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A Bribe Is Not a Relationship

In the early '90s the word "interactive" got hijacked to mean any kind of marketing on the Internet. (How ironic since shopping on the Internet was not very interactive in those days.) Long before that, the word "brand" got misrepresented as something companies do to their customers, when in reality it is something customers do to companies.

Now I want to rant about how the word "loyalty" has been kidnapped. Loyalty has been dislocated from its true meaning and is now used to describe programs and promotions, usually supported by sophisticated software, that encourage customers to buy from a company multiple times.

Hey, there's nothing wrong with multiple purchases, but return visits don't necessarily correlate with true, meaningful loyalty. This kind of tit-for-tat transactional loyalty can be fleeting. Purchase intent one week doesn't automatically lead to purchase intent the next week, if a competitor offers a better sale price or promotion. This is the kind of loyalty that can evaporate quickly when another company offers better incentives.

The sturdiest, most indelible loyalty is that which is built from a relationship, and not from bribery. When a customer's frame of reference is her long-standing, ongoing conversation with a company, and not the gamesmanship of which company is offering the best rewards this month, she will not be easily seduced by a slightly better offer.

Can you use points programs, punch cards and repeat purchase incentives in your efforts to create true loyalty? Sure, but only if these promotions happen in the context of relationship-building encounters with those customers. And, what's most interesting, if you can build true "We" relationships with customers, you may not need to invest as many of your resources in these programs. Your customers will have more powerful reasons to keep coming back.

So, what's happening in your company? Are you creating solid, relationship-based loyalty, or are you continually wooing your customers with the latest new and improved, bigger and bolder, see-if- our-competitors-can-top-this promotion?

(Related question: Are loyalty promotions becoming a commodity?)

Steve Yastrow posted this on 09/16/08.

Comments

"...the word "brand" got misrepresented as something companies do to their customers, when in reality it is something customers do to companies." This seems to imply that companies have no influence on how their brand is perceived whereas I think in reality "brand" is a far more complex and evolving 2-way relationship.

In just about any industry or service, price is an important part of the buying decision. However good your product or service, however good your relationship with the customer, there comes a point where s/he will say that the price premium is too much. It would be naive to call any discount, rebate, promotion or other price issue a bribe: it has a place in the palette of offerings you present. If it's the only one or the main one then you will find yourself being drawn into a transactional, commoditised world. As you say, I think you have to use it as one tool amongst many, but don't ever under-estimate how important it is especially in times like the present.

Posted by Mark JF at September 16, 2008 10:30 AM

Your comment inspired me to write about my own "loyalty" to United Airlines. I travel United all the time but only because of my frequent flyer status. This program should be better defined as a switching cost management program than a loyalty program. My full post is here:
http://brandmix.blogspot.com/2008/09/why-i-fly-united-airlines.html

Posted by Martin Bishop at September 16, 2008 11:42 AM

Hi Mark,

You are right that pricing is a very important consideration in presenting a product offering. Discounts and promotions have their proper place as well.

However, most of the time when you hear, "Loyalty Program" thrown around, it is, in essence, a bribe to trick a customer into giving you more dollars. I saw a particularly transparent incarnation of this recently at Frullati. The manager handed me a flimsy card that claimed to reward me with a free smoothie. If I bought five of them. In the next month. Only valid at that particular location. Only valid on smoothie purchases. My first thought was, "Why would I buy five smoothies in a month just to get one free?" Frullati's manager was clearly trying to trick me, the stupid customer, into buying more smoothies.

Loyalty programs have nothing to do with loyalty because loyalty can't truly be one-sided. For a customer to feel loyal to a company, the company has to be loyal to their customers as well.

Posted by Amanda Cullen at September 16, 2008 1:39 PM

Great point. Loyalty is built on the foundation of relationships, we need to remember that. Perhaps that's some of the power of social media- it's ability to bring the customer closer to a business.

Posted by Brett Tilford at September 16, 2008 2:27 PM

Mark JF - I agree that the best brand impressions are built on 2-way relationships, not on 1-way chest beating. That's why it's too bad that "brand" came to mean something else.

Amanda makes a great point about "asterisks" on loyalty promotions ... if you make me jump through too many hoops, you must not be that interested in my business. One of my wisest bosses, Jim Noyes, once made the point that he'd never run a promotion that did too well, i.e., take away the restrictions, let the promotion do its thing, and make the customer feel like you really care for his/her business. Then the promotion can be a stepping stone to a true relationship.

Brett's point about social media is a good one. Let a tribe weave itself around your business, and the customers will not only feel closer to each other, but to your business.

Posted by Steve Yastrow at September 17, 2008 12:10 AM

Last week we were out shopping for an LCD TV, and as usual the choice was a Sony.

Now, Sony doesn't offer any discounts on their LCD TVs. Others do, as much as 25%. That's a lot of money in Bangalore.

The TVs that others sell are also of good quality,
and has the same 1080p specs. Some of them even offer a 3 year warranty, while Sony offers only 1 year.

Probably everything inside, including the LCD screen, is made by the same vendor.

We know all of this. Yet we chose to buy a Sony.
I think that's what you mean by "Loyalty".

Jay, from Bangalore

http://www.ideaburger.blogspot.com

Posted by Jayakumar Hariharan at September 17, 2008 12:49 AM

Jay from Bangalore:
I've got a bunch of Sony stuff.

They make solid equipment.

I will never buy another Sony product. Because I bought a Sony HD camcorder that uses a format no one else supports.

That's loyalty.

I shop a lot at REI. Because historically they had quality merchandise at prices that were reasonable. Now more and more of their stuff is made in China (oops, "Mainland China"), but the cost isn't dropping.

And I hate voting Republican cause of the way they've poisoned that brand.

Loyalty is a two way street and the public is a drunken fool driving a 1975 Cadillac right up the middle of the road.

Posted by Billy Oblivion at September 17, 2008 12:57 AM

Amanda - picking up on your comment about a supplier who, "...was clearly trying to trick me, the stupid customer, into buying more..." I fully understand that that's how the deal made you feel. I think the problem is that many organisations launch these programmes without really thinking them through. They're probably well intended - the originator probably really does want to give you a thank you for your repeat purchases - but then the lawyers and the accountants suddenly become marketing experts and you've got silly terms and conditions imposed on the deal.

Love the marketeer, hate the marketing programme!

Posted by Mark JF at September 17, 2008 2:09 AM

Promotions, incentives, deals and discounts are just the tactics that get someone to notice. They all have a place within any strategy to begin the relationship with a customers.

It becomes a problem when these tactics become the strategy - tail wagging the dog so to speak.

Being a wallflower never got anyone noticed at the school dance and it is the same with products and services. You must do something to get noticed first - relationship second.

I've said this a million times to my clients - in the hands of a skilled surgeon a scalpel is a tool for good... in the hands of a hack - it is a very, very dangerous weapon.

Don't hate the game - hate the poor players - but don't hate the ones that do it well.

Posted by Paul Hebert at September 17, 2008 6:37 AM

Hi Billy

The point is not me buying a Sony or you not buying a Sony. The point I wished to illustrate is the intangible, "comfort-zone" part of Loyalty.

The public by large, including me, might be "drunken fools", but we nevertheless invest cash on this intangible factor. That's why it is important.

Jay, from Bangalore
http://www.ideaburger.blogspot.com

Posted by Jayakumar Hariharan at September 17, 2008 7:31 AM

The biggest threat posed by "loyalty" programs is the destruction of meaning itself. Just 15 years ago, the word "loyalty" still had connotations of semper fi, 'til death do us part, greater love hath no man than this. Now, it's synonymous with price-shopping.

How long can you cynically, hypocritically abuse an emotive term before it loses all connotation? We're getting to that point. CapGemini advertises their "loyalty factory," for example. As Paul Hebert posts above, when the tactic becomes the strategy, we've lost it.

The destruction of meaning in "loyalty" is mirrored by that in "client focus," and "human capital." I touch a bit on this in a recent blog posting of my own at Trust Matters, at http://trustedadvisor.com/trustmatters/407/Outsourcing-Loyalty--and-other-Oxymorons

Thanks for the post, Steve.

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Posted by Charles H. Green at September 17, 2008 8:51 AM

Decades of the "customer first" mentality and the arrival of the new generation in the market place have created a dynamic in the wireless industry that makes one see the customer loyalty/relationhip paradigm needs to change. Free and unlimited is the expectation. Wireline reliability and audio quality with mobile equipment that is essentially nothing more than an FM radio. The iPhone lesson is new and cool will beat that carefully cultivated customer relationhip a good part of the time as over 40 percent of those activated the 2G iPhone were new customers to AT&T. Customers who claim all calls drop yet a glance at the unbilled minutes shows none of the "signs" of dropped calls..one minute to same number...and 6oo plus minutes used the last week or so. It will be interesting to see the road we go down. You can be the best company on the planet but subsidize enough customers you'll be the best company that ever went broke.

Posted by Dave Wheeler at September 17, 2008 9:47 AM

Marketing analytics tell us the obvious - that sales promotions exist to provide short-term sales spikes, not loyalty. As other commenters have noted, sales promotions (and I use that phrase a second time on purpose to remind us they are not 'loyalty promotions', they are sales promotions) are tactical and short-term. They don't/can't deliver customer loyalty. Now stretch out a short-term sales promotion, give it a card for the customer to put in their pocket, call it a 'loyalty program', use it to cross-sell to customers and...you've got a pig with lipstick on, to borrow a quote from another arena at the moment. 'Loyalty programs' are the most widely mis-labeled activity in marketing.

Posted by Phil Dourado at September 17, 2008 10:52 AM

Congratulations! This post was selected as one of the five best business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.

http://blog.threestarleadership.com/2008/09/17/91708-a-midweek-look-at-the-business-blogs.aspx

Wally Bock

Posted by Wally Bock at September 17, 2008 4:13 PM

A friend who used to work at Coca-Cola told me a good one today ... they used to refer to price promotions as "renting" volume. You can promote your way to revenue increases, but the volume is not everlasting. The same can be said for traditional loyalty programs ... but not of true "We" relationships.

Posted by Steve Yastrow at September 17, 2008 7:47 PM

While I understand and agree with the core concepts of the "We" relationship, I do see some real significant challenges even adapting parts of it effectively into many service industries...wireless, airline, and to a degree hospitality. Poor service abounds in this sector and the reasons are many and varied. It's not always the people, it is often the companies policies and processes. A "we" relationship directly with those who provide the service would be a marvelous thing and actually could help identify and resolve the root cause issues. Attittude and work ethic might be a small part of the problem. turnover, lack of time tools, and training, morale also play a role. The new consumer however has expectations that are unrealistic. These pages are often filled examples of poor service that vilify airlines and hotels. Is it unrealistic to expect you get where you need to go on time and with your baggage...absolutely not. Are there factors beyond the control of the crews and counter folks that can cause late arrivals and missing bags....yep. One of your conrtributors wrote of buying his iPhone Day One...maybe two. He wrote of his admiration of Apple, design, "cool". His biggest regret? It wasn't available on T-Mobile. Did his loyalty to T-Mobile keep him a customer? No. Does it matter that it was his admiration for Apple and things new and cool that caused him to change carriers...not really? Bottom line is that T-Mobile, a terrific company by the way, lost his business. Trumped by the new and cool.

It's all in the application. An information exchange between a customer and company accomplishes nothing unless the data is used and applied somehow...hopefully to improve performance, productivity and results. Feedback given directly to the folks whose policies and processes might be responsible might work if they are serious about improving things. Perceived as critisism it may go nowhere.

Posted by Dave Wheeler at September 18, 2008 9:50 AM

Provide good leadership and then get out of the way for the front line folks to do the work is what Dave is saying unless I'm missing his point. Well said Dave - I'm with you needless to say.

Forget managers - its front line workers who create the 'we' and the image/reputation. The most effective leaders know that and they are quietly in the background creating the culture that allows their folks to do great work on the front line. I was thinking about this the other day. Annie and I used to go to a regular pub/restaurant called 'The Plough' here in England for a meal most Thursday evenings. We often talked about how good ‘The Plough’ was. But in fact what we were really saying is how good ‘Sue’ is – she was the waitress who usually served us. Sue was ‘The Plough’ to us. Obviously the leaders in the background were giving her the freedom and liberation to do the right stuff for customers... And she succeeded. We never knew the name of the manager or the owner – we never needed to - but we will always remember Sue. Sadly we moved away from that town 12 months ago.

Posted by Trevor Gay at September 18, 2008 1:18 PM

Trevor...it is indeed the frontline worker who is the face of the company to the consumer at the point of service. Their ability to make that interaction "VALUE ADDED" is based on the support they get from their leadership. Who best knows the problems with the service and the barriers to providing a great experience than the consumer and the frontline provider. The expectations of the consumers of some services will never be met. That being the case, is it worth the investment of time and resources in "WE" relationships to retain customers that can't be satisfied. Or do we follow Sprints lead with the "serial callers" and invite them to take their business to a different company?

Posted by Dave Wheeler at September 18, 2008 10:07 PM