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Loyalty Without Bribery

Do incentive programs simply extend thanks to keep customers coming back? Experts in business psychology liken them to bribery that can spoil true loyalty. There's a better way.
Views: 844 Created 03/04/2010

Loyalty Without Bribery

 Phrases such as points program, loyalty rewards, frequent buyer, and loyal customer are often used in similar contexts. The central idea is that a company that rewards consumers for making repeat purchases can secure steady business from them over time. While this may be true, real loyalty is seldom involved.

 Some marketers describe incentive programs as extending a thank-you gesture to keep customers coming back. Experts in business psychology liken the practice to bribery. They point out that repeat purchasing is not the same as true loyalty. Indeed, loyalty does not depend on discounts or give-aways. Real loyalty can be spoiled by bribes.

 Customer loyalty is a matter of business relationship management. In contrast to points programs and pay-your-bill-to-enter lotteries, there is a higher road to true loyalty. It is more profitable and requires a different view of the business relationship.

 Many retailers use club membership cards with give-aways and points programs as buyer incentives. As intended, these generally do secure repeat business and keep customers from leaving for competitors. However, the benefits to these companies come at a considerable cost. Close study of card-based loyalty programs reveals the main advantage: consumer data from tracking customer purchases.

 For example, when a grocery-chain customer has his or her card swiped at the till, a computer links the products purchased to his or her name. This contributes to consumer statistics involving the information that the customer provided in applying for the card. Thus, the give-aways and discounts associated with shopper’s club cards are a cost that grocery chains sustain to gain consumer information for targeted marketing campaigns as well as repeat customers.

 Though retailers and their suppliers naturally seek more and better consumer statistics to sell more products to more customers, and to keep them coming back, true customer loyalty is left out of the equation. Indeed, loyalty and rewards do not belong together in the context of reasons why customers buy.

 The dominant view equates loyalty with repeat purchasing: “If they continue buying from you, that means they’re loyal.” That makes sense on the surface, but lacks a basic understanding of what leads people to feel loyal. Actual loyalty fits with sentiments such as devotion and faithfulness. It has more to do with intrinsic incentives than extrinsic incentives.

 For a business to earn the true loyalty of its customers, it must understand that discounts and contests – examples of extrinsic incentives – are superficial. Customers want more – ideally in sync with their personal values, such as being treated sincerely as a valued individual.

 For example, the greeter at an optician’s shop remembers every returning customer and always treats them warmly. If a competing optician’s shop offered a free iPhone as an incentive to attract new customers, it wouldn’t faze this shop’s patients. They’d never go anywhere else for eyeglasses or contact lenses.

 In a Gallup Management Journal article, WJ McEwen and JH Fleming write, “Without a strong emotional bond, customer satisfaction is meaningless.” (Customer Satisfaction Doesn’t Count, GMJ, March 13, 2003) Is there a strong emotional bond by the time you’ve bought nine cups of coffee then get the tenth free? Gallup: “These customers aren’t really loyal; they’re just customers who haven’t left yet.”

 Generally, retaining customers is much more profitable than attracting new ones. Even so, any company that gives away prizes or provides discounts must recoup the costs of doing so. Inevitably, the cost recovery comes from pockets of the same customers.

 When customers develop real loyalty to a brand, it leads to greater depth of the business relationship as well as mutual liking. The development of true brand loyalty comes from engaged personnel serving customers with sincerity. Engaged personnel who foster true customer loyalty work for companies that treat them well and operate under well-defined, service-focused values. Such companies can make good profits and dispense with the trinkets.

 No “loyalty” program based on extrinsic incentives can foster true loyalty. A company that consistently treats its customers and its personnel as liked, trusted, valued individuals creates a successful brand. A successful brand typically also has a meaningful mission statement and a name and motto that express compellingly what makes it distinctly valuable. Real loyalty to such a brand follows and lasting success may result.

 - Glenn R Harrington, Articulate Consultants Inc.

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