Loyalty Can Be Bought

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.

14 thoughts on “Loyalty Can Be Bought”

  1. Thanks for opening the floodgates on this topic. “Loyalty” has been bugging me for a while. (We ran a cover story back in June 2008 entitled “Lollipop Loyalty.”)

    Here’s the problem:
    Loyalty itself may not be a useful concept any longer.

    Emotional loyalty is irrational, regressive, and social — it’ll keep you as a customer longer than you should be, which will make no sense, but you’ll want to talk about it. (Apple comes to mind. And TiVo.)
    Intellectual loyalty is rational, progressive, and personal — it’ll make sense for you to remain a customer, but perhaps for reasons only you understand. (The Kindle, for example.)

    Emotional loyalty brings with it a lingering sense of nostalgia, or gradual loss, or inevitable decline.
    Intellectual loyalty brings with it an eye to the future, to expansive possibility, to aspirational advancement.

    Emotional loyalty is often subconscious, or even unconscious — and therefore hard to break.
    Intellectual loyalty is by definition a conscious thing.

    Put simply?
    Emotional loyalty is to the old, which costs us, but it’s a strong connection.
    Intellectual loyalty is to the new, which benefits us, but it’s a weak connection.

    It may help to think of our “loyalties” — to companies, to brands, to products — as nodes in a social network: In a snapshot taken at any given moment, a mesh of weak connections may seem to predominate, but the strong connections are the ones that have long-term value.
    j.
    @kitson on Twitter
    http://twitter.com/kitson

  2. Oh! One other thought:

    Why are we always framing this topic only in terms of “customer loyalty,” as if the only useful vector were the loyalty that customers show to companies?

    Where’s the examination of “company loyalty”? Isn’t that a necessary aspect to the full, bidirectional relationship that “loyalty” should rightly imply?
    j.

  3. I am glad this is stimulating the discussion, but I want to be clear that by measuring loyalty I generally mean measuring across an index of questions that triangulate on loyalty. Intent to repurchase being one possible component that would appear to be an indicator of “rational” loyalty.

  4. Measuring loyalty, to the extent you can “measure” it, is not the key issue. Measuring implies quantifying the degree of loyalty tha a customer has to a company, product, or service.
    I would posit that the value of CEM lies in correlating, or identifying the causal relationships to specific experiences, products, and services that seem to co-occur most frequently with “loyal” customers.
    CEM is not bad for identifying these co-occurances. Don’t focus so much on the loyalty score. Identify your loyal customers, and then figure out what experiences co-occur, significantly, to those customers.

  5. Esteban very good point. i think very often emotional loyalty gets equated with purchasing power (Which is really what loyalty SHOULD ultimately translate to for a business). emotional loyalty gives a user base with which cool stuff can be done and yes certain purchasing power can be tapped, but that purchasing power if frequently overestimated.

    1. Yadu,

      I agree with you that business often overestimate the level of loyalty they get from their customers, even count on it sometimes – and get shocked when they don’t get their expectations met. Emotional loyalty is a very tricky thing that the company cannot do much about – they either have a cult-like following or not. And that is up to the customers, not the company to determine.

      Thanks for your comment.

  6. Loyalty is the consumer’s expectation based on the brand’s promise and past actions. Rational or irrational, it is always bought/earned. The currency is the value provided, and exchange rate is the perception of that value.

    Measuring loyalty is an exercise in hindsight. Sure, you can look back and see what worked and what didn’t, but brand loyalty is merely the result of your actions as compared to those of your competitors.

    Mark Gallagher
    Brand Expressionist®
    Blackcoffee

    1. OK,

      I tell you what, from now on you can write my posts.

      I think you hit, brilliantly, on two key items in measuring loyalty: it is a hindsight experiment (cannot be predicted or manipulated going forward) and perceptions and expectations play a key role in it. I still want to be able to distinguish between emotional and rational (and there is a way to manipulate results and sorta-kinda predict “loyalty” when dealing with rational based on past experiences) and be able to measure them separately.

      Alas, with the differentiation I would like to keep, I cannot make your definition better. Great Job!

      Thanks for reading and for that great comment.
      Esteban

  7. 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
    http://www.fuze.comhttp://www.fuze.com/modules.aspx#feedback

    1. Chuck,

      Thanks for the detailed feedback. I think that, if I read your comment right, you are making some great valid points.

      1) There is a difference between rational (price-driven as an example) and emotional (harley davidson is the perfect example, the early macs are another – not anymore) loyalty where the product or service does not matter (emotional) or it does (rational). I totally agree that one can get away with more due to the emotional investment that customers make into it. I wrote this in another blog, as a comment, and I think it is interesting to repeat (I also briefly mentioned it above) emotional loyalty is slowly dying due to the increased complexity in offerings of brand and service, the slow rise of Generation Y (also called the Me generation) and the generational shift it brings with it, and the fact that companies are training customer to not be loyal by not corresponding. Unrequited love only goes for a short time before it ends.

      2) you recognize the importance of customer experience in fostering rational loyalty (even emotional in some cases) where products have become commodities (which is often the case with services and established products). There is no difference between Coke and Pepsi (let’s not start that war – yes they are different) so both focus on the experience of drinking it more than in their differences. There is no difference between going to one hotel or another in Maui (same beaches, same water) so the hotels focus on the experience delivered while there. These differences in experience are critical for brands trying to establish a pseudo-emotional loyalty (it is not true though, since a bed is a bed is a bed – the client just thinks they want a better bed, better food, etc.).

      3) you are highlighting the importance of feedback management (as someone who has said that for a long time, thank you) in managing the experiences, the loyalty etc. i can only agree with you 1,000% on that.

      Thanks for reading, and the detailed feedback.
      Esteban

    1. Jeffrey,

      Started reading your blog, like three times, but always get interrupted. I like the approach of using affective and calculative commitment, and the use of Spock and Vulcans to highlight the emotional-rational perspective. very interesting blog. will comment when i am done reading it 🙂

      Thanks
      Esteban

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