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Wednesday, January 12, 2005

Profit Impact Of Business Loyalty

Business Loyalty is inextricably linked to the creation of value as both a cause and an effect. As a cause, loyalty initiates a series of economic ripples that cascade through your enterprise and will impact your survival. As an effect, loyalty reliably measures whether or not your company has delivered superior value: Your Customers Will either come back for more, or go elsewhere.

If you get it right, revenues and market share will grow as the best customers are swept into your business, building repeat sales and referrals. Because your firm's value proposition is strong, you can afford to be more selective in new customer acquisition and to concentrate your investments on the most profitable and potentially loyal prospects, further stimulating sustainable growth. Therefore, your strategy is to attract and retain the best customers.

Sustainable growth enables your company to attract and retain the best employees. Consistent delivery of superior value to your customers increases employees’ loyalty by giving them pride and satisfaction in their work. Furthermore, as long-term employees get to know their long-term customers, they learn how to deliver still more value, which further reinforces both customer and employee loyalty.

Loyal, long-term employees learn on the job how to reduce your costs and improve the quality of your product(s)/service(s), which further enriches the customer value proposition and generates superior productivity. Your company can then use this productivity surplus to fund superior compensation and better tools and training, which further reinforce employee productivity, compensation growth, and loyalty.

The spiraling productivity in your firm, coupled with the increased efficiency of dealing with loyal customers will generate the kind of cost advantage that is very difficult for competitors to match. In turn, your sustainable cost advantage coupled with steady growth in the number of loyal customers will generate the kind of profits that are very appealing to investors, which will make it easier for your firm to attract and retain the right investors.

As you know, loyal investors behave like partners. They stabilise the internal environment, lower your cost of capital, and ensure that appropriate cash is put back into your business to fund investments that will increase your company’s value-creation potential.


"The ultimate victory in competition is derived from the inner satisfaction of knowing that you have done your best and that you have gotten the most out of what you had to give."

Howard Cosell

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