Opinion: The loyalty myth, and other misunderstandings

(Published January 10, 2011)

Sooner or later, every company that sets out to increase repeat business arrives at an arresting conclusion: Increasing repeat business is hard work. Worse, hard turns to impossible when you confuse repeat business with customer loyalty. Repeat business does not depend on customers being loyal to you but on your perceived faithfulness to a specific, unique customer value. Allow me to try to translate that.

Let’s say Mr. Entrepreneur wants to increase his repeat business. His mind will likely seek some way to either up the value to the customer, better communicate that value or, ideally, both. And this instinct is exactly right. The task of increasing repeat business is ultimately one of increasing the customer’s perception of the value they get exclusively from you. So far, so good.

All successful efforts to increase repeat business by increasing value fall into one of two categories: You either improve the central value proposition or you augment it. To cite a highly visible example, Domino’s Pizza tried this recently when management decided that the way to build repeat business was to—how’s this for a wild idea?—make a better tasting pizza. The logic was pretty simple: The more people who liked the taste of Domino’s pies, the more likely they are to buy another one on another day.

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The other approach doesn’t change the central value proposition, but instead adds something extra to the purchase or experience. Here’s an example of that approach:

When I take my car to Ducky’s Car Wash, I’m happy to find free coffee and newspapers in the waiting area. Do those perks get my car washed any faster or better? Of course not, but so long as Ducky’s suds and brushes are as good as the competition’s, chances are I’ll pull my dirty car into Ducky’s because I know my wait is going to be more pleasant.

There’s an art to this sort of thing. It’s not always necessary to change or enhance your core offering. The reality is that customers will often respond to shifts in the presentation of the value you’re already offering. Marketing consultants like me frequently encounter these situations as they listen to clients describe a great value in the existing product or service that nobody seems to have noticed. The fix is obvious: Push the unknown aspect into the spotlight.
And that is how you increase repeat business. What you’re really doing is increasing the perceived value of doing business with you. And you do that by either literally improving the value or at least improving how you communicate that value. Hopefully, you’re doing some of both.

Hold on. Isn’t all this the same as improving customer loyalty? No. Here’s why: Efforts to increase repeat business work only to the extent that the customer comes to believe that returning to you is in his or her best interest. Loyalty, on the other hand, is about deliberately doing something personally disadvantageous.

No, that’s not a misprint. The real measure of loyalty lays in the sacrifice of self-interest. (Think about what the U.S. Marines do all day.) In business, this theorem implies that a loyal customer will return to you even when he or she is aware of better options.

Seem unlikely? It actually happens all the time. Girl Scouts sell tens of millions of cookies to millions of people who really don’t need cookies. This scenario is a reversal—admittedly, a rare one—of the textbook situation in which the customer is trying to get the best product or service for her money.

Now, a Girl Scout knocking on your door may well be able to leverage this type of purchasing to win a trip to Washington, D.C.—but, regrettably, you won’t build a great business by using the same thinking.

Hence, customer loyalty is a poor synonym for repeat business. It’s flat-out bonkers if taken to mean that a customer owes loyalty to a business. What you need to do instead is focus on increasing the customer’s perceived value of returning to you. Strive to associate that specific value—one the customer associates only with you—in the minds of your customers day in and day out in everything you do.

In this way, your brand will become shorthand in the shopper’s mind for the specific, unique value you provide. If you do it right, repeat business is something you won’t even have to worry about. You can go get your car washed instead.

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Source: Brandweek

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