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Is loyalty the absence of something better?

November 21, 2007

Back in the 1990’s, Dave Williams then President of Loblaws spoke at an industry conference and said a few words that have stuck with me ever since.

Loyalty is the absence of something better.

Are customers really that ‘fickle’ that past relationships mean nothing, as soon as something better comes along – they scatter like gazelles on the savanna?

Perhaps if we break this down a little maybe the assertion won’t be as scary.

To begin, are customers migrating away from you or are they going towards something else? The former is something that you caused, the latter something that someone else did that was more relevant to your customer than you.

The only way you are going to be able to answer that question is to actually talk to your customers. Conduct regular surveys and polls – it doesn’t really matter how accurate the methodology – they all have their strengths, weaknesses and bias – its the trend line that tells the story.

Carefully monitor your customer’s shopping behavior to uncover the signals of disaffection: the amount of spend, the depth of spend across your product line and the frequency of spend – at all levels of customer importance – not just your top 20%.

If they are going toward something else – maybe they weren’t your customers to begin with. Also define what you mean by customer, what share of wallet do you have of their expenditures – is anyone with less than 60% SOW really your customer? Or come at this from an RFM or LTV calculation.

Even when you have that figure at hand – the real big question is why are they buying your brand. Is it a matter of convenience, low price? I would personally subtract those customers from the mix and if that scares people – great because now you have come to a significant realization about what your brand really stands for in the market.

So lets work with your real customer base.

1. Say thank you.

When was the last time you thanked your customers. Not the throw-away kind of vocalization – but the real thing. Thanksgiving is coming up – use this time to figure out how to concretely and truly express your thanks for their patronage – maybe in the form of a personalized benefit or perhaps in the form of a charitable good work made on behalf of the customer. And don’t do it only around the holiday seasons – do it year round. Naturally a funding formula will help you define your investment budget. Make no mistakes – this is an investment in your customers. If this is difficult for your management to accept – then you should think about changing.

2. What is your brand promise and where have you strained or broken that promise?

Customer complaints can be dealt with – the key is to listen and acknowledge the failing and use that information to improve the system. Customers understand that mistakes happen, that everyone is human. What they need is to have their situation acknowledged and walk away with a sense that it won’t happen to them again. Again with the power of communication – a dialogue can be initiated to keep the customer appraised of the actions being taken – share some hard facts/figures with them as to the extent of the problem their situation has helped to identify and for the icing on the cake – a heartfelt thank you for their part in making it better – from as high up the organization as you can.

It’s when customers sense that nothing is going to change, get better or worse still that they are being placated or ‘managed’ – that a switch is turned off and your brand has now become a convenience driven commodity.

3. What has the brand done to retain their customers?
If the enterprise does nothing to invest in their customers to prolong and strengthen the relationship (which is ultimately measured in term of the profit they create for you), then you deserve to fail and fail miserably – the only hope is that those who are working in support of your organization – do not suffer as well. Having a paying customer is not a priviledge – a private corporate money machine that generates DCF’s.

4. What proportion of your brand’s profit growth has come from organic growth versus acquisition. If too much attention is focused on customer acquisition there is a danger that enterprise’s resources become too focussed on cost reduction of existing services to yield the margins they need to offset the cost of customer acquisition. I’m not saying to ignore customer acquisition – but keep it in balance and recognize that the greater your ability to generate organic growth – the more it speaks to your ability to provide the brand promise customers are seeking from you. They in turn become your advocates who will generate referrals for you – reducing your cost of acquisition so that you can share that with your referring customer and/or apply toward further product innovation.

How will you know when your organic growth measures are gaining traction? look at the response rates to your direct(ed) promotions. It should be trending up. As an aside – I have always been perplexed by the satisfaction some people have of having a response rate of x % – I tend to look at the 1-x% and wonder – why not?

So what have you done to evolve your brand promise with newer, better delivery of solutions to meet emerging needs?

Note focus on emerging as opposed to current needs for the simple fact that many emerging needs will also meet the requirements of current and it gives one the added advantage of actually being and being perceived as being an innovator in the category.

5. What have you done to create stickiness for your brand? – not the stickiness embedded in a contract or by virtue of the inconvenience customers may have of making a change – but the honest to goodness “I’ld walk a mile for a Camel” type of stickiness.

Clearly the things talked about to date (brand promise, listening, thank you, brand innovation) will enhance stickiness – but what else can you do to ‘institutionalize’ stickiness programs for your brand.

perhaps escalated soft/hard benefits to further reinforce the benefits of being a longterm customer.

Is loyalty the absence of something better? It’s the something better part we need to focus on – because customers will leave – especially if we give them no reason to stay.

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