Sunday 18 August 2019

The Economics of Passenger Loyalty

Have you ever thought that saving a customer can be ten times more efficient than finding a new one? This is what Seth Godin calls 'economics of loyalty', and here is why:

'The us/them mindset of most corporate customer service is simple:    

  1.  When you can, get it over with.
  2.  If at all possible, evade responsibility.  

Which means that when things go wrong, you’ll likely encounter a legalistic mentality that begins and ends with, “it’s out of our control.”

There’s an alternative.

It begins with understanding the economics of loyalty. Saving a customer is ten times more efficient than finding a new one. If it costs an airline $1,000 of marketing and route development to acquire a first class business traveler, it’s worth at least $10,000 in customer service to keep one. And that means that an extra ten minutes on the phone clocks in at a high value indeed.

And it continues with a simple tactic: Instead of defining the minimal legal requirement, outline the maximum possible action you could have taken.

“You’re right ma’am, that was a terrible situation. And we could have alerted you in advance that the plane was late, and we could have trained the flight attendants to be more aware of situations like this and we could have been significantly more responsive when we saw that the whole thing was going sideways. That’s incredibly frustrating–you’re right.”

Because it’s all true. You could have done all of these things. And it’s true, it was frustrating. If it wasn’t, she wouldn’t have called.

And then, after learning all the things you could have done, send the ideas upstream. It’s free advice, but it’s good advice.

Because the race doesn’t go to organizations that do the minimal legal requirement. The race goes to those that figure out what they could do. And do it.'

Just wondering, what would be the ratio if this economics of loyalty is applied to employees?  What if the decision to keep a valued employee is ten times more rewarding than finding a new one?