Loyalty Without Bribery
Phrases such as points program, loyalty rewards, frequent buyer, and loyal customer are often used in similar contexts. The central idea is that a company that rewards consumers for making repeat purchases can secure steady business from them over time. While this may be true, real loyalty is seldom involved.
don't spoil a good thing
Some marketers describe incentive programs as extending a thank-you gesture to keep customers coming back. Experts in business psychology liken the practice to bribery. They point out that repeat purchasing is not the same as true loyalty. Indeed, loyalty does not depend on discounts or give-aways. Real loyalty can be spoiled by bribes.
loyalty involves a relationship
Customer loyalty is a matter of business relationship management. In contrast to points programs and pay-your-bill-to-enter lotteries, there is a higher road to true loyalty. It is more profitable and requires a different view of the business relationship.
retailers as mercenary intelligence gatherers
Many retailers use club membership cards with give-aways and points programs as buyer incentives. As intended, these generally do secure repeat business and keep customers from leaving for competitors. However, the benefits to these companies come at a considerable cost. Close study of card-based loyalty programs reveals the main advantage: consumer data from tracking customer purchases.
faux generosity costly
For example, when a grocery-chain customer has his or her card swiped at the till, a computer links the products purchased to his or her name. This contributes each time to consumer statistics linked to the information that the customer provided in applying for the card. The technology and the storage, retrieval, and security of shopper data involved in such programs require significant ongoing investment. Thus, the give-aways and discounts associated with shopper’s club cards involve multiple costs and responsibilities that grocery chains must sustain to gain consumer information used in targeted marketing campaigns that aim for bigger, more frequent purchases.
emotional engagement essential
Though retailers and their suppliers naturally seek more and better consumer statistics to sell more products to more customers, and to keep them coming back, true customer loyalty is left out of the equation. Indeed, loyalty and rewards do not belong together in the context of reasons why customers buy.
statistics blind to heartfelt loyalty
The dominant view equates loyalty with repeat purchasing: “If they continue buying from you, that means that they’re loyal.” That makes sense on the surface, but lacks a basic understanding of what leads people to feel loyal. Actual loyalty fits with sentiments such as devotion and faithfulness. It has more to do with intrinsic incentives than extrinsic incentives.
respect my values
For a business to earn the true loyalty of its customers, it must understand that discounts and contests – examples of extrinsic incentives – are superficial. Customers want more at a deeper level – ideally in sync with their personal values, such as being treated sincerely as a valued individual.
sincere friendliness trumps bribery
For example, the greeter at an optician’s shop remembers every returning customer and always treats them warmly. If a competing optician’s shop offered a free iPhone as an incentive to attract new customers, that wouldn’t faze this shop’s loyal clientele. They’d never go anywhere else for eyeglasses or contact lenses.
repeat purchasers not loyal per se
In a Gallup Management Journal article, WJ McEwen and JH Fleming write, “Without a strong emotional bond, customer satisfaction is meaningless.” (Customer Satisfaction Doesn’t Count, GMJ, March 13, 2003) Is there a strong emotional bond by the time you’ve bought nine cups of coffee then get the tenth free? Gallup: “These customers aren’t really loyal; they’re just customers who haven’t left yet.”
retention trumps recruitment
Generally, retaining customers is more profitable than attracting new ones. Indeed, loyal customers often go to extra lengths to buy from companies that they prefer. In contrast, any company that gives away prizes or provides discounts to recruit new customers must recoup the costs of doing so. Inevitably, the cost recovery must come from somebody's pockets.
mutual liking and trust, mutual benefit
When customers develop real loyalty to a brand, it involves mutual liking and leads to greater depth of the business relationship. The development of true brand loyalty comes from staff who like their job as well as their employer and who serve customers with sincerity. Engaged personnel who foster true customer loyalty work for companies that treat them well and operate under well-defined, customer-service-focused values. Such companies can dispense with the trinkets and give-aways and earn good profits.
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