Saturday, 3 July 2010

Loyalty businesses not loyalty programs

About a year ago on the blog I suggested that loyalty would be doing a big come back, and in the last year there have been numerous loyalty and CRM briefs and pitches flying around. We have been fortunate enough to get a few and win some businesses. So it looks like I was proved right. That's all I wanted to say ...

But then you start to think a bit deeper. Increasingly if a business wants a loyalty program that probably means something is broke and they are looking for a mechanic to fix loyalty. For a few businesses loyalty programs (transactional based ones) are difficult to implement. Little control over the retail environment ... very infrequent purchase behaviour in the category ... big ticket, low margin. White goods would be an example.

We should look at loyalty differently, examine businesses in sectors with relatively high levels of loyalty and work out what they do well. My 'guess' is that they have good products, strong brands, good customer service processes and policies, customer focused culture. The trouble is it is easier to create a loyalty program than fix a business. Short-termism creeps in. But perhaps we should think about creating loyalty businesses not loyalty programs.

If Easyjet thought of themselves as a loyalty business that happened to sell flights how would they behave differently ?

Its quite a good question to pose to businesses.

I am off to look at our research now, there is 1000 page doc on my desk at work, to see what businesses with great bonding and loyalty scores do so well. But if anyone has a nice neat answer that will save me a lot of reading please let us know.


  1. Surely the holy grail for businesses is that hardest but simplest of achievements, that cuts out us dirty-minded marketers altogether: a business that sells a better product at a better price with a better experience and service than everyone else. Ergo, loyalty is given rather than asked for.

  2. Takes me back 15 or so years when Loyalty Programs abounded...suddenly everyone was maddly dashing about looking for ways to eliminate churn. Most loyalty programs as I recall were marginally sucessful and then only in the short term...part of the problem is how do you continue to outshine your own past performance? And how do you keep exceeding customer exectations when it's you that keep's raising the bar? Part of the problem I think is that many companies may find themsleves perplexed by the impact that social media/ networking is beginning to exert and this may be their knee-jerk reaction. Another problem is that Loyalty is not a nice tidy continuum where one finds a handy formula and the results just keep chugging on day after day...consumers are fickle and promiscuous and becoming more so, they will not stay indefinately. So how long do we expect them to remain loyal and to what kind of products or services laundry detergent or life insurance? Consumers are better informed and peoples values have changed radicaly in the last decade...does anyone really beleive that their fortunes will be significantly impacted by any product or service they use? Most things have become commoditized.... I think your right about operating a value driven enterprise, value (as in aggregate value not price points) will always reap the best benefits. But as for churn? Rather accept that it will be a constant and focus on a continuous thru-put. The half life of any product or service is constantly eroding and in todays marketplace that erosion can be measured in months if not days.

    I hate trying to fix broken companies it always leads to unrealistic expectations, nothing is worse than trying to fill the role of the Fair- Haired-Blue-Eyed-Boy who's going to save the day... it always ends in tears.

    But have fun with your 1000 page doc

  3. Both make really good points. Thank you.

    Implicit in your comments is that churn is a symptom of another malaise and perhaps if we thought of it this way it would force us to work on the fundamentals rather than create a machine or department to stem the flow.

    Looking after customers is everyone's job. Looks abit trite in type but you get the idea. Good to see i am not the only cynic in the world.

  4. If you should generate earnings great and yet what happened to all your commuter traffic you sent to the vendors web site, you will need to uncover new targeted visitors anytime you wish to market.

    online affiliate marketing


About Me

My photo
United Kingdom
Just curious about marketing, psychology, economics, business, irrational behaviour, people, models, communications, advertising, market imperfections, b2b marketing. I work in the marketing communications industry for OgilvyOne.