Friday, August 3, 2007

Loyalty - NOT

There is an article dated July 30th by Stuart Evans of ICLP, a marketing agency in the UK, that suggests that the word "loyalty" is a misnomer. Stuart makes the point by using some statistics from frequent flyer programs (ffp). He notes some recent research by his company and another firm, Priority Pass, indicated the most important factors among airline travellers are 'price' (62%), 'schedule' (54%), 'ffp' (21%), and 'brand loyalty' (13%). Although the percentages don't add up, they do indicate some ranking that does make sense. He makes the point that companies should move away from the mindset of loyalty and shift towards factors that reward customers purchasing behavior.

However, he has some counter data that certainly clouds the issue he has proposed. He points out that research (not specified when or by whom) indicates that 'ffp' is a key factor in determining choice of hotel or airline. A whopping 70% believe it is fairly or extremely important in deciding their choice while only 30% said it was unimportant.

Stuart believes that many loyalty programs have failed to radically change customer behavior over time or deliver bottom line contribution to profit.

I love this guy! He is shouting what I have been saying in my recent blogs that loyalty in a single dimension is a problem. This is consistent with my previous definition that loyalty has four dimensions and that reward loyalty is probably one of the weakest because it is not based on company performance - only a reward. The problem with using a reward to create customer loyalty is that it is just a reward and can be exceeded by another company at any time; hence, the loyalty may persist only as long as there is no better reward in the market. The other dimensions of loyalty are product loyalty, process loyalty and relationship loyalty (previously described in recent blogs).

Stuart also makes the following statement: "an emotional attachment to a brand only via its loyalty program is illogical and does not happen." In this case he seems to be identifying loyalty only with reward programs. I would strongly agree with his statement as long as he continues to define loyalty only in terms of reward programs.

The bottom line for me was that once again when someone defines loyalty simplistically, it doesn't make sense. This is particularly true when the single dimension is a rewards program. Customer loyalty should (and I believe it does) come from company performance not a give-away.


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