 9001:2000 will enable many companies to recognise and capitalise on the lifetime value of their customers.
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