Is Customer Loyalty an Outdated Concept?

Companies are not fair to us – that’s the view of almost half the UK adult population. In 1980 only 14% thought this way; now 44% do according to nVision from Future Foundation. Nearly two decades after loyalty theories radically changed the business world, average loyalty has declined, whilst consumers have strengthened their recommendation and switching muscles. That’s a dangerous situation for companies to be in.

“Companies that want to improve their service quality should take a cue from manufacturing and focus on their own kind of scrap heap: customers who won’t come back.” So begins the seminal article on customer loyalty, ‘Zero Defections: Quality Comes to Services’ by Fred Reichheld and Earl Sassar in Harvard Business Review 1990

If customers today think that companies are more unfair to them than in the past then companies must accept they are not delivering value for money, that customers to not trust them to be ‘on their side’, and that their brand values need to be inspiring – not internal.

As the original loyalty theory by Reichheld said, feedback is the guiding voice for a systematic approach to building human assets. Loyalty is more relevant today than ever, 80% of customers will continue with a company to whom they feel loyal, especially the over 40’s and more educated, but understanding the ‘best customers’ to invest in is still the key. No one will ever achieve 100% loyalty, and not every customer is capable of it.

Back in the ‘way back when’, there used to be a little mantra about building loyalty, it still applies as a good engagement process, but we now have more tools to achieve it.

• Recognise me (but don’t force me to remember complex passwords!)
• Know me (but don’t be too familiar until I deem it OK)
• Act accordingly (by making life easier and solving my problems)
• Communicate (and listen)
• Respect and involve me (but don’t waste my time, understand my goals)
• Anticipate my needs (because you know things I don’t, that’s your value )
• Show you care (about me, and about society)
• Appreciate me (thank me for my business and involvement)