Why Customer Loyalty Isn't As Valuable As You Think It Is

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When you think of customers who are “loyal” what images come to mind? Committed souls who have an emotional connection to your products and will stick with you through thick and thin? True believers in your brand and its mission in the world? Wouldn’t it be wonderful to have throngs of such “loyal” customers? Absolutely! The emotion of loyalty is one of the most powerful in the world. It’s what keeps marriages together. It’s what sends marines back into the battleground to save a buddy. It’s what causes people to sleep in a parking lot to be the first fan in the stadium of their favorite sports team’s opening game. But when we talk about “customer loyalty” in business today, let’s be honest, that may be the fantasy we want to believe, but it’s not what we measure and it’s usually not what we inspire.

Although the word “loyalty” can certainly refer to that powerful emotion of commitment described above, at most companies it's used instead to refer to a specific behavior—repeated transactions. 

You might book the same airline every week because they fly where you need to go, or eat at the same coffee shop every day because it’s near your home. These companies consider you “loyal,” even though you may not feel loyalty for their brands. Nevertheless, you have your reasons for continuing to do business with them—to behave “loyally”—at least for now.

The term “customer loyalty” is also very often used in the context of loyalty programs—point-based accounts that give the customer “free stuff” if they engage in repeat transactions. Loyalty programs can be very effective. However, with limited exceptions, loyalty programs are really just a form of discounting. You pay $300 for a flight, but you get points back that are worth, perhaps, $25 toward future travel. Maybe you also get coupons for a couple of free drinks.

It’s a solid move to improve the value proposition in this way, but it’s really just a way to offer the customer a better deal. It may stimulate sales, but it’s transactional; it won’t send your customers back onto the battlefield to save your brand.  In fact these “loyal” customers may not care about your brand at all.

So to me, the term “customer loyalty” is defined in business to mean the “frequent transactor.” We need to use a different term to refer to the emotional connection we would like to create in our customers.  I call this feeling “customer love.”

You can’t buy love. But you can inspire it by ensuring that you follow The Customer Love Formula.

THE CUSTOMER LOVE FORMULA

What is this formula? We have studied hundreds of brands, some that are truly loved by customers, like Starbucks, Nike, Disney and Apple, and many who may be successful at driving transactions, but are not truly loved, like Citibank, AT&T, or American Airlines. 

Analysis of our research reveals that there are three primary factors that are common across “loved brands.”

• They meet the needs of their target customers extremely consistently.
• They periodically do things that delight customers beyond their expectations and needs.
• They “stand for” something that resonates with their customers.

When we say “stand for something” that doesn’t necessarily or even primarily mean politically. While there are loved brands whose formula includes a social stance, such as Ben and Jerry’s (environmentalism) or Chick-fil-A (conservative social values), other brands “stand for” apolitical values or philosophies; Apple stands for empowering individualism; Häagen-Dazs stands for the joy of indulgence; Nike stands for achieving your personal best; Walmart stands for the idea that you deserve low prices.

One problem is that many brands don’t really stand for anything, or at least nothing the customer believes is sincere, and that limits their ability to inspire customer love. “Standing for” something doesn’t just mean you have a slogan or an ad campaign. In order for cynical customers today to love a brand for what it “stands for,” they need to see those values in action, whether through philanthropy, policies, products or service.

Of course, the devil is in the details. What are the most important needs of your customers? How do you determine if you are meeting them consistently? What “extra” things would delight your customers? What are the values that your customers find attractive?

It may sound like a puzzle, but if it is, there’s an answer key. There are proven methods to answer all these questions, mostly through various forms of customer research (which I discuss in depth in my book, Winning Digital Customers).

And in fact its not just critical to research and understand these customer mindsets and preferences, they must also be studied on an ongoing basis because the answers are not static.

That’s why so many once-beloved brands are now gone. At one point they were meeting and exceeding their customer’s needs and they stood for something customers cared about. That’s how they became beloved. But when their customers’ needs or values changed, the brand didn’t transform, or transform enough, and that broke their “cuBook a FREE 30-minute callstomer love” formula.

Book a FREE 30-minute call with us!

YOUR TURN 

Are there brands you love? If so why? What have they done to inspire those feelings?

I talk in detail about the “customer love” formula in my Wall Street Journal bestseller, Winning Digital Customers. Get the first chapter for FREE here, or purchase the book here.

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Howard Tiersky is the founder of FROM, The Digital Transformation Agency where he works with leading brands on digital transformation.

• Check out his Wall Street Journal bestselling book, Winning Digital Customers: The Antidote to Irrelevance.
• Howard did a podcast episode last week with the SVP of Direct to Consumer Business at Highlights for Children, David Gitow, where they talked about how digital has affected the publishing industry and shares his observations about consumers’ on-demand needs. Listen to the episode here. 
• And of course SUBSCRIBE to this newsletter to make sure you stay on top of his weekly insights on digital transformation here on LinkedIn. 

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