Welcome back. In the first part of this post we defined “deal” loyalty as bought and "real" loyalty as earned. In our opinion, there’s a simple reason why we see so much deal loyalty out there and precious little real loyalty. Real loyalty is HARD. It takes a great deal of commitment, patience, and effort. Just like consumers, businesses find it much easier to just write a check than to exert real physical effort.
OK, so maybe that’s an extreme analogy, but in reality we are faced with intense competition and lightning-quick commoditization of our products and services. It’s an impatient world we live in these days. The path to creating sustainable customer loyalty often seems daunting. Management is looking for quick results, and discounts provide them.
A colleague and friend is going through a difficult situation right now. He runs marketing for a national retail company with about 100 stores, mostly based in suburban malls. For the past few years, as competition heated up on both the brick & mortar and digital fronts, they reacted by discounting. Their bottom line has really suffered (shocker!), and their President decided prior to Holiday 2011 to cut back considerably on discounts. Our friend has only been there for about 18 months, so he was thrown into the middle of this debacle and, to his credit, pushed back on the President’s strategy. Of course, their Holiday business tanked and so far Q1 2012 doesn’t look any better.
This was because they didn’t answer the following question honestly and thoroughly: Without discounts, what do we have to offer?
Let’s hope they have enough cash and patience to get through this difficult period. Hopefully the reality of the situation will alert the organization to the fact that they need to create real customer loyalty or it’s “off the wagon” and back to the discounting drug.
So, what can companies do to create real customer loyalty? The good news is that there are proven strategies and every industry can find ways to improve.
Here are a few ideas. there are plenty more, and we’ll explore them in later posts.
Product Improvements - This is the simplest. Think of all the game-changer product improvements that have catapulted companies beyond their competition. By continuously innovating, customers will remain loyal and gladly pay a premium.
Service Improvements - Whether you are a professional services firm, a middleman, an OEM, or whatever, odds are that service is a big part of your business. Customers for years have rated client/customer service as the number one reason for defection. Great service can overcome deficiencies in product, but only to a point. We’ve all heard that correcting a problem makes a customer more loyal than if they didn’t have a problem in the first place. That does not mean we shouldn’t worry about products, but it does showcase the power of exemplary customer service.
What can you do to improve your service? Are there proactive things you can do to improve loyalty? He’s an example. We worked with a major retailer that was looking to improve real customer loyalty. We analyzed their customer service data and found the products and customer segments that generated the most complaints (relative to all products). We then implemented a proactive service call just to follow-up after a purchase and make sure everything was OK. That call cost about $2. After one year, those customers spent $10 more than the panel-matched control group. I’d take that ROI all day long.
Move Up the Chain – If your business is truly driven by price then real loyalty is going to be very difficult. The only solution is to reinvent the business. Maybe there is a way to expand your offerings to provide the services that specify and purchase your products. If you are working through middlemen, can you reinvent your business to deal directly with customers? Don’t be afraid to compete with distributors. It may be a matter of survival.
Be the Only - Marketing consultant Al Reis famously advised that if you’re not number one in your category, create another category. Can you go beyond that and find something that is completely unique to your business? Take the competition right out of the equation. Provide your customers something to which they will be truly loyal. But make sure it’s real. Customers cannot be fooled for very long and once they figure out that you’re not the only, they’ll be gone forever.
Let’s continue this discussion in the next post. That will be the last of the series.