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The funny thing about Loyalty:

October 31, 2011

Flickr: Sappymoosetree

Grant Fairley may have been right when he bluntly stated, “If you want loyalty, buy a dog”.

I include close family, trusted colleagues and clients and other true friends into this little equation (no offense to any of them) but pure transactional customers…mmm, not so sure.

Loyalty is defined as “a feeling of devoted attachment and affection”. Now if we are to believe this of customers that come into our stores and swipe with our cards, then we are largely delusional and will be lulled into a dangerous space of overstating our role in their lives and complacency.

If you are responsible for the retention strategy for a large customer base, then you would immediately need to confront the reality that there is very little loyalty when it comes to customers. And looking at most “Loyalty” schemes, why should there be?

Don’t confuse loyalty with:
a) The well-ingrained and intended hassle factors associated with switching accounts (telco’s, insurance companies and banks raise your hands here).
b) The repurchasing of the same product, as you can’t get a decent trade-in or will lose your warranty on your product by going elsewhere (car industry, your turn to raise those hands).
c) A points programme that you’re locked into with your airline and you cannot transfer those hard-earned miles to another carrier (airline industry – over to you here…).
d) Your customers getting points every time they swipe their card when buying groceries at your store – your customers didn’t ask for this, you gave it to them in the hope of locking them in for more purchases and to one day to understand their personal data better so as to sell more to them (supermarkets, your turn…).

Now there is nothing really wrong with any of the above as low-end, short to medium term customer “retention” strategies (although it would be quite handy not to have to discount my air miles by 50% every time I want to use them…) but the relationships defined above are often more akin to Stockholm Syndrome than to any possible form of Loyalty – in fact most of them breed anger and disloyalty.

Loyalty is not a transactional relationship, it is as described above, a “feeling of devotion” that very few brands are able to create via their current “Loyalty programme”.

In fact, good old fashioned brand advertising can often yield a much higher level of emotional connection as deftly done, you are using powerful emotional cues to associate the brand with e.g. their childhood, their mother’s baking, doing the best for their kids etc. etc.

And then certainly the lived experience in-store and in follow-up service is all-important: where one has the greatest opportunity to build an engaged, real and human connection that can lead to a sense of being loyal. I remember Michael Francis, the CMO of Target (America) telling me that he doesn’t allow his sales team to even refer to people coming into their store as customers. They are looked at and referred to as “guests”. Think about it, you’d sure treat a guest a whole lot better than you would a potential customer – as you’d be the host. It wouldn’t be purely transactional. You’d care, you’d listen, you’d offer advice, and you’d be helpful…and then they’d buy (versus you selling)…

You want people to buy their next car from you because they received outstanding service and the product delivered functionally and emotionally, not because of a trade-in price. This can be applied to telco’s, banks, supermarkets, airlines etc. The minute we believe we have devoted customers because of a card and point-related system, we’ll be on the slippery slope towards losing them.

Sure, use these cards as part of a retention strategy and then actively look at other ways of enhancing the relationship. Just delivering brilliantly on the functional basics will get you 95% there alone.

Some tips towards transactional “loyalty”:
a) Don’t underestimate the enormous power of getting it right first time.
b) Make the transactional behaviour as quick, simple and easy as is possible.
c) Say sorry if you’ve made a mistake and fix it quickly.
d) Fess-up if you have a product issue ahead of the customer raising it.
e) Don’t argue as the first step – if the customer has a problem, unless they are delusional, they genuinely have a problem – real or perceived.
f) If a customer wants to move their account, use human dynamics and “deal-sweeteners” (added value) to retain them – not enumerable hassle-related tactics. If you are         helpful, kind, considerate and understanding, chances are the customer will think twice about switching (versus being aggressive or defensive).

The card swipe is valuable in the information it gives you to enhance the relationship, to offer better and more relevant deals, to cross shop the customer, to be helpful or useful with better tips, advice etc. but it can’t replace the value of exceptional service and the lived and human dynamic. So, reconsider your supposed “Loyalty” programme as your Customer Retention Strategy and your pencil around keeping these customers will begin to start sharpening itself.

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