The word loyalty is thrown around quite a bit inside the customer service world today. Numerous books and scores of articles have been written and blogs posted about the importance and relevance of customer loyalty, as compared to customer satisfaction, and that there is actually little relationship between the two.
A loyal customer is one who has a devoted attachment to a company’s business, brand or products and buys from that company over and over again. Extensive research conducted recently by the Corporate Executive Board suggests that customer loyalty is the most accurate predictor of a company’s profitability.
A closer look at the nature of customer loyalty in the customer service context reveals two distinct and very different kinds of loyalty.
The first kind of loyalty is what we refer to as Convenience Loyalty. Convenience Loyalty is generated by companies primarily through customer loyalty programs, which are essentially ways for retailers and other kinds of businesses to encourage the continued patronage of customers. One of the best examples is, of course, the frequent-flier airline miles program. The proliferation of these kinds of programs over the past several decades is evidenced by the multitude of rewards cards that clutter wallets and thicken key chains everywhere.
I recently selected Airline X over Airline Y when booking a domestic flight solely to earn the frequent flier miles on my Airline X account, despite the fact that Airline Y had a more convenient connecting airport for the flight and a slightly earlier scheduled arrival time. This suggests that I have convenience loyalty to Airline X, but …
Am I truly loyal to Airline X? Will I recommend Airline X to others? Probably not. Will I tell others how wonderful Airline X is? No. In fact, I am not particularly fond of Airline X at all. I do business with them because my choices are limited, and, well … I might as well earn the points.
The second kind of loyalty, which we at Pretium believe is more powerful, valuable and profitable than Convenience Loyalty, is Emotional Loyalty. Emotional Loyalty to a company is a customer’s bond with or personal connection to the company’s business, products or brand that stems from the feelings the customer develops in doing business with that company. Customers who are emotionally loyal to a company tend to describe their experiences with the company using passionate language (“I just love that company”), and they often proactively seek out ways to reward the company by becoming promoters.
Apple is an example of a company that has absolutely nailed the art of fostering Emotional Loyalty within its customer base. Apple’s customers tend to feel great about owning and using Apple products and being members of the “Apple community.” Apple customers enjoy sharing their Apple experiences with others. Even those customers who have an occasional negative experience with Apple tend to remain emotionally attached to the Apple brand.
It’s the emotional attachment that drives profitability. Convenience Loyalty can and often does drive revenue, but it will not drive profitability in the same way that Emotional Loyalty drives profitability. When I am emotionally loyal to a company, I will do everything I can to do business with that company. I will not accept a substitute or settle for an alternative unless it is absolutely necessary.
The goal of every customer-facing employee should be to create an emotional bond or connection with the customer that engenders Emotional Loyalty.
Every customer has a practical need (that’s the primary reason for the communication), but every customer also has an emotional need, sometimes several, associated with that practical need. When the front-line employee is able to solve the customer’s practical problem or issue and identify and solve the customer’s related emotional need, he or she is two-thirds of the way toward creating Emotional Loyalty.
The remaining one-third is providing the customer with a low-effort experience. Customers are far more likely to become emotionally loyal to companies they perceive as easy to do business with. Companies that have a front-line skilled in solving not just their customers’ practical needs, but also their emotional needs, and are able to create a low-effort experience in the process are well-positioned to create emotional loyalty.
Emotional Loyalty is created not by a great reward point system but by creating a customer experience that makes the customer feel great about doing business with the company. These feelings are generated from customer interactions on the front line.
Customer-facing employees must learn to have a new and different conversation with their customers that centers on meeting the practical and emotional needs of the customer and reducing the customer’s effort. The traditional (old) conversation simply doesn’t work. Companies that learn how to have this New Conversation and learn to engage their customers emotionally will win the profitability race.