Loyalty Can Be Bought

Posted by Esteban Kolsky on September 1, 2009

4 comments | 1802 reads

Today is a loyalty-as-you-conceive-it-does-not-exist type of day.

First, I read this well-written piece from Roderick Morris (@roderickmorris), where he states

Operating under the idea that loyalty can be measured, monitored, and the resulting insights applied, CEM looks to create customers that make the conscious decision to purchase, not of inertia or absence of alternatives, but in the spirit of a strongly positive relationship.

I wanted to comment so bad there, point him to my previous post on how measuring loyalty is wrong… but, they did not allow comments. The last point in that statement, about a customer using the relationship as a basis for the commitment, kept resonating in my mind.

Later I read for the third or fourth time someone tweeting that airlines that offer WiFi get more customers. The article says:

According to a study published this week by Wakefield Research for the Wi-Fi Alliance, about 75 percent of frequent business travelers surveyed said they'd choose an airline based on whether the flight has Wi-Fi or not. Half of respondents said they'd even consider moving their reservation by a day to get on a flight that offered Wi-Fi. And more than 70 percent of those surveyed said they'd rather have Wi-Fi access on board a flight than a meal provided by the airline.

That got me thinking (and tweeting if you were there at the time and read some of it).

I mean, if customers are loyal (and look at how much airlines spend on loyalty programs and rewards), then why would they chose to go with a better feature (and not even a free one, but a paid one at that)?

I said before there are two types of loyalty, emotional and intellectual, and I now further that by saying that emotional loyalty is not an option.

No matter how hard you will try in today's world you cannot establish an emotional connection with your customers (OK, prove me wrong and tell me the million companies that you know that have done that). Emotional loyalty is a roll-of-the-dice, it may happen but is nothing organizations do, rather the customer's personality (and, no – you cannot replicate that personality to create more emotionally-attached customers).

Since you know already that measuring Loyalty by itself is useless, and you are going to use Loyalty as a metric (against my objections) then you are going to be talking about rational loyalty. And whatever metrics you use in your NPS or NPS-like approach to correlate that to business functions, you have to make sure they relate to rational loyalty: price, features, functions, discounts, perks, and similar.

And, make sure you understand that despite what your measurement may tell you (promoters vs detractors vs neutral) – that is the loyalty that is easily bought.
NOTE: thanks for Haim Toeg (@htoeg), Trip Babbit (@TriBbabbitt), Graham Hill (@GrahamHill) and Mitch Lieberman (@mjayliebs) for discussion to grow this post. Also, thanks to Roderick Morris for letting me (unknowingly) pick on his post to further the conversation – done with the utmost respect.

Esteban Kolsky

Esteban Kolsky is the founder of CRM intelligence & strategy where he works with vendors to create go-to market strategies for Customer Service and CRM and with end-users leveraging his results-driven, dynamic Customer Experience Management methodology to earn and retain loyal customers. Previously he was a well-known Gartner analyst and created a strategic consulting practice at eVergance.

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Arturo Coto

September 2, 2009

Loyalty can be bought, but for how long?

Great topic / discussion Esteban.

The airline example you provide highlights the hierarchy of needs of a business traveler. As I see it, Wi-Fi is a new feature that now differentiates the air travel experience and is one that business travelers have been waiting for. The option to travel, stay connected and get work done far outweighs the miles I would get from that trip.

However, what happens when all airlines provide this service? How about when it becomes standard across the industry? Do we move from rational to emotional until a new rational option taps into the hierarchy of needs again?

The target segment needs to be considered, I would think. The study cited focused on business travelers. I wonder if the same results would hold true for non-business travelers? Would they go out of their way for the Wi-Fi service, or would that not tap into their hierarchy of needs?

What I typically recommend is to clearly understand the needs of your target market, continuously satisfy the rational requirements and engage them with outstanding service / experience to create an emotional connection. You have to manage both.

My 2 cents...

Arturo Coto

Chuck Van Court

September 2, 2009

To me it seems like loyalty

To me it seems like loyalty is often a pretty tough thing to retain these days with price being the major factor for so many folks coupled with the ease at which price comparisons can be achieved using the Web.

However, it seems like products and services that require ongoing contact with a company have an easier time sustaining loyalty because the frequency and need for interactions place a premium on the customer care provided, which in turn can create a real relationship that matters to the consumer and clearly brings the value proposition beyond price and product.

Products that do not require a lot of post-sale interactions seem to build loyalty largely on a couple of factors: quality and brand image. Quality is assessed through usage with the product over time: it works well and it keeps working. Brand image has two forms: how the brand is perceived and what the brand is perceived to impart on the consumer.

A product that develops a reputation for quality and/or value can cause some people to accept and embrace the brand far beyond their own personal experiences with it. Image imparted on a consumer from a brand latches onto people’s inherent insecurities and vanity and can be so strong that it trumps the perceived quality of the brand. A great example is Harley Davidson, whose bikes’ image is perceived as calling its riders out as rebels and general bad asses, which allows it to charge upwards of a 40% premium over comparable alternatives that have proven to be more reliable and offer more functionality.

Ironically, the one place that all companies have an opportunity to earn loyalty is when the consumer is unhappy, which could equally be created because of a lapse in customer care as a lapse in product/product quality. Depending on how the situation is handled, the outcome can run the continuum from either a lost customer to an advocate. Like our closest friendships, business and brand relationships get stronger when you successfully work through the tough stuff.

This is where I believe technology can make a difference to ensure that customer feedback:

Gets quickly and easily from customer-facing staff on the front lines to appropriate management.

Is captured so that customer-facing staff know when the consumer being worked with has recently expressed any dissatisfaction with the company and have the feedback and current status on things at their fingertips. This gives staff the ability to demonstrate to consumers that their feedback is heard throughout the company and taken seriously.

Is managed and followed up on like any other case within expected service levels. This is where the company demonstrates it has the walk to go along with the talk, which is vital to get consumers to expend the time to provide feedback in the first place

Can be viewed in aggregate to identify potential trends so that preemptive action can be taken before too much loyalty has been unnecessarily eroded..

Beyond exposing feedback to management, effective feedback management tools must make it easy to capture feedback from any channel and must be fully integrated into the case management tools used to provide customer care.

Thanks for starting the discussion, Esteban. Good stuff!

Chuck
www.fuze.com
www.kb2dot0.com
www.fuze.com/modules.aspx#feedback

Graham Hill

September 5, 2009

Reports of the Death of Loyalty are Greatly Exagerrated!

Hi Esteban

An interesting article.

So loyalty doesn't exist. Or rather, loyalty can be bought. Hmmm.

Most neurobiologists, and their psychologist cousins, recognise that we use a multi-step processing system for processing our experience of perceptions of product, people and company (henceforth, product) touchpoints. The first part involves sensing the touchpoint, which leads to subconscious physiological emotions being triggered and may result in conscious feelings about it being generated. All touchpoints are processes in this subconscious way. The second part involves thinking about the touchpoint, deciding how to act and forming an opinion about it. Only a minority minority of touchpoints are processed in this conscious way. Indeed, some neurobiologists reckon as few as 5% of them are. Over a period of time the subconscious and conscious parts of the processing system build a set of expectations of what to expect from the touchpoint in the future. We adjust our expectations through Bayesian updating as we gather more experience with the touchpoint, but disastrous touchpoints aside, it becomes harder and harder to do so.

So emotions rule the roost when it comes our perceptions of experience touchpoints. The very same emotions that neurobiologists and psychologists recogise as forming the basis of an emotional attachment, preference, or loyalty, to a product. Not to all products of course, but just to those that delivered superior touchpoints compared to the others we have experienced in the past. That means that we may not be consciously aware that we are loyal, but we show it in our purchasing behaviour. That doesn't mean that we only buy one product of course. Most of us are promiscuously loyal to a number of products in any given category. In a minority of cases, you could argue that loyal customers may even have a real relationship, although this is generally to a person rather than to a product or company, particularly in low-involvement products.

There is plenty of academic, business and personal anecdotal evidence to support the fact that loyalty exists, that it can be measured (and forget simplistic balderdash like NPS, sorry!) and that companies should act as though it is important. That doesn't of course mean that more loyal customers are more profitable than less loyal ones, or that you should spend most of your marketing budget on loyal customers. Indeed, there is plenty of evidence that they should not in most circumstances.

Loyalty does exist. It is an emotionally-powered thing and thus be definition, occurs mostly at the subconscious level. But it manifests itself in our purchasing behaviour. Can it be bought. To a point. But some bike riders will always want to ride a Harley Davidon, no matter that they are too slow, too heavy, too unreliable and too expensive. Try to pursuade them otherwise at your peril!

Graham Hill
Customer-centric Innovator
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Interested in Customer Driven Innovation? Join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

Esteban Kolsky

September 16, 2009

Amazing

Graham,

As always a very lucid and incredible response.

I apologize for taking so long to respond, but I was under the impression that I was going to be notified of new comments and was not - I just found this today.

While I cannot turn down the evidence, some of which I even read, on Loyalty you quote my approach is different than yours. Most of the points you present I capitulated - er, agreed to during my three day loyalty definition experiment. Especially the one about HD (beloved brand, other rules apply there - mostly emotional).

However, my approach as always is how to turn this into a business metric that can be measured easily (NPS, pfffffft), make sense, and can be used in organizations. And nothing fits the bill for the majority of companies (Sure, some of them may be doing very well in that area). Thus, my conclusion is that if we need to measure loyalty for business (A futile enterprise) at least do it for the rational part of it -- which is the part that can be bought.

Thanks for your great comments... sorry not to reply before.

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