1. A survey of 132 professional service providers and users found near universal agreement that client loyalty correlates strongly with profitability. 2. The top perceived benefits of client loyalty according to respondents were retention, referrals, and shorter sales cycles. 3. The key drivers of loyalty identified were responsiveness to clients' needs, relationship management, and reliability in meeting commitments. 4. While loyalty yields long-term benefits, it requires sustained investment in client relationships over many years rather than quick returns.

1. Client Loyalty … Priceless!!
By Ed Wertzberger and Marly Heidkamp, RevNew group Inc.
Y
ou know the cost of tics and quantitative data. Instead these around client loyalty. We asked partici-
your sales and marketing are the collective and thoughtful views pants to tell us about the benefits of
organization. You may provided by survey respondents and client loyalty. In rank order they stated
even know the costs RevNew group Inc. the following as the top benefits:
of obtaining a new client. So what is
The survey was posted on various Benefits Percentage
the ‘worth’ of client loyalty? Is there a
Web sites, blogs and networks seeking Retention 84%
correlation between client loyalty and
individual interest in participation.
profitability? And does it come with Referrals 73%
To participate, an individual asked
its own price tag? The RevNew group Shorter sales cycle 70%
to have the survey sent to them. Of
Inc. (small business that focuses on Open, candid communications 70%
the 200 interested individuals, 132
the power of relationships) wanted to
completed the survey. Mutual business relationships 68%
know if there is a direct correlation
between client loyalty and profitability. Interesting participation demographics: Reduced cost of sale 67%
We also wanted to know the benefits Reference able 59%
of achieving loyalty. So, we asked the Participants Percentage
Higher margins 54%
question in a survey developed to Providers 70%
better understand what you as profes- Users 30% An important comment shared by the
sional service providers believe are users was … “you do not have to be
U.S. 81%
the benefits, barriers and competitive the low cost provider.” This is espe-
Non-U.S. 19% cially true in a loyal relationship. Also
advantages of client loyalty. We also
surveyed users of professional services Partner/executive/owner 46% important in today’s economic envi-
to get their perspective. Senior manager/director 37% ronment, they stated loyal clients will
Over 20 years of experience 56% fight to keep you in tough times with
Based on our experiences of interviewing budget cuts. Other benefits to client
over 800 executives across industries Under 20 years of experience 44%
loyalty include: profit streams tend to
and professional service firms, service Over 40 years old 64% be more resilient over the long-term,
providers can have an ‘internal view’ of Under 40 years old 23% increased acceptance to cross-selling
their relationship that does not match Over 50 employees 67% (including new business lines), and
their client’s view of the relationship. better positioned to keep your footprint
Less than 50 employees 33%
Upon developing the survey, RevNew and block competing firm(s). Providers
integrated the opportunity for both We asked the question…do you believe state they receive many personal bene-
views and sought to survey both groups; there is a direct correlation between fits in a loyal relationship, such as
professional service providers and users loyalty and profitability? Ninety-two higher job satisfaction, increased talent
of professional services (providers and percent of all participants said ‘Yes’! retention, and long-term friendships.
users). This is not intended to be a But before we dive into the price tag, it
research-based paper grounded in statis- is important to understand the views What drives client loyalty? You won’t
see golf, dinner or receptions men-
tioned. What you will see (in rank
About the Authors: order) are the three Rs: responsiveness,
Ed Wertzberger and Marly Heidkamp relationship management, and reliabil-
are co-founders and managing directors ity. Users told us mastering all three
of RevNew group Inc. Prior to his work will differentiate you and help build a
with RevNew group and his most recent strong, loyal relationship. RevNew has
involvement with Huron Consulting, Ed
Wertzberger was a senior partner with found every individual defines and
Arthur Andersen LLP focusing on global measures responsiveness, relationship
sales and strategic client management. management, and reliability differently.
While at Andersen, he held numerous lead- Therefore, each relationship needs to
ership roles, including that of Global Managing Partner for Andersen’s global sales and
strategic client management program. Similarly, prior to her RevNew group involvement be cultivated differently. How do you
and her current role as Senior Manager, Business Development with AWHONN, find out? Ask.
Marly Heidkamp held numerous management positions: VP of Client Services at Picis,
Inc. and Senior Manager at Arthur Andersen focusing on global sales and strategic Responsiveness is more than replying
client management program. Marly can be reached at mheidkamp@revnewgroup.com. and a returned phone call within
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2. Client Loyalty … Priceless!! 1. Consistent quality work product indicated a strong belief in a correlation
continued from page 1 between loyalty and profitability. Yet,
2. Fees perceived as value received
24 hours. There is a performance many of the respondents stated it is
3. Understand issues of importance
expectation directly linked to a difficult to measure. Many believe prof-
response. Who is responding? Do you 4. Manage stakeholder relationships itability from loyalty requires long-term
ask someone else to follow-up for you 5. Understand the organization activity investments which yield “pay-
and never check back to make sure backs” over years rather than months.
To be considered a benchmarked activ-
a follow-up was completed? Are you
ity, 90 percent or higher of providers Now back to the question: is there a
merely responding or are you providing
and users agreed the specific activity price tag for client loyalty? One respon-
“valued information” in your response?
significantly impacted satisfaction, dent stated “there is no price on loyalty.”
Relationship management should
loyalty, and competitive advantage. Apparently it is easier to determine the
encompass the entire client experience.
However, providers and users had benefits of loyalty in a relationship and
Are you including stakeholders/
differing views regarding the specific what activities drive toward attaining
individuals that are important to your
activities. Collectively, users agree loyalty. Equally, internal and external
client in the total relationship? Often,
on activities that drive loyalty and barriers and behaviors to loyalty are
an executive/buyer wants to know you
competitive advantage; however, they recognized. Based on RevNew’s experi-
are “including and paying attention”
measure performance against these ences, relationship management to a
to those individuals important to
activities on an individual basis. level of trust and loyalty is a long-term
them. Reliability means consistency
Providers generally believe in greater investment, one relationship at a time.
and repeatability of service and “your
impact toward building loyalty from Generally speaking, organizations and
word.” Remember to ask your valued
activities (rated higher). Sales and individuals do not have the patience
client, what is important to them in
business developers as a group viewed today to invest in long-term relationship
building a trust-based, loyal relationship
more activities as important drivers of development to drive long-term prof-
and how can you mutually arrive there?
satisfaction, loyalty, and competitive itability. In today’s difficult economic
Not everyone wants to, or is willing advantage. Users tend to be more easily climate it is even more challenging to
to, build a loyal relationship. Some satisfied, yet more difficult to reach “stay the course” to maximize relation-
individuals and organizations don’t a loyal relationship. However, users ship value, when in fact, loyalty is very
have the desire to partner. Partnering believe relationships matter and can important. Users told us, during tough
and loyalty is a two-way street. As significantly drive toward loyalty. So economic times, they will fight to retain
one respondent stated, “creating client much so, users value relationship-based their most loyal relationships as more
loyalty is hard work, creating institu- activities more than technical skills. pressure is put on internal budgets.
tional loyalty is a multiplication factor.”
Users told us they “benchmark” against It is widely accepted knowledge the cost
Many organizations do not operate in
their most current experience and of maintaining a client varies within
a preferred-provider model, hesitate
expectations. It is vital for the provider organizations; however, it costs 5 to 10
to rely on a single vendor, and operate
to “narrow the gap between expectations times that cost to secure a new client.
in a decentralized environment. User
and the actual service provided.” Users And many organizations believe a loyal
organizations may be struggling inter-
also stated high levels of satisfaction do client provides double-digit growth.
nally with issues that can ultimately
not equal loyalty. Equally important to The intangibles are numerous and over
block provider attempts at achieving
note: providing good service does not 90 percent of the respondents agree, the
loyalty, such as organizational bureau-
mean you have a strong relationship and benefits of a loyal relationship include
cracy (silo mentality, turf struggles,
having a strong relationship does not profitability, it just isn’t measured.
and political navigation), decision-
mean you have obtained client loyalty. Therefore client loyalty is priceless!
makers out of touch with client needs,
and rigid procurement policies. And Consistency is king! Users explained Client loyalty … built over time with
provider organizations face their own consistent quality service is considered the right activities, investments, consis-
challenges of poor delivery models, an “expected standard.” And not all tent quality service delivery, stellar rela-
inability to invest (time, resources, and providers deliver on the expected stan- tionship management, satisfaction …
budget), and lack of leadership support. dard. Users suggest consistent delivery with determined and executed measures
of expected standards can create com- will become better than priceless.
What activities have high impact on
petitive advantage.
building loyal relationships? Admittedly, This article was reprinted from the 2009
we were surprised in the degree of agree- Loyalty can provide a competitive July/August Issue of MarkeTrends with the
ment between users and providers. The advantage and respondents told us how written consent of The Association for
following activities are believed to be you determine and measure profitability Accounting Marketing.
benchmarked drivers toward loyalty is a function of your internal organiza-
(ranked in order of highest impact): tion. Over 90 percent of the respondents
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