Is There Really Such a Thing as Loyalty?
Originally published on Loyalty 360.com
I remember speaking to a department store retailer many years ago about what exactly customer loyalty was, and he said to me, “Loyalty? If you want loyalty, buy a dog!” I have never forgotten that phrase, and it still makes me laugh. What does having a loyal customer mean? In sports, it means that even if your team is losing this year, you’re still buying season tickets. Unfortunately, customers do not feel the same way about retailers as they do about their sports teams. How many customers do you know that will continue to shop at a retailer that is neglecting them and not taking the time to discover and satisfy their needs? There may be some, but certainly not very many. The American Society for Quality states that “the number one reason for losing a customer is neglect.” 68% of the time, neglect is the reason given by customers for going elsewhere. Only 14% of customers cited dissatisfaction of a product or service as their reason for abandoning a retailer. Those figures speak volumes about the importance of paying attention to your customers!
I, like most of you, have several email addresses. I have an email address that I use exclusively when signing up for loyalty and subscription-based services. You probably do that too and are well aware of why I do it. Besides all of the spam I receive, which I believe comes from retailers who sold my information, I also receive daily email offers from those retailers. I have never received an email offer that I actually thought was targeted uniquely for me and provided me with the feeling that the retailer knew me and what I might be interested in buying. Mass offers do nothing to drive loyalty from me, especially when I know everyone in the universe is receiving the same thing. In fact, receiving this type of offer has an adverse effect on me, and I actually become irritated. So my question is, with all of the recent talk about omni-channel and customer-centric retailing, what are retailers actually doing to achieve loyalty from their customers?
I remember another conversation I had several NRF’s back with Deborah Weinswig, Managing Director at Citi Group Research. I was talking about the work I was doing then at Microsoft to really change the game regarding retailers’ results around customer loyalty. Deborah’s comment was, “if only they would make the slightest attempt to know and cater to me!” Everyone wants to feel special and get a deal. The concept of selling products in a specialty retail store where you put those products on a shelf and hope someone will buy them because of a discount offer you placed in Sunday’s paper are over. I am not even sure many people receive the Sunday paper these days. The internet is disintermediating your retail store now! I do a lot of shopping on the internet, and if I have any loyalty these days it is with Amazon. I welcome the chance to get off my couch and go to a retail store where I feel special and get a good deal. Once I’m there, I will surely spend more money on other things to make up for any margins lost on “the deal”. This is not difficult to understand! It is about people and human behavior.
So in my opinion loyalty is truly measured by the actions taken by your customers. That means frequency of visitation and spend share are directly proportional to their degree of loyalty. You can argue that someone tweeting about your brand is loyalty. What if they tweet about you without ever buying anything? Are they still considered a loyal customer? Statistically, twenty percent of customers drive eighty percent of a retailer’s profit. It would be wise not to neglect or take for granted that twenty percent. First, identify who they are. If you cannot do that today, that’s where you need to start. Next, discover as much as you can about those people. Just ask them! If they are hesitant about providing you with information, they are not loyal, and worse, do not trust you! Fix that before going further. Lastly, treat all of your customers great, but treat that twenty percent greater! I heard that recently at an event where Theo Christ, Senior Director from Sak’s Fifth Avenue, talked about being customer-centric. She gets it, and it’s time others started getting it too.
Today, there are many solutions professing to have solved this “how to achieve customer loyalty” endeavor by installing their new widget. The real answer is that it takes hard work, introspective observation, help from those who know, technology, and most importantly, commitment and organization. You cannot reinvent yourself without doing the work and making the investments. If someone tells you differently, they are wrong!