Friday, September 28, 2007

More Support for a Three Parameter Loyalty Model

I continue to look for support for a three parameter loyalty model. The three parameters are product, process and relationship. I continue to discount all award programs as contributors to loyalty. My reason for not including these programs is that they do not breed loyalty. Awards offer customers encouragement for buying their product or service but are only as good as the award and does not carry any persistence. The value of the award is only as sustainable as the market allows. As soon as a competitor provides a "better deal", there is no longer any reason to remain "loyal".

Now, the good news. A recent study conducted by M/A/R/C(R) Research and National In-Store found over 16% of consumers said they would stop visiting a store all together as a result of a bad customer experience. The next significant statistic is over 95% of consumers indicate sales associates are very/somewhat important with about 66% indicating they are very important. An interesting quote in the study is "while product and price may bring customers in the door, executing expected level of customer service keeps them from walking out and into a competitor's store".

This study included responses to an online survey from over 12,000 shoppers and in-store audits of almost 4,000 office supply and consumer electronics stores.

The bottom line is that award programs and discounts can bring customers in, but they are NOT a component of loyalty! Loyalty comes from a product that is so attractive, that other products do not compare in the eyes of the customer. Loyalty can also come from a service that is unmatched. And FINALLY, loyalty comes from building a lasting relationship with the customer.

1 comment:

Rick Tingstrom said...

I think that companies can pursue different strategies to drive loyalty depending on where they are in the product cycle. For example a company that has a commodity style product such as a cell phone, or other consumer device could potentially drive loyalty by throwing manpower at educating their customers/potential customers of the various features and benefits of the product. The fact is most of these devices have more functionality than the average consumer is aware of or is utilizing - even when they purchase the product.

While this strategy costs money in the short term, as data is accumulated around product usage, this educational process can become more automated, and eventually emerge as part of the product itself. This is the strategy that Apple has used to differentiate itself - by customer engagement in its stores but also feeding back usage data so that each new generation of product becomes more intuitive. Their lead now allows them to sacrifice margin by employing still more personnel in their stores driving loyalty....
One needs only to go into an Apple store and then to a Best Buy, or Fry's to see the real difference in philopsophy, and resulting loyalty (or lack of). The rest of the retail stores are taking manpower out of the equation - hoping to trim margin in the short term. The result? HDTVs are hitting 50% return rates based not on product quality but on the fact that customers can't make them work at home like they saw in the show room.


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