Do you really know what contributes to customer loyalty? Probably not, so here’s the right answer.
“How are you doing on customer loyalty?” I asked the CEO of a client company. “Great,” he said. “Our new loyalty program is really having an impact!” I probed further asking, “And how do you know that?” The CEO smiled and responded, “Well, our customer ‘sat’ score is now up to 89%. We’re in much better shape on customer retention.”
Those answers were the typical response from someone who confuses satisfaction with loyalty. They also reflected three myths surrounding the impact of customer loyalty on the bottom line:
- Satisfaction is a measure of retention
- Retention is the same as loyalty
- An affinity program is the best ticket to getting you there
The basis of all customer loyalty efforts is to influence customers to be motivated to buy again, buy more, advocate or show tolerance for errors. Underneath the premise is the implication that satisfied customers are essentially inert … they had a need and it was met. Satisfaction is historical, not aspirational. The demonstration of loyalty comes into play when a new need is presented or a situation is at hand for the expression of fidelity.
Satisfaction is static. The notion that one is “completely satisfied” versus simply “satisfied” is a flawed construct created by marketing researchers in an attempt to ascribe a grade to a customer’s assessment. It is a bit like determining if a person is slightly pregnant, pregnant or completely pregnant. The etymology of the word “satisfaction” is fulfillment—figuratively meaning a full cup, not a somewhat full cup. It is, or it is not full. One is, or is not satisfied.
Factors that created motivation were completely different from those that yielded satisfaction.
Cracking the Loyalty Code
Loyalty, on the other hand, is much more challenging to nail down. Customers who return to a store to purchase again are demonstrating loyalty. Customers who pay a premium for a Harley-Davidson motorcycle, wait months for delivery, tattoo the logo on their body and tell “I love Harley” stories to anyone who will listen are also demonstrating loyalty. However, the two are clearly not the same. Retention and devotion are both measures of loyalty, but at opposite ends of the allegiance scale. I like my colleagues and am loyal to them; I love my wife and would not abandon her for Miss America. All this makes the discussion of factors that produce loyalty trying and the measurement of customer loyalty dicey.
The foundation of most affinity programs is to add a feature to the value proposition that is designed to incent customer loyalty. If my 10th movie rental is free, I am motivated to rent more movies and stay with Rewind Videos rather than pay a visit to Letterbox Videos down the street. If my loyalty card gets me a discount on my CVS/pharmacy purchases, I am more apt to drive right past the Rite-Aid to get there. But, is there a limit to the power of affinity programs as a customer motivational device?
Those answers were the typical response from someone who confuses satisfaction with loyalty.
Weighing In With Herzberg
Frederick Herzberg is a researcher most college students learned about in Psychology 101. Herzberg’s legendary research into motivation found that the opposite end of those factors that produced dissatisfaction did not result in motivation.
Take away pay or allow poor working conditions, for example, and workers will become dissatisfied. But increasing their pay or improving working conditions only leads to satisfaction, not motivation. Factors that created motivation were completely different from those that yielded satisfaction. Workers were motivated by factors like achievement, recognition and the work itself.
The Herzberg Motivation-Hygiene theory is true for customer motivation. Factors that lead to customer dissatisfaction are not the other end of the continuum from factors that lead to loyalty. They are on a different continuum. If the restaurant I visit is dingy, I’m dissatisfied; but having a squeaky clean restaurant is not likely to motivate me to choose one restaurant over another. That is, unless all the other restaurants in town are dirty.
If the factors that contribute to worker motivation indeed apply equally to customers (human motivation is human motivation), it would be helpful to know if some motivational factors had a higher valance than others. Herzberg, for instance, found that “achievement” was higher in its motivational power than “recognition.” The “work itself” fell closely behind “recognition.”
If you ask customers what an affinity program represents, most will tell you it is a company’s way of thanking them for their patronage. And while some programs are much more effective than others at incenting retention, all fall short of delivering to customers the feeling of success or achievement. Imagine the power of the incentive if attention to the customer’s experience (the service counterpart of the “work itself”) were added to the loyalty creation mix.
What Matters Most to Customers
We asked hundreds of customers of several major organizations (from health care to hotels to auto auctions) what factors contributed to their loyalty to an organization. The most popular answers were:
“They made me feel successful.”
“I got what I needed but in a way that made the value I received seem worth more than the investment I made.”
“I’m treated special, not just like everyone else.”
“They know me and respond to my unique needs.”
“Their people are smart so you know you are associating with winners.”
Notice the success-making achievement theme woven through these customer responses.
The second most commonly mentioned theme focused on the customer’s experience. We heard comments like:
“They’re always easy to do business with.”
“You never worry about getting lost.”
“They respect my time.”
“Every unit works together to get me what I need—no bureaucracy.”
The third factor related to recognition: “They always thank me for my business” and “They never take me for granted.” The learnings not only matched Herzberg’s work, they confirmed the fact that affinity programs when used alone miss the full power of customer motivation.
Retention and devotion are both measures of loyalty, but at opposite ends of the allegiance scale.
As a single pronged approach, affinity programs can too often lead senior leaders like the CEO in the opening paragraph to conclude that loyalty is only about retention—i.e., keeping customers. It also entices senior leaders to view customer retention as an effective growth strategy. Such an approach places the lion’s share of the customer growth engine in the sales department, the most expensive approach to customer acquisition. However, providing customers with a sense of “achievement” plus a remarkable “experience” (along with “recognition”) pushes loyalty towards the devotion end of the loyalty scale and turns customers into an excited extension of the sales force.