Wednesday, October 14, 2009

Building customer loyalty the Disney way.

Post 346 - The average company in America today loses between 10 and 30% of its customers annually. Research by Bain & Company shows that a 5% improvement in the rate of retention can increase profits anywhere from 25 to 100%. Service firms rely on existing customers for 85 - 95% of their revenue. The AICPA reports that it costs eleven times as much to bring in a new customer as it does to keep an old one. Imagine being able to increase your marketing and advertising effectiveness by a factor of eleven! With all of this empirical evidence, why do so many businesses still focus on customer acquisition rather than on customer loyalty and retention?

As world-class service providers know, customer satisfaction is no longer enough to ensure customer loyalty and retention. In fact, according to the Harvard Business Review, 65 to 85% of customers who chose a new company said they were satisfied or very satisfied with their former supplier. In today’s marketplace, a company has to exceed customer expectations and achieve customer delight. With more than 70% repeat business, Disney serves as an ideal example of a company that’s maintained customer loyalty over half a century, creating a repeat customer base that spans generations.

In 1955, after the opening of Disneyland, Walt Disney established the Disney University to train Disneyland’s 600 Cast Members (employees in Disney-speak) to be aware that they were there mainly to help the Guests. They were told, “You’re either serving the guest or you’re serving someone who is.” This training continues today and all new Cast Members still attend a one-and-a-half day Traditions course. The wording is very precise. They’re not orienting their Cast Members, but rather passing down traditions. Every Disney CEO attends as well.

When the first Christmas parade was being planned for Disneyland at a cost of $350,000, the Park Operating Committee spoke against it, arguing that the holiday crowds would come with or without the parade. Walt listened and then told them, “We can’t be satisfied, even though we’ll get the crowds at Christmastime. We’ve always got to give ‘em a little more. It’ll be worth the investment. If they ever stop coming, it’ll cost 10-times that much to get ‘em back.”

Walt gave my parents a personal tour of Disneyland in 1962. He told them he was always on the lookout for “plussing” opportunities - ways to provide more pleasure for the Guests. At Walt Disney World today, there's a “Take 5” program where each Cast Member is encouraged to take five minutes out of their day and make something special happen for a Guest. This could be as simple as offering to take a picture for a family (so everyone gets in the shot), to giving away a stuffed animal to a sick child in her hotel room.

Disney refers to these encounters as Moments of Magic and attributes its phenomenal retention rates to creating as many of these moments as it can. And by emphasizing Moments of Truth - any encounters a customer has with the firm that develops an impression of its service – it’s changed its internal focus from the activity being performed to the outcome of the encounter with the customer. Most businesses need to entirely re-engineer their processes and procedures if they’re to turn these moments of truth into opportunities to wow their customers. Today, tens of thousands of professionals from more than 35 countries and over 40 industries have attended business programs at Disney Institute and learned how to adapt the Disney approach for their own organizations.

More on Disney “magic” tomorrow.

1 comment:

Steve Berke said...

I think this article will fully complement you article. PLease continue publishing helpful topics like this. Regards, from Always Open Commerce