A Question of Loyalty

Everyone in retail and service business these days speak about customer loyalty. It seems as if it has become a sort of a fashion item – if you don’t have a loyalty program in your retail store, your place is in Alberta’s Dinosaur Park with all those bones …
There are out there numerous “experts in customer loyalty”, “customer loyalty coaches”, “loyalty marketing consultants”, various researchers and even spiritual healers and gurus specializing in the matter – look it all up on Google!

However, one might want to stop for a second and think for himself: what does the “Customer Loyalty” term really entail? Is it just a buzz word, another marketing trick or there really is some substance to it? If it is not a trick, do I need it? And if I need it – how do I obtain it?
The antonym to the word “loyalty” is “treachery” – not a very ear-pleasing word. It seems that a person (or a business) cannot survive if they don’t have loyal supporters, because they are surrounded by armies of the treacherous enemies. Well, may be it isn’t that bad, but the emotional life of a person or cash flow of a business without loyalty will definitely suck.
Apparently, the loyalty is not just a buzz word and is something everyone needs. So, the next question is: ‘how do I obtain it’?

Let’s see. A synonym to the word “loyalty” is “faithfulness”. Many people understand that having true faith, or “being faithful” is an act of active trust based on the informed opinion, good will and compassion practiced consistently over an extended period of time (not to confuse with the “leap of faith” which denotes a mindless, emotional, potentially disastrous act). As a result, the loyalty is based on the informed opinion (or “practical experience” or otherwise “knowledge”) and requires some additional components which operate on both sides of the interaction over a period of time.

Now, let’s see how customer loyalty is achieved in business. A business transaction is an unlikely combination of demand (read: “Can’t delay any longer!”), offer (read: “Here you come!”), list prices (“You, greedy pig!”), marketing (“Over-promise and under-deliver”) and careful evaluation process (“Bah, humbug!”). (Please Adam Smith and Karl Marx forgive me for such frivolous interpretation!)

In the struggle between flame and ice, yin and yang of the businesses, emerges a new relationship which can be loyal or treacherous. If the experience of the struggle has been rather positive on both sides (it’s weird how a positive relationship may appear out of struggle, not?), the relationship may last and remain loyal, at least until the next encounter. If not…
As a service and consulting company we know for sure that customer’s experience is all for getting repeat business. If we’ve been proactive, responsive, polite and nice on the phone, willing to meet the customer’s needs, bending over backwards to fulfill and exceed the promises, generous with recording billing time, yet knowledgeable and not overpriced, we’ll see the customers come back. That shows on our track record. For instance just in a couple of months after receiving the Microsoft Presidents Club inclusion for the first time in June 2008, in addition to the new sales Retail Hero acquired dozens of existing customers who defected from (read: “lost their loyalty to”) their original RMS VARs. Reason? Word of mouth - better service, better expertise, better rates…

Huh? Just stop there. Did I really say “Better prices”? How did that come into the picture? What it has to do with loyalty? Aren’t we willing to “give the world for those who love us”? Apparently not, at least - not in business. Business loyalty has its very much earthly price - if the price is too high the loyalty disappears, disregarding whatever is the “customer service experience”. I seriously doubt that the word of mouth would bring us new customers if our prices were even 10% higher than that of the competition.
With Retail business it’s even worse. The customers vote with their wallets, not hearts. Posh and trendy Retail stores spend billions of dollars on “customer loyalty programs” in which they train the clerks to provide the “best customer experience”, but the shoppers still loom to the discount outlets where they have zero customer service but much lower prices.

Says John Knapp, a strategic thinker and owner of the “Cornerstones Consultancy” in London, UK:
‘…The notion of a 'Loyal Customer' or worst still 'Owning' a customer is just total arrogance or at the very least a delusion. To achieve 'Customer Loyalty' you would need to supply 100% of your customers needs, 100% of the time. You would need to have convinced them that your competitors’ offers were not worth straying for, that on this occasion buying from a competitor because they are closer to home isn't worth saving their valuable driving time.’

As no one is perfect, there’s no way for to meet 100% of the customer requirements. Thus, we cannot be very serious about customer loyalty.

Or can we? In Retail, unless you exclusively sell the living water and it is not available anyhow else, even by mail order directly from Shangri-la, you are doomed to compete for the customers by enhancing the customer service and dropping prices.

The first part requires significant investment into business planning and staff training (and everyone knows that nothing can be as treacherous in Retail as investing into training of the staff who typically are quite disloyal). The second part directly hits the bottom line and does not even guarantee the result by itself.

So what is the answer to the “Customer Loyalty Question”? Our observations tell us that a balanced, technology-oriented approach to the customer loyalty in Retail may be the best answer.

While staff training is important, the technology can be used to enhance the shoppers’ experience. For example, if you keep track of your customers and know the history of their purchases, you may offer them one time special discounts on the products which are of particular interest to them (you could tell by analyzing their purchase record). As these are small, “one at a time” individual item price drops, it will have minimal effect on your profits compared to the “80% Off, Everything Must Go!” campaign – and yet it will have a positive meaning to a satisfied customer who will feel “special”.

Knowing additional information about the customer (i.e. the names of the customer’s pets at a pet store) allows the cashier to be proactive and add a personal touch to the sales transaction.
However, remember how we said that the true loyalty may only be obtained on the both sides at the same time? Without the customers reciprocate your efforts and actively participate in the program, what is the worth of all these “loyalty points” you give them?

One of Retail hero’s latest customer loyalty programs, fully integrated with Dynamics RMS, is “Happy Checks”. In this program the customer collects points while shopping at the store. These points are converted into personalized coupons, or “Happy Checks” which are printed and mailed to the customers, along with some brochures and promo material. Because the “checks” have expiration dates, the brings the customers back to the store faster. Yet, because of the first class mail communications they receive from the store on a regular basis, the customers feel “special”.

Some of our fist users have reported and incredible 60% customer return rate within the first couple months since implementing the program! That’s the way of increasing customer loyalty in retail business.