Social Loyalty

Published On November 16, 2009 | By mbalogh | Blog, Uncategorized

Today’s customer is less likely to spend and more likely to be discerning when they do which has further widened the profitability gap between maintaining existing customers and acquiring a reluctant new one.  Traditional loyalty problems are a good start, but where they leave off new media loyalty is just getting started.

Traditional loyalty programs actually use loyalty as a metaphor for spending money,  usually in a specified time period — like a year.  There’s two mistakes here.  First, defining loyalty as someone who gives you money, and second assuming what the customers spends is all you profit from.

I have two friends, both of whom travel, both by plane, but in two very different ways.  The first travels often, but not very far, and to many destinations.  She’ll head up the coast to Maine, or down to Florida, occasionally heading out west but almost always within the continental United States.  The second doesn’t travel as much, but when he does it’s usually internationally and to a hand full of the same places.  Sometimes Italy, sometimes Singapore, maybe someplace in Europe, but almost always quite a distance away.  The first person is loyal.  She has a system to make her life easier.  She’s been around the block and knows what she likes.  She has a favorite airline, hotel chain, and car rental agency and is a member of several loyalty programs.  The second person has very little loyalty, but still signs up for the programs.  He hasn’t been doing it long (relatively), but is getting the hang of it.  He travels far and long so he has to spend a lot of money to do it.

One travels a lot, not always with you, and the other spends a lot of money.  Which traveler would you rather have as a customer?

Monetary Loyalty

Traveler #2 spends a lot of money.  He’s bought his way into your platinum program in just a few trips earning upgrades and the royal treatment.  Traveler #1 has earned her respect as a traveler.  She goes to a lot of different places so it might take her a while to ramp up her status if she doesn’t get a chance to visit the same place for a while.  One year she didn’t even make the top level at her favorite airline so traveler #2 got the bump to first class.  She’s still a little pissed about that.  She joined the loyalty program to make her traveling life that much more comfortable, but in so many cases it doesn’t seem to be making the difference, despite her loyalty.

Traveler #1 sticks with you because you offer the best service, while traveler #2 is really only there because he doesn’t have a lot of choices yet you reward #2 while letting #1 slip through the cracks.  What kind of a loyalty program is that?

The hidden expense of life-time value

The second mistake in traditional loyalty program is looking at the books.  While a valuable source of information, this is truly only part of the picture.  Traveler #2 spends a lot of money, so he must be the better customer, right?  Wrong.  While he does travel he goes to a lot of places his friends and family will never go.  When they ask his advice on traveling most of the time his answer is, "I don’t know, sorry.  Maybe you could ask traveler #1, she does a lot of that sort of thing."  If you ask him he’d probably tell you he enjoyed Singapore airlines the best but domestic travel is all the same.  He hasn’t been around the block enough to give you all the tips and tricks and can’t tell you "how it used to be" so he’s a little bit easier to please.

Traveler #1, on the other hand, loves to give advice.  She travels a lot and everyone knows it because she’s a real advocate for what she likes.  Want to take the family to Disney?  She goes to Florida twice a month and can tell you which airlines have the most comfortable seats and best service.  Going skiing in Vermont or Utah?  She knows some great places to stay, when to schedule, and where to rent your car.  In fact, she’s on a first name basis with one of the representatives at the car rental place so she’ll try to hook you up, but no promises.  It used to be that X-corp was the best, but they’ve really been cutting back with the economy, so I’m going with Y-corp now, you might want to check them out.

Avoiding the pitfalls with new marketing

New marketing is all about understanding your customers.  It’s about establishing a relationship and cultivating it.  It’s about using the massive amounts of information that we collect every day to differentiate between loyal customers and the ones who just appear that way.  It’s about looking at behavior first to understand our customers, and marketing second, to give them what they need.  It’s about facilitating communication between our loyal customers — between each other, and with ourselves — and then listening.

If you were to open a dialog with each of these travelers you’d probably hear two very different things.  The first would give you quality feedback based on her optimized experience within the bounds of your industry.  She’d tell you where you could improve offering great and innovative ideas for free knowing she’d benefit from them in the end.  She’s a prosumer.  From the second you would hear silence.

Now which customer would you rather have? 

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One Response to Social Loyalty

  1. Quinn Hudson says:

    You have some excellent points regarding the desirability of Traveler #1 from a company’s persepective, and the missed opportunities from companies who may not appropriately appreciate Traveler #1. Word of mouth is a valuable, and potentially profitable, marketing tool. Also, as a “Traveler #1” myself, I can confirm that I get aggravated at “loyalty” programs that are fooled by newbie tourists who plunk down one hefty payment or take that single one-time trip around the globe and rack up the miles!!!

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