Loyalty and Engagement

dogengagement

I have recently been asked to join a panel at a conference where the discussion will focus around loyalty and engagement in the context of customers and businesses.

I think the discussion primarily revolves around the definitions of both loyalty and engagement, what do they mean?  Only by understanding the true definition can one create an idea, process or policy, which can be applied to business.

Both loyalty and engagement are concepts I have never really taken time to consider with regards to business.  Of course, the ideas around ‘loyalty cards’ and ‘user generated content’ as two examples of the topics to be discussed have been around for years. I’ve had fleeting discussions about both subjects, yet I have never really taken the time to understand the true meaning of either.

I’ll begin with loyalty.

I’ve always considered loyalty as basically sticking to those you love (friends and family) not matter what may come.   As for drivers of loyalty then I would once again suggest love or devotion to a person or cause.  I’d add that fear is also a driver of loyalty and maybe complacency.  Certainly loyalty is not necessarily a rational concept.  Misplaced-loyalty certainly exists.

After some on line reading I learn that loyalty as a philosophical concept only really garnered any attention during the early twentieth century by Josiah Royce (The Philosophy of Loyalty, 1908).  Royce believed that loyalty is a primary virtue within humans, the main driver of principals.  Interestingly, Royce also has an opinion set in the commercial context:

“In the commercial world, honesty in business is a service, not merely and not mainly to the others who are parties to the single transaction in which at any one time this faithfulness is shown. The single act of business fidelity is an act of confidence of man in man upon which the whole fabric of business rests.”

                                                                                                            Royce 1908

I take from that statement Royce is really talking about building trust and a relationship between the customers and the business.  This then leads to loyalty.  Trust must be built by the expectations of the consumer being met and even better, being surpassed.  This begs the question, what are the customer’s expectations?  I think this is the first vital question a business must ask itself if is to satisfy customers.

Apple

Apple seems the primary business to which people would associate loyalty, indeed, we’ve all seen the queues outside various Apple stores over the years as the fanatical customers await the next installment.  So one might wonder, what drives such loyalty?  What are customer’s expectations?

Well, it’s not price.  £1,000 for a laptop is still £1,000, no one expects Apple to be ‘cheap’.

However, I think customers do like the design (looks good), the ease of use, the speed of use and post purchase customer service.  Interestingly, Apple is prohibitive in that you can’t mix and match software on to other devices.  Through the various Apple products an ecosystem of sorts is being created.  No matter where you are, you can access your Apple bubble.   Over time, this makes it much harder for customers to walk away because by doing so requires time and effort in spades as readjustment is required.

Only a few weeks ago did Mark Rogowsky contribute this article to Forbes around Apply products and loyalty:

http://www.forbes.com/sites/markrogowsky/2013/07/07/if-you-think-apple-customers-are-loyal-now-watch-and-see-whats-in-store/

Over the years and especially since the launch of the iPod in 2001 Apple has consistently delivered on its promises and customers expectations.  It hasn’t always surpassed expectations but it has (most of the time) met them.  When Apple wobbled (remember the iPhone 4 signal problems in 2010?) customer confidence has wobbled too and this has been reflected in the market share price movements.

Another example of enduring loyalty might be found in banks.  I’ve opened my first bank account when 7 or 8 years old.  I still use that account as my main current account.  As of today that’s around 29 years of loyalty.  Why am I so loyal?

The reasons are greatly different as to why one might be loyal to a bank than say  to Apple.  I am loyal to my bank partly because I have no appetite to move.  I don’t want the hassle of moving my bills, direct debits, standing orders etc, I don’t want the stress and am afraid of something going wrong (fear!).

The other reason is that there is no compelling reason to move.  What material benefit can I garner from moving from one bank to another?  Not much so far as I can see, the gaps in competition are too small.

Two more examples of loyalty are Airlines and in the UK, Tesco, the now multinational giant of a Supermarket.

Airlines and have been at it for years, but you’ve got to fly a long way before you see any benefit.  Flying a long way costs money, so the impact has never ben ‘mass market’ nor far reaching.

Tesco

Tesco is different.  At Tesco, Sir Terry Leahy introduced Tesco’s ‘club card’ sometime ago.  It was the first of it’s kind in UK retailing that had any material impact.  The benefits produced a long list but near the top 1) Customers come back to get more points, and points mean prizes such as discounts of shopping bills and2) Tesco could, for the first time, begin to gather data ‘per customer’.  Talk about ‘big data began a few years ago, Tesco were onto it over 10 years ago.

The use of that data enabled Tesco to understand their customers more so than ever before and certainly more so than their competitors.  That understanding led to be able to offer relevant products at good prices in the right place within the store and backed by the most effective promotions.  Porters 4 p’s come to the forefront please.

Of all Sir Terry achieved, I’d argue the club card had the largest impact.  This was a step change for loyalty programs.  It will be interesting to see how the loyalty card concept moves from analogue to digital as shopping continues to moves on line.

On the 27th July 2011 the Harvard Business School published an article entitled “Customer Loyalty Programs That Work’ written by Maggie Starvish.

This article directly links loyalty with engagement, in fact it states “The most important component by far is customer engagement’.  So, onto Engagement.

Engagement

As I earlier stated, I believe engagement to be active participation.  Yet from a business perspective the concept of engagement is more complex.

Fundamentally most businesses (rightly or wrongly) are out to make money for their shareholders.  Altruism plays a small part in added value (unfortunately).  With that in mind then businesses must want engagement as at some point, it leads to profit.

Starvish writes that engagement plays a key part in generating loyalty.  Starvish argues that engagement via a loyalty program happens in three stages and facilitates loyalty itself.  The first of the three stages is the offer (rewards account / card etc..) moving to contact (much like a Supermarket contacting the customer with discounts) and then finally two way communication between retailer and customer, a conversation.  So, ultimately, engagement facilitates loyalty as customers become active participants with the business.

Whilst I agree with some of the points made by Maggie, I believe a key factor has been missed.  No loyalty program is needed at all to generate engagement, yet once engagement is generated then the chances of loyalty are increased.

So how to generate engagement?  Well, reward is one way as we’re all experienced in via airlines, supermarkets and many more businesses.  But there are other ways.  Many individuals as well as businesses run blogs or use social media such as Twitter or Facebook to begin conversations and enter into dialogue with customers.

So, on line publishing has created a platform by which makes it easier than ever for businesses to reach customers or customers to engage with businesses. Indeed social media is used frequently by customers to vent frustrations and garner attention when making a complaint, this can of course turn ugly for a business if not handled in the correct manner yet I may also be an advantage to businesses, turning a potentially damaging situation into a positive reflection on the company.

Durex recently ran social media campaign, aiming to be light hearted.

SOS Durex

Durex asked its customers which city needed Durex SOS condoms (they ordered via an app).  Rather than being London for example, users hijacked the campaign and voted for Batman (yes, true) a conservative and Muslim province in Turkey.  Durex shut the campaign down.

Mcdonalds recently also fell fowl during a social campaign.  They launched McDStories, they wanted customers to share their best Mcdonalds stories.  Unfortunately, customer took to twitter and matters into their own hands:

Mcdstories

Mcdonalds quickly ceased the campaign.

Humorous indeed but I would hazard a guess the exec’s at those businesses had a stressful few days and I am sure know a great deal more than I regards damage limitation.

What is interesting is that in both cases the business tried to coerce customers into talking about the businesses.  It seems either customers saw straight through the plan and found the campaigns insincere (so demolished them) or the businesses really do not know who their customers are

I suspect it’s more that the customers felt like they were being used to promote the businesses and did not take kindly to that.

Waitrose, another UK based Supermarket has also fallen down when running a social media marketing campaign yet they handled it very well.  Waitrose is seen as sitting in the upper end of Supermarkets, some might describe Waitrose as decidedly middle or even upper middle class.

When they ran a ‘Why I shop at Waitrose..’ campaign they were inundated with various mocking tweets:

waitrose

Yet almost all tweets were in good humour, helped by the fact Waitrose very politely replied to a great number and publicly stated they enjoyed reading the communications.  Whether the campaign had any adverse affects is to be seen, I’d suggest they came out of it better than they ever could have imagined!

So engagement sits on a very fine line.  I’d suggest any engagement has to be organic rather than manufactured and genuine.  Customers must be allowed to make contact and engage as and when they wish yet the same is not true for the business itself.  The business should only ever contact and engage customers for genuine reasons.  Only then will trust build and trust certainly is a factor in leading to loyalty.

Conclusion

The subject of loyalty and engagement is complex.  I offer no real insight and have only barely scratched the surface.  Even with regards to my conclusions below and thoughts above they cannot be applied to all businesses.  Each business is different and so the boundaries of customer contact etiquette change.

With that in mind, I’d conclude that

  1. Loyalty and engagement are intrinsically linked yet mutually exclusive.  Loyalty can happen without engagement and engagement can happen without loyalty.
  2. Loyalty is irrational, it is emotional and cannot be mechanically induce
  3. Trust builds loyalty.
  4. Poor experiences damage loyalty.

For me, the business lessons from this are:

  1. Meet (or exceed where possible) customers expectations.
  2. Give customers a platform to converse with the business.
  3. If the business is to converse, ensure the reasons are genuine and not motivated by increasing sales.
  4. Protect those customers who are loyal.  They’re one of the most valuable assets the business will ever have.

I shall leave it at that!

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