• 06:44:10 pm on July 24, 2008 | 17
    Tags: , , , , , , , , ,

    First, apologies to Mel Brooks for partially stealing the line from his movie “Blazing Saddles“.

    That is the truth – organizations that focused on customer loyalty are taking the wrong path to customer retention.  Mea culpa, I was one of those people who saw Customer Loyalty as the end-all for customer service.  If you could just achieve high levels of loyalty, the idea goes, you won’t have to worry about customer retention.  I have since learned through work I have done with several clients, that loyalty carries no reward with it.  There is no higher wallet-share, there is no higher likelihood of repeat purchases — there is nothing that foretells that Customer Loyalty helps an organization, and plenty to show otherwise.

    Maria Palma wrote in her blog (Customers Are Always) a couple of days ago that Bargains and Deals may just trump customer loyalty.  I commented in that blog that loyalty only brings up your cost of customer maintenance, and it does not provide you with the benefits you expect.  Let me expand on that.  Customer Loyalty and Customer Satisfaction are similar concepts: they rely on feelings that are not easy to manage or control, are expensive and cumbersome to measure appropriately, and they have not really shown any correlation between what they cost and the benefits they bring.  It is just another way to look at a customer feeling about a company, instead of a product or experience, that cannot be used to predict future behavior.

    In the movie “Nothing in Common” Jackie Gleason plays an older salesperson who prides himself in having the best relationships with his clients.  They all admire him, respect him, and have great loyalty towards him.  Early in the movie, a brash young new VP of sales calls him into his office to discuss his performance.  He is truly impressed by the relationship he has with his clients, but when he looks at the performance he is dismayed.  Abysmal sales numbers have been trickling in for the last few years.  Turns out all his clients are now buying from the competition because they have better shipping policies and cheaper prices.  So much for loyalty, and for Jackie’s job.

    I said it before, and I will say it again.  Don’t focus your metrics on your customer’s feelings.  Instead, focus on what matters. There are three things you can do to ignore customer satisfaction and customer loyalty and come out ahead:

    1.  Build a solid infrastructure (technologies and processes) to deliver great customer experiences across channels.

    2.  Extend it to include feedback, sales, marketing, operations, and to create end-to-end commendable customer experiences

    3.  Ensure that the delivery of your experiences meet customer expectations, and use expectations to improve your delivery

    Then, you won’t have to worry about loyalty, satisfaction, or anything like that.  Then you will be able to simply focus on doing the best possible job for your customers – and get rewarded for it.

    Are you focusing on the right metrics? Are you doing the right thing?

    Advertisements
     

Comments

  • Bill Hogg 10:43 pm on July 24, 2008 | # | Reply

    Provacative premise — ditch loyalty as a goal — but I agree. Too often we measure the wrong things because they are often easiest to measure. Even worse, sometimes we ask the wrong questions all together (Were you satisfied with your experience today?).

    The key is to first find out what is important to your customers and then track that. Sales are a lagging indicator and will tell too little too late.

    I think a balanced scorecard is comprised of 2 sides. One side tracks easy metrics (how many, how fast, etc). The other digs into the quality of the experience, whether we meet their needs (these might be seen as customer feelings).

    Then you can continue to offer products that meet your customers needs, together with an experience that meets (or exceeds) their expectations.

    Then you will have created a fan.

  • Maria Palma 12:48 am on July 25, 2008 | # | Reply

    Hi Esteban,

    Thanks for taking the conversation here and expanding on it! I’m happy to read other perspectives on the subject and as I said in my reply to your comment on my blog, you are right: There really is no loyalty anymore.

  • Glenn 1:23 pm on July 25, 2008 | # | Reply

    Estaban, don’t worry about stealing the quote from Mel Brooks. He got it from John Ford in Treasure of the Sierra Madres.

    Bandits approach the gold miners and say they’re polices officers. “Where are your badges?” the miners ask.
    “Badges! BADGES! We don’t need no stinkin’ badges!”

    Great scene in a great movie. One of Bogart’s best.

    BTW, I totally agree with your conclusions.

    I’ll be reading…

    Glenn

  • Brian Lunde 4:25 pm on July 25, 2008 | # | Reply

    It’s no fun when everyone agrees…so I am here to offer a contrary opinion. The claim that “loyalty carries no reward with it” is an example of a generalization being made from a few cases. I can assure you from empirical results that my firm has produced for numerous clients (across industries ranging from financial services to consumer durables), not to mention credible work by many other researchers in both business and academia, there can be very clear and significant financial rewards associated with higher levels of customer loyalty. So a broad claim that loyalty doesn’t work is patently false.

    The other part of your post that I find curious is that you go on to argue for a focus on customer experience. On this point I heartily agree…but what do you think the consistent delivery of excellent customer experience leads to? It’s called customer loyalty…

  • Esteban Kolsky 5:43 pm on July 25, 2008 | # | Reply

    @Bill
    Thanks for stopping by, I really enjoyed your web site (I have heard your name before, but had not taken the time yet – well done). As for your comment, I agree with you in part. Scorecards are definitely needed, but the problem has been that most people who do them end up doing your first part (how many, how fast, etc.) and ignore the rest. It seems that the whole concept of customer-centric behavior is counter to a scorecard per the current implementations. The point I always try to make is to take a different view than the traditional… don’t care how many billions were served as long as they all got what they wanted. (sorry McD – could not resist).

    @Maria
    Welcome… and thanks for starting this conversation. It would be great if more people read your blog (you do a great job) and followed your advise

    @Glenn
    Thanks for agreeing, and for setting me straight. I am a dorky fan of comedy and I think that Blazing Saddles is one of the most fun movies I have ever seen. I had fun looking up that quote and looking at IMDB for the rest of of the quotes.

    @Brian
    Thanks for stopping by. I looked your blog also, very nicely done. Like your entry on ending the satisfactionitis scourge and let me pledge to help you there. You probably noticed that is one of my pet peeves. I want to also end the associated malaise, “loyalty syndrome”. I would nothing more than to have organizations stop asking me if i am satisfied (rule of thumb: if you are asking, then the answer is no), or whether I would recommend them or visit them again (i really, really, really don’t know… do you really want to base your decisions on my trying to please you with the right answer? wouldn’t you rather focus on how to improve delivery next time). I want to move the dialog to how to deliver perfect customer experiences every single time. The outcome may very well be loyalty, but since you cannot measure nor modify loyalty — why focus on a metric that you cannot control? Focus your efforts, time, and money in something you can control, modify, improve and see results. Then, you won’t have to worry whether you have achieved loyalty, satisfaction, or whatever you want to call it. That is my driving force here… and plenty of my clients liked the approach enough to adopt it and see good results.

    Thanks to all for reading, and taking the time to comment.

  • Rudy Vidal 7:16 pm on July 26, 2008 | # | Reply

    Ok, you got my attention.
    your walking perilessly close to the edge, thank you for that, since it is what makes us better.
    What you’re saying is true in this regard. We almost always worry and measure the wanted result. This, I agree, is not what creates results since by the time we measure it, it is too late to be actionable. These are what we call LAGGING indicators.
    LEADING indicators, on the other hand are those indicators that “lead” or cause the wanted result.
    The perfect example is Mc Donald’s. In their quest for higher ticket sales per customer, they did not measure the actual sales amount, but instead, measured how oeften a hostess said “would you like fries with that?”. Hence we are measuring that which creates the desired result.

    Loyalty is good, I must disagree with you. Loyalty allows us a higher level of stability in our business, because layal customers are less likely to move to another brand, they are more like to repurchase at a higher price and more likely to recommned others. Surely, this is not up for discussion.

    I do agree with you that it makes no sense to measure or concentrate on loyalty. It is better to measure and concentrate on, as you list them: Infrastrucutre efficiency, feedback mechanisms and learning about customer’s expectations, becuase they allow us, as you mention, to manage the customer experience. it is the customer experience that delivers loyalty.

    Loyalty is not a logical reaction, but a emotional reaction based on the customer experience.

    Thanks for your provocative and enlightening post.

    Rudy Vidal
    http://www.willtheybuyagain.wordpress.com

  • Tom Lutzenberger 2:08 am on July 28, 2008 | # | Reply

    I agree with Rudy, you’re on the edge. So I’m going to push you off of it entirely.

    I think fundamentally you’re lead astray by misplaced trust in internet infrastructure, viral marketing strategies, Web 2.0 approaches, and taking the company out of the selling process altogether. Let the website sell the goods smoothly and the world will come to your door. Right?

    No, it doesn’t. It takes work to get the world to find your door in the first place. It takes person-to-person relationships to get a sale, and it takes customer retention to bring them back again and again. And that’s what builds companies’ baselines, allowing them to grow bigger and chase new customers.

    We carried the discussion further on our blog as well. Cheers!

  • Forget About Customer Loyalty? « The Green Paper Chase 2:22 am on July 28, 2008 | # | Reply

    […] was working on another project this weekend and had the chance to peruse an interesting blog post by Esteban Kolsky of eVergence. His premise in a nutshell was forget about making customers feel good and customer retention. […]

  • Esteban Kolsky 10:59 pm on July 28, 2008 | # | Reply

    Thanks for coming by guys, I appreciate your comments…

    @Rudy
    Thanks for noticing the note of the entry. I don’t care about loyalty one way or the other, if it works for you and your business needs then by all means, use it. I recommend against it, but I don’t have scientifically measured surveys or stats to back what I say – just my anecdotal experience. I like the edge, I think that is the place where we do the best work.

    I do believe, however, that measuring or using loyalty to prove something is not good. Alas, I may be the only one there – I also don’t believe in even measuring satisfaction. I have been accused through my career of looking at things in a different way, and I agree… why follow the masses when you can do a tremendously better job by setting your own path.

    @Tom
    I admire your comments, but you don’t know me sufficient to say that I follow marketing fads as you describe above. I am probably the only person I know who calls Web 2.0 by its real name (from the old 60s): distributed architectures. Changing the communications platform does not change the idea of what you are trying to do. I don’t concur with viral strategies, although this comes from experience having launched a product that relied on viral propagation and did not get the expected results.

    I can see where what I am saying can lead to that, but I am not sure you are getting the core of my message in this and other entries around the site: we are too focused on who and how (customers) will interact with us, and we don’t spend enough time preparing for any other contingency. This is to say, we want to create the perfect experience by committee, getting customers and stakeholders to agree, instead of just merely looking for the best experience across. If we focus on satisfaction / retention / loyalty then we are likely to get just that: satisfied customers that we can retain and beget loyalty… but, how about the new customers? how about new products and new segments? surely you agree that the same process, properly customized, could be used across products and segments (you do segment, right). If so, then my statement makes even more sense.

    I don’t care for, nor do I endorse, satisfaction, retention, loyalty, NPS scores… etc. Been doing this for long enough to figure that there is a better way: focus on building customizable, personalized, dynamic experiences that cater to all customers and stakeholders, you won’t have to worry about anything else. it works.

  • Rudy Vidal 6:13 am on July 29, 2008 | # | Reply

    Esteban,
    we are all talking about the same thing.
    here is your quote:
    “there is a better way: focus on building customizable, personalized, dynamic experiences that cater to all customers and stakeholders, you won’t have to worry about anything else. it works.”

    You’re right, if we build these great experiences we don’t need to worry about anything. Because building experiences is what creates loyalty – our goal.

    Loyalty is important. But it is also the goal not the journey, and I believe that is what you’re saying.

    Please don’t throw loyalty out the window. it is important. Loyalty however comes from the following:

    great experience ->exceed expectations -> emotion -> loyalty -> customer willingness to spend $

    Rudy Vidal
    http://www.willtheybuyagain.wordpress.com

  • tlutzenberger 3:53 pm on July 29, 2008 | # | Reply

    Fair enough, I definitely respect your experience in the matter. I’m just seeing a trend of “turnage” going on without any further interest in keeping customers around. Your point on create a great selling experience and everything will take care of itself seemed to be going in that same direction; however, I could be completely wrong in my perception. Cheers!

  • Esteban Kolsky 4:32 pm on July 29, 2008 | # | Reply

    @Rudy
    @Tom

    Thanks for your comments, and I think we are all closer than it seems. My position on this, which i tried to expand on before, is that Loyalty will exist as a byproduct of stellar customer experiences. I want people to forget about customer satisfaction, customer loyalty, customer retention and just build the most impressive customer experiences possible based on stakeholder and customer feedback. if you do that, then worrying about (and measuring) NPS, loyalty, satisfaction or whatever else comes second and you cannot possible have a low score!

    Thanks for reading

  • Roger Brooks 2:41 am on August 20, 2008 | # | Reply

    In my experience, customer loyalty is a very complex animal. There are obviously many factors that ultimately lead to earning a customer’s loyalty; however, it is the notion of changing a customer’s behavior that intrigues me the most.
    Many companies advertise specials or promotions to try to motivate customer behavior, which I categorize as 1-hit promotion wonders. In order to fully engage a customer whereby you can monitor their purchasing behavior, it requires their participation in a loyalty or rewards program. The purpose of a customer loyalty program is to identify customers and to reward customer behavior that best fits the company’s business objectives.
    If accomplished, loyalty & rewards programs allow you to identify and then market directly to consumers in a one-to-one fashion. These programs can be considered successful once you are able to motivate and change customer behavior.
    For example, if you own a chain of gas and convenience stores the average customer may patronize your store on their commute to work and a competitor on their commute home. If you institute a customer loyalty program your goal may be to change customer behavior so that your stores are their first choice both to and from work. Technology is such that you can monitor customer trends (such as frequency of visits) and reward customers for taking action on a loyalty promotion.
    If a customer who historically makes one visit per week now visits three times per week (after marketing directly to that customer) then we know we changed that customer’s behavior, or in essence changed their customer loyalty.

  • Esteban Kolsky 12:08 pm on August 20, 2008 | # | Reply

    Roger,

    Thanks for a great comment — and the opportunity to continue to pontificate. I like your examples, and I agree with them, but the reality (unfortunately) is that the method you describe requires complex understanding of your customers and their needs, desires, and behaviors — which unfortunately most organizations don’t have or know how to manage.

    Organizations must embrace the true concept of loyalty, not the misguided belief that it brings undying business returns, and adopt it to the operations. In the absence of that, which is what we have today, they should not misuse the metric and idea.

  • The Uselessness of Granularity in Feedback Management « eVergance Blog 1:19 pm on October 14, 2008 | # | Reply

    […] as with customer satisfaction and loyalty (you could click on these links for my previous rants on loyalty and satisfaction). The concept of giving people choices is good, as it creates way for them to […]

  • Solving the WHYDFMT Problem in Customer Service « eVergance Blog 5:12 pm on January 12, 2009 | # | Reply

    […] have written countless times that Loyalty does not exist (come to think of it, it is the most popular post in this site – if you have not read it yet, take […]

  • Actions Speak Louder Than Words in Customer Loyalty « eVergance Blog 5:29 am on February 25, 2009 | # | Reply

    […] if you have my previous entry on loyalty you know that I think that Loyalty is so badly used in organizations that it is useless.  Thus, […]


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: