Customer Loyalty Isn’t Valuable. WHAT?

I believe in customer loyalty.  In fact, I have a speech – my most popular speech – entitled Earning Customer Loyalty.  So imagine my surprise when I was reading a recent edition of Advertising Age and found the article entitled:  Why Customer Loyalty Isn’t as Valuable as You Think” by Hamish Pringle and Peter Field.

However, when I began to delve into the text I learned that they believe in customer loyalty and communicating and marketing to them, however, they don’t recommend it as the single marketing strategy.  In the article the authors agree that a happy customer will return and will recommend – becoming a brand advocate for your business.

However, it is the pesky unhappy customer you have to worry about – which ties in directly to my Make or Break Moments – connecting and building relationships with your customers.  If you take the time to build a relationship with a customer – if they become unhappy (let’s face it – life happens – we will mess up on occasion) they will be more likely to return so we can make it right. 

If we haven’t done anything to connect with the customer then the only person they’ll tell is our competitor when they take their business elsewhere – oh and the seven, ten or fifteen friends they come in contact with over the next month.

The authors conclude their article (which is chalk-ful of great data, studies and statistics) by saying “Marketing communications do not appear to be able to influence loyalty significantly, whereas they can make a big impact on penetration. ..don’t be tempted by the fool’s gold of loyalty – it will probably turn out to be a whole lot less valuable than you’d hoped.”

Perhaps in terms of ad dollars – I would agree.  Believing that just reminding a prior customer that they’ve shopped with you and counting on that marketing message to convince them to drop everything and return with their wallet open is foolish.

However, if you took the time to nuture that relationship with active listening, empathy, understanding their needs and exceeding their expectations and THEN you send them a message – you have a far greater chance that they’ll respond in a positive way. 

Customer loyalty hinges on the relationship, not the marketing message.  However, a loyal customer is your best word of mouth advertiser and if they believe you care and will put their needs above your register – they will return. 

How loyal are your customers?  What percentage return for more? 

“Companies spend 6 to 10 times more to acquire new customers than they do to retain existing customers. But a 5% increase in customer retention can have a bottom-line profit increase of 75%, depending on the industry.” 

-Don Neal, Director of Business Development for Hallmark Business Expressions