Customer Loyalty Comes from Conversation

What if instead of focusing on loyalty programs, companies focused on customer rewards? The best reward of all being a loyal company that looks out for its customers, understands their needs, and works in alignment with partners to deliver on them.

How many loyalty cards do you have in your wallet? Do they work for you or are you working to get anything out of them? Often at the (company and personal) cost of the very thing they were created to promote - loyalty.

Conversation leads to brand experience, which in turn may lead to loyalty. Card or no card, a reward for many customers today is often a prompt customer service rep who seeks to listen and understand what is needed and has the ability and company back-up to make it happen.

Some issues with loyalty programs are:

• the use of monetary rewards to encourage repeated purchases - are a convenience, not an indicator of long term behavior. Customers will buy brands interchangeably when presented as offer, and revert to their preferences when not. There are other ways to target pricing, an example of which I wrote about in who gets what and why?

Work on understanding what your customers value, instead. IKEA for example, is in a very tough retail business, yet the company manages to be anything but flat when it comes to customer loyalty. The whole store and product experience reward. That's what I call brand equity.

• the wait time to realize a gain from being loyal - and then on top of that there are usually penalties and costs associated with using the points. We do live in an instant gratification marketplace. Also, the more distance you create between the product or service reward and the customer, the less likely the program will work.

Work instead on decreasing barriers between what you sell and what customers want to buy by building quality, value and convenience right into the product. QVC does a good job with that. Former president and CEO of QVC Doug Briggs said: "We don't bombard customers with special offers or coupons to build loyalty, because it's easy for them to switch to the other guy's coupon. We focus on customer communication and satisfaction. For us, it's about building trust and developing long-term relationships. If QVC has earned a customer's trust, we believe they will buy—over and over again."

• the message that some people are more special than others - will be counter productive especially with the increased peer to peer conversations. What a company gets out of the program is the data on customers use, spend, etc. Yet they do not seem to connect that data to the way they treat those customers. And today there are ways to make everyone, not just a few, feel special on the basis of that data.

Work on executing flawlessly on the basis of what your customers love (and value) about your brand. I wrote about how Anthropologie thrives through product, presentation, and people. Another example is Southwest airlines - they're coming to Minneapolis, BTW. I will fly Southwest for the first time when I go to SxSWi, I will let you know how that goes.

The way to a customer's heart is much more than a loyalty program. Making customer evangelists is about creating experiences worth talking about. Today at Fast Company expert blog we talk about how to upgrade your customers' loyalty.

I used to do a lot of shopping at Benetton stores, so much so that I often received a thank you card from the store manager. They had my address. Yet, when they pulled out of Philadelphia, nobody bothered to tell me. A missed opportunity indeed. That conversation would have further cemented my loyalty - especially since I do travel a lot.

On the success story side, all I have at the moment is Apple. What companies hve earned your loyalty? Does it go beyond a card? I suspect it does. What do you look for in a rewards program?

[loyalty card by Kake Pugh]

Comments

[Rachel Burkot]

I think the best rewards program comes from finding out what people value. It sounds overly simplified, but really, that's all there is to it. For instance, when the price of gas started to increase, a grocery store in my area started offering 10 cents off per gallon when you spend $50 in the store. These groceries aren't cheap - a Wal-Mart supercenter is a better deal - but because the other store demonstrates that they understand what their customers value, they've seen an increase in sales, so it benefits both sides.

[Susan]

Right now I am loyal to Talbot's, Chevron and Apple. As an example, Talbot's received a new CEO last year and she has really stepped up the customer interaction from her. And, they continue to provide great service in the stores and online.

[Adam Needles]

Valeria, this is a great call-to-action!

I wanted to add -- along the lines of what your store manager at Benetton used to do -- that conversation and customer-knowing should still be backed with budget/empowerment.

For example, it's critical that an employee not only recognize and engage a particular 'regular,' but also know when to give that person special treatment. This is a key management practice at Ritz-Carlton, which does it well. The advantage of such empowerment is that you can take care of your customers and deliver the same level of care that a vanilla 'loyalty' or 'frequent-shopper' program might offer, but with 100X the returns, less cost and no alienation of other customers. I also think it helps create mystique that contributes to the idea of a personalized experience.

Again, great piece.

[Ricardo Bueno]

Re: "Making customer evangelists is about creating experiences worth talking about."

This just about sums up how companies can go about earning my loyalty. I've had excellent experiences with Apple's customer service for example. So much so that I evangelize their products on many occasions.

[Ugur Ozmen]

Who can say a woman that her hair are horrible.
* Partner? Absolultely NO!;
* Spouse? Definitely impossible!, NEVER EVER;
* Darling? Just before the end of the relationship!...
But the coiffure can say it.
Why you are loyal to coiffure. Not because he has a loyalty card, not because he is the cheapest alternative in neighborhood...

Copy what he is doing, you will have the best loyalty program.

[Justin Barrie]

Agree very much with the arguments above. We are building a platform that will allow consumers to manage their cards but also allow retailers to connect and hold conversations with consumers in a community setting. Check out http://www.perkler.com/

[CASUDI]

I consider my business partner James to fit the profile of a "loyal customer", so when I read your post I decided to ask him.

1 He's been a loyal Chevron customer for 35 years, and would choose to fill up his car at a Chevron dealer even if the next station was a couple of cents lower. But several months ago he stopped using Chevron. Here is why: his usual choice of dealers (3) closed, with no warning or suggestion where he might go instead. Then they sent him a new card (ugly design, and he's a design snob) but instructed him he could not use it until a certain date. So he continued using the old card until one day on an out of the country trip, it no longer worked. END of a 35 year relationship.....

2 He's been a Nordstrom customer for 25 years, and still shops there. Why? first, he likes their selection of merchandise better than than any competitors, and most importantly, he likes their customer service. "The sales people always go above & beyond to get me what I want, finding the right size/color at another store, mailing it to me on the island, showing me an alternative selection that beats my original choice, etc." STILL shopping at Nordstrom.

3 He patronizes 'Penguin Coffee' (our local independent coffee house entrepreneur; and Penguin does have a loyalty card), but James says he'd go there anyway, the incentive is incidental. He enjoys the personal contact with the owner, with a shared interest in classic cars & trucks, and the proprietor Aaron is also a creative person, so that's another reason to patronize Penguin. Second, James says he appreciates the 'community of locals", who occupy the most comfortable chairs 5 days a week for an hour in the early morning, because he admires the atmosphere that allowed the community to develop. (I think it's the "truck talk" with Aaron).

4 James has been using Apple computer products since 1979. That's customer loyalty.

So, where are my loyalties?

1 I've been driving Audi's for 22 years, and purchased my last two from Zoltan at the Audi dealer in Seattle. Would I follow Zoltan to another brand of car? Probably not, though that's not totally impossible, depending on the brand. Would I follow Zoltan to another Audi dealer? Absolutely. Zoltan is available on his BB 24/7, even on holiday. Every time I've emailed or called him he has responded within less than 2 hours. He calls or emails me checking to see how I am, and how the cars are running. When I go in for service, a loaner car is waiting. But that's not all! He set it up for me to drive an R8 sports car on the racetrack as part of Audi's R8 intro, creating a loyal customer for life!

[Valeria Maltoni]

@Rachel - it does seems simple. In the industrial age, when companies started getting busy with scale, we sort of lost touch with dialogue and taking a personal interest in people. In looking over the examples provided here today, including my own, it's clear that we favor those companies that manage to remember about us, what we value, how they can help.

@Susan - interesting as Casudi also provided Chevron as an example of doing it right (or used to). I never even saw a Chevron station where I am. Now I feel I missed out.

@Adam - thank you for adding the thoughtful dimension of employee engagement/empowerment. That's exactly right in that not everyone will want the same treatment and customer interaction is very situational.

@Ricardo - my Apple experiences have been memorable. Even in the cases when they missed the mark, the way they fixed it was better than how most companies handle you well.

@Ugur - you had me in stitches. That was a perfect example! In the service industry especially, the customer *is* the product.

@Justin - thank you for the link. I'll check it out.

@Casudi - I feel the same way about my local Toyota dealer. Granted, I don't drive a luxury car, but they go out of their way to accommodate my needs and schedule. Once they stayed open later so I could have the car serviced. We have so lost that sense of community you describe in the story about James! The businesses that are able to create one, will win in the long run. When businesses think of customers and employees in terms of cash flow and assets, that's when they start the decline as they in turn will be viewed as commodity.

[peter]

Valeria, why would I want a customer evangelist for my business? Do they buy more?

Reading about James, I also wonder if concepts of loyalty are, in part, a rationalization of undiagnosed habit.

I also wonder why, as consumers, we need more than simply the product and service. Why do we need a corporation to satisfy our emotional needs to earn our loyalty.

I understand that corporations must respond to changing consumer behavior - But I'm fascinated by the the concept of the needy consumer.

Peter

[Juan]

It was the problem with others marketing approachs... Dont think in what costumers value... Loyalty is not a discount or a card, is a feeling that come from the heart of costumers and dont from the head of marketers...

Welcome to the NEW Pasión por el Marketing...

[Valeria Maltoni]

@Peter - evangelists don't necessarily buy more, although they might. They may sell more of what you provide by referring you to others. When you deliver a product or service that satisfies someone, they may become loyal to your business for that reason. Maybe I'm simplifying, but loyalty is not complicated. Loyalty programs, on the other hand, have been quite contrived as an incentive for people to do more of what they want: usually buy more. As a consumer, I don't feel particularly needy. However, I need a company to deliver a good product and service and to stand behind it when it is not that good. We all have different thresholds. We're having this conversation because so many companies do not deliver on the reason they're in business in the first place. Long conversation.

@Juan - value can be different for each of us as customers. But, as you point out, one cannot buy value. It needs to be provided. Passion is good, as long as it is put to the service of value.