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Part three of five in a series on loyalty. We’re halfway there, don’t give up on me now! Comments and contributions will be part of part five. – Clay

Now for the traditional, business school stuff: variables of customer satisfaction.

Satisfaction among a set of customers, no matter the business, seems to be composed of six key variables:

1. Product Performance: Does the thing I’ve purchased live up to my expectations?
2. Price: Does the price of the product match up with its performance relative to my needs?
3. Information: Does this thing give me some mental benefit that I haven’t had before?
4. Privileges: Am I afforded some unique opportunities, above and beyond what I expected of the product?
5. Surprises & Delights: Is there some un-promised and awesome thing that happens as a result of my using this thing?
6. Delivery Systems: How do I receive this thing?

Differentiation from competitors can be – well, kinda has to be – created in multiple categories, and the more differentiation, the better.

You knew that.

But what we’re talking about here isn’t just general best practices for business, it’s building integrated loyalty systems. Yesterday we covered the “How?” question for collective action, and today we’ll cover the “How?” question for altering satisfaction variables, based on the collective action that you’ve created by doing something great for your customers and prospects on the internet and in the real world.

The first step is to map how your product works against the six components of customer satisfaction, according to the segment of people who use your product or service that you’re targeting with your efforts in the collective action space.

You should probably do research to find out how you’re doing. Don’t guess.

From there, I’ve adapted a pretty straightforward process from Dawn Iacobucci and Bobby Calder’s Kellogg on Integrated Marketing for deciding what kind of benefits make sense to provide to the people that engage with you. You should buy that book, by the way. It’s super dorky, but really helpful.

Iacobucci, Calder et al. provide seven phases:

1. Set the vision: Where are we going?
2. Identify best customers: What’s important?
3. Value them: What are they worth?
4. Set goals: What will we accomplish?
5. Set attributes: What do I do for them?
6. Communicate: How do I get the word out?
7. Evaluate: Did it work?

I’ve dropped the last two as they ought to be intrinsic to the program; measurement and communication shouldn’t be “phases” but should be core to what’s going on, and I’ve simplified it/made a few tweaks here and there.

So with that in mind, I’ve layered my revisions to their phases with the Collective Action Design Framework and the Satisfaction Variable Performance thing:

Click the image to embiggen.

Clunky name, I know. You’d probably fill this thing out, like a worksheet. Answers in every box inform every other one, I imagine, so it’s likely that you can’t just do strategy by numbers here.

This is intended to be used for a single group of people, not to describe your broad vision for loyalty. You might have multiple targets and multiple ways of engaging them, and that’s okay. Just be sure to map them out.

So here’s how to use this framework.

Intent: What are your broad goals in terms of customer loyalty?
Do you want to increase loyalty? Do you like having customers? I hope so.

At its broadest scale, what are your intentions in the space? Write them down.

Identification: Which people within this community are most important to your business?
The biggest surprise in my business-life is that most companies don’t have a clear or shared understanding of who of their customers are, let alone who among all their customers are the “best.” Define best as you will. Sure, there’s a colloquial understanding, or an aspirational understanding, but hardly ever clear-cut, simply explained and collectively held knowledge across everyone in an organization.

So in the identification piece, for a particular community of people that are your customers and are interacting with you in the social space, the key outcome is to be able to agree upon and write down the groups of people that are important to your business, either for marketing reasons or commercial reasons.

Evaluation: What is the lifetime value of the people that are most important to you?
Even harder challenge: tell me, tell anybody the actual lifetime value of the people you’ve identified as important to your business.

What value do they provide? How do they provide it? Do they buy a ton of your product? Do they buy a little of your product, but they buy it consistently over a long period of time? Do they help you improve the way you do business? Do they spread your messages to all their friends?

Sidebar: Non-sales (or Marketing) Value
There’s a million ways that people provide your business with value, and when you’re considering the different ways people do it, don’t forget about things that don’t explicitly tie to sales. I know, I know. But it’s important.

Key outcome of the evaluation piece: for the people that are important, work to define in absolute terms how much value they provide to your organization.

Objectives: What change do you want to create within these important people?
You’ve now officially left the really difficult part of the program. If you know who is important, and you know why they’re important, deciding on the change you want to create is easy.

Sidebar: Objectives
And yet, objectives frequently suck. Probably because people don’t do their homework. If it’s not measurable, it’s not an objective. Anyway.

With the community of people in mind, decide what kind of change you want this integrated loyalty effort to produce. You could make the group buy more frequently. You could reduce the likelihood that a valuable customer would decide to not buy from you again. You could get certain, vocal segments to talk about you more. You could get more information on a segment you don’t know much about (scary, but you could do that). You could grow the number of people in a certain segment, as defined by purchase habits, beliefs, etc. You could find people that are similar in some way to your most valuable customers (look-alikes) and try to get them to be more like your best homies.

Outcome: One or more measurable things that you want to achieve. Almost done!

Initiatives: What are you going to do for these people that will create the change you want?
Now for the fun part, but probably a contentious one within an organization: deciding what valuable thing you’re going to give to people when they give attention, money, or some other valuable thing to you. Using the satisfaction variables, choose one or more things to change. To make it amazing, choose things that are tied to the Collective Action Design Framework.

In yesterday’s example, trading Membership Rewards points for participation in a reward-point-obsessed community makes a ton of sense. In my mind, that’s part Price variable and part Privilege variable. Most loyalty systems seem to fall along this spectrum, predominantly because it’s harder to vary the other elements.

But you’ll be better off if you’re more creative.

• Dropbox is able to vary Performance by giving people extra space for successful referrals.
• Zappos varies Delivery by speeding up the shipping process for people that are likely to spend more in the future.
• They’re not loyalty programs per se, but Mint, Netflix and OkCupid give more Information to people that give them more information.
• Local bars and restaurants vary Privilege and Surprises/Delights by hooking regulars up with more attentive service and a freebie now and then.
• Bank of America (and I assume all banks, but I know BofA does this because I worked in their call-center once) varies Privileges by giving special, live phone support to customers that have multiple accounts with the bank,
• My aunt and uncle use an unofficial credit system to ease Delivery for frequent customers, putting a card with their name on it in a box near the register; if you are on a ride and need a tube, but are out of cash…no problem.

So the outcome for this final piece is to pick the variable most aligned with what the community wants, and improve it in some obvious way. These are your initiatives, and you should work with your partners and internal resources to get them done.

And unless you’re the owner of a small business, you’ll probably need to use the outcomes of Identification, Evaluation and Objectives to substantiate your decision in financial terms, but that should be easy at this point.

Onward and upward from there!

More tomorrow, but thanks to all y’all so far for your comments and thoughts. I’ll be including them in the final output of this, on Friday, which I think will be a whitepaper of sorts. If you’re cool with it, I’ll include your quotes, name, and a URL of your choice in the document. I think it’ll be cool.