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The end of loyalty? 31 October, 2006

Posted by Jay Ball in marketing.
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The subject of customer loyalty is guaranteed to get the attention of virtually anyone involved in marketing. The cost of acquiring new customers always massively outweighs the cost of retaining existing ones (although sadly retention is still given too little meaningful attention by too many companies). And with so many technologies approaching parity, switching brands has never been easier.

Of course, exactly what marketers mean by loyalty is often a somewhat fuzzy idea. Generally it comes down to a desire for existing customers to carry on doing what they’re already doing (with a hope that they may do a little more too). As a result, many ‘loyalty programmes’ use classic behaviourist ideas of rewarding desired behaviour and habitual repeat buying. This is fine when we’re talking about getting some points on a store card for buying sugar but doesn’t stand up to anything more complicated than simple reflex purchases. This is because it is focused almost solely on habits of mind rather than anything deeper (what academics term ‘routinised response behaviour’).

A truer definition of customer loyalty is whether people will wait for your product if it is out of stock (or still in beta). Whether they will recommend it to their friends (or blog favourably about it). And whether they’ll forgive you when you make mistakes.

But in a 2.0 world is anyone really ‘loyal’ to brands anymore (especially in the tech sector)? Loyalty is, to some degree, a measure of permanence. Yet as we all know, technology is about relentless change. The technology graveyard is littered with the remains of brands and products that at one time attracted many loyal users. And we are potentially seeing a new wave of change with the move to webOS-based services.

It was unthinkable at one time that Sony Playstation users might defect instead of waiting for the next version. Yet right now the brand’s position seems more precarious than ever as PS3’s release date and availability moves ever farther away and the competition gets its act together.

Likewise, until Firefox came along, Internet Explorer had effectively won the browser war. Sadly, having won, there was no need to remain focused on improving the product (ie better serving users) and, from a technology standpoint, Microsoft has been playing catch up ever since.

Even Apple, one of the more bomb-proof tech brands, only had to have a few scratched Nanos and discolouring MacBooks to see once ‘loyal’ customers fall out of love with the brand.

One reason for this is that there is no habit of mind for most technology purchases. They are two infrequent, too expensive and the next purchase is almost never a like-for-like replacement of an older product (tech moves on too quickly). Buyers are also more informed than ever before (and far less scared of technology than they used to be). They are more willing to adopt earlier because on the whole the consequences of getting it wrong aren’t too worrying.

So where does this leave tech marketers?

The first thing to do is turn the whole loyalty question on its head. Instead of asking how loyal your customers are to you, ask how loyal you are to your customers. What can you do to help them get through their day? What would you do if you really were on their side? Find ways to be loyal to them (their wants, needs and aspirations) between purchases.

Secondly, involve customers in refining existing products and developing new ones. Work as partners with them. The open source ethos of co-creation comes into play here. If customers have some skin in the game then they are more likely to stay the course.

Finally, never, ever compromise on support. For most tech companies, this is the prime communication customers have with the brand between purchases. Yet examples of great support are considerably rarer than those of diabolical support. There is no faster way to squander hard earned brand equity than to deliver a crappy support experience.

So is loyalty dead? Yes and no. Traditional notions of brand loyalty are, in the tech sector at least, gasping their last breaths. But in their place could come a more authentic, more effective relationship with customers.

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