CUSTOMER LOYALTY is actually pretty simple…it’s all about TRUST. Customers are loyal to you because they trust you and what you deliver to them on a consistent basis. I have never heard any customer say they are loyal to a business where they didn’t have a solid level of trust.
Companies get confused about this issue when it comes to truly understanding Loyalty. Let me give you an example that might help clarify a bit more. Let’s say you continually put out “DEALS” to your customers and they keep coming back to purchase your latest deals. Maybe today it is a BOGO offer (buy one get one free), or tomorrow a “Buy two get one free”, or possibly a “Get a free gift with every purchase” offer the next day. You know the offers and the companies that do this all the time for a whole host of products. Are you loyal to them…or are you loyal to their Deals? Do you TRUST THEM or simply shop their deals?
Now look at companies that take a different approach. Instead of offering you these specials, they offer you an incredible experience when you interact with them…they treat you like you are special and they do things for you that are incredibly helpful. They are proactive in helping you when you’re not buying anything because they have taken time to get to know you and your personal preferences. Are you loyal to them? Do you TRUST THEM?
I know…it’s a bit obvious when I put it like this…but it’s really this simple…and this is how it is being presented to you, the customer.
In the first example, there is no question YOU ARE LOYAL TO THE DEAL, NOT THE COMPANY. Just to prove this point, ask yourself what happens to your customers when you don’t offer a deal or when one of your many competitors offers a better deal? THE CUSTOMER LEAVES. They don’t stay because they trust you…they stay because they are loyal to the deal. That’s all they are loyal to and unless you stay on the “deal drug” and keep offering them some new deal, they are gone.
And today, with the massive presence of Groupon, Living Social, and a host of other “deal sites” can you really compete on the deal any longer? How willing are you to discount your products/services by 35-85% on a regular basis? And if you do make these discounts, do you really think these customers are coming back when your products/services aren’t discounted? Your fooling yourself if you think they will come back because they know see how good you are…they don’t. They are loyal to the deal…not your company.
Take a simple example…pizza. There are tons of pizza places around…including the big chains like Pizza Hut, Papa Johns, Papa Murphy’s (lots of papas in pizza), Dominos and a host of others. They frequently compete on deals. When someone wants a pizza, they will shop their top 2 or 3 pizza places and pick the one that has the better deal. The customer considers their product to be roughly equal with others…at least close enough where they can’t differentiate it significantly. So they shop for the best deal, not the business…they are loyal to the deal, not the business.
But in the description above where the company is all about helping their customers and giving them an awesome experience, there is no question YOU ARE LOYAL TO THE COMPANY AND THE EXPERIENCE, NOT THE DEAL (they probably don’t even offer deals). You buy from them because of the way they make you feel and their product/service is also of great quality. You are loyal to them because you know how you will be treated every time and it is consistent. You are also appreciative that they offer quality products/services to go along with an awesome experience. They are loyal to you and your business…and they trust you to deliver this to them…every time.
Go back to the pizza example. Now instead of shopping to see which pizza place is going to give you the best deal, you go to your favorite pizza joint…knowing the price is going to be higher. You love walking in where they know your name and what you like on your pizza. They ask about your family, your job, and a host of other personal items they have taken time to know about you. They even give you some really cool things you find valuable about pizza…such as how to make one at home when you want to have a group over to make pizzas. They offer you insights into many other aspects of pizza and cooking and ingredients that will help you enjoy your pizza…such as how to reheat certain types of pizza. You wouldn’t think about going anywhere else for pizza…YOU ARE LOYAL AND YOU TRUST THEM.
What does “LOYALTY” or “DEALS” look like in your own business. When companies say they have 60% loyal customers, are they loyal to “the deal” or are they “loyal to the experience and company”? This is a great introspective review for any company. If you offer deals and took them away, would you see an immediate drop in sales? If you don’t offer deals, do you see an increase in revenues because your loyal customers keep coming back and buying even more? These are just of few of the questions leaders should be challenging their business with to help define whether they have created TRUST with their customers or simply deal loyalty.
And here’s one more wrinkle to put into the mix while you are evaluating where you are on the loyalty curve. What if you have both…customers only loyal to the deals and customers that are loyal to your experience? This can happen for a business…which creates significant confusion to both employees and customers. If you find yourself in this situation, you should evaluate if you are offering the deals to the wrong customers…customers that really aren’t in your desired target persona market. In most cases you will find you are…and the wrong customers are driving the revenue only when the deals are present. Stop the deals and they leave…offer the deals they stay. It’s time to fire these customers…
If you truly want to build TRUST AND LOYALTY in your business, create an experience and strategy that causes your customers to be loyal to your company, not the deals. Create a plan that gives them an incredible experience and lots of help in improving their own lives. Focus on these two elements and you will be shocked at just how much customer loyalty you can create in your company. And in the end, profitability goes up because your “cost of sale” goes down while revenues go up. You are investing in the customers that reward you with their wallets and their loyalty.
If you decide you would rather focus on a “loyalty to the deal” strategy, then you have admitted you are a COMMODITY. That’s fine, as long as you can consistently win in the commodity game. I personally don’t believe this is a stable or long term solution. But if you have the business built around being able to do this consistently and for long periods of time, stay focused on the deal. I personally haven’t met any companies that can pull this off. If you are one of these, I would love to talk with you…
