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Posted by Sherman Whipple on February 11, 2000 at 17:07:21:
In Reply to: Cards make you LOYAL? posted by John Taylor on February 11, 2000 at 12:23:21:
John,
This is one of those situations where I can't discuss how I know this, aside from pointing out that this is a frequent issue I deal with in our information audits, but the topic of loyalty programs, and, even the concept of loyalty, is incredibly interesting from the research perspective. What we call "Customer Loyalty" is really a whole perception versus reality thing, and, yes, there are a lot of good numbers out there to back this up. I doubt, however, that much is available to the public.
The majority of those in marketing management perceive Customer Loyalty as meaning that the customer or a portion of their penetrated share either possess or can be stimulated to possess some compelling motivation to patronize their business and consume their products which supersedes that of rational factors of demand, awareness and access (the market formative criteria). In other words, they build in an assumption that customers behave irrationally.
Further, many believe that, in some way they "own" these people. They say: "These are OUR loyal customers", as though they have some proprietary claim on them. Their feelings are hurt when one of these customers patronizes a competitor and view this as "disloyal".
Then there is a minority in marketing and corporate management whose perception is exactly opposite. They define customer loyalty as their commitment or promise to the customer. It is the compelling driver within the organization to put the customer first. This practice is founded upon the belief that consumer choices are based upon rational behavior.
What is interesting here, though, is not so much the differences in the perceptions, rather it is that the short-term benefit or results in implementing loyalty programs, such as the cards, are the same, regardless of whether management perceives itself as promoting/rewarding customers loyal to them, or expressing their commitment to be loyal to the needs of their customers. Both philosophies yield a comparable positive direct increase in share from the promotion. Short-term the difference is indistinguishable.
Where the two perceptions differ, however, is when we look at the long-term impact. Marketers with the philosophy that they own customers frequently discover that, once the particular loyalty promotion is over, they are no better off than when they started, and in some cases, see a net reduction in share. Conversely, those who see themselves as loyal to their customers as a core philosophy, typically retain the gains from loyalty promotions. These are the businesses who endure.
John, your illustration of the check-out person who passed on the savings to you, without you having to present you card, is the perfect example of this. By standing in line, you proved you were a customer. By giving you the benefit of the card, he/she demonstrated that they were loyal to you, promotion or not. This person has helped their organization gain/retain share.
Perverse as it may seem, there are still companies out there, who would fire such an employee. These are the same people who ask researchers to conduct customer loyalty surveys. They just don't get it when you try to explain that loyalty is an irrational metric. Rather they would be better served by measuring the market and customer satisfaction/expectation relationships. But, then, of course, they would have to change their perception.
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