The Evolution of Customer Loyalty (Part II)

different-paths-Robert BornhofenHow do you separate the truly great from the good companies, or the good from the bad? In Part I of this topic, I addressed several problems associated with poor customer service and outlined three high-level recommendations. In this post, I offer additional advice for consideration, with the intent of helping leaders build brand strength within their companies, to truly understand what it takes to keep customers happy and loyal. To set the stage, allow me to reiterate how Amazon’s founder views the customer:

We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.

– Jeff Bezos, Founder & CEO of Amazon

Clearly what Amazon claims to do is far easier said than done. Based on a quick literary search, there is enough content published on customer loyalty to write a book series. For now, allow me to submit three additional areas that affect loyalty: leadership, customer stickiness, and marketing. Collectively, these areas have helped shape customer loyalty in an era where customers are better informed with more choices to fulfill their needs, while influenced by product reviews and public sentiment. In response, companies need to work smarter in order to strengthen their brand, hold onto their loyal customers and attract new ones.


Why does it seem that most organizational ills point to ineffective leadership? Well that’s certainly the case when sorting companies based on their ability to keep customers happy. Let’s face it, leadership sets the tone of how employees function and behave. It plays a huge role in shaping the organizational culture. As part of the company’s strategy, leaders need to: (a) be actively behind strategic initiatives; (b) fix what’s holding a company back in serving customers; and (c) persuade employees to adopt new, improved ways of doing business. For competitive advantage to be achieved, organizations must develop core competencies that resonate with customers and exceed what the competition offers. In addition to Amazon, this is what Apple, Chick-fil-A, and Kroger do to earn industry recognition in customer service.

It reasons that the really good leaders make time to review customer service metrics, ask insightful questions, and take action in order achieve goals. A simple measurement such as the Net Promoter Score can be used to understand how customers feel about the company by asking one simple question: would you recommend company XYZ (your organization) to a friend? Where NPS scores are low, leaders need to simply ask “why?” On the surface, what might seem to be a simple issue may in fact be a symptom of a deeper, more serious problem. Only by studying the problem can leaders truly understand the fix needed. Evidence exists to show a strong correlation between NPS score and a company’s ability to deliver customer service. Notable companies with high NPS scores include USAA, Southwest Air, and Pandora – all industry leaders.

In addressing customer service as a leadership issue, Dr. Rob Elkington argues that employees tend to “not have a clear understanding of the organization’s vision and mission, and so act in ways that actually undermine that vision and mission.” He adds that “employees may not have enough time to deal adequately with customers, and/or they have not been trained to deal adequately with customers.” This situation clearly points to questionable leadership practices. On the topic of customer service, rather than a customers’ satisfaction level, focusing too much on quantitative measures (e.g., number of customers served) can overshadow and distort the customer experience. While employee productivity and operating profit are critical elements to company survival, so too is the ability to treat customers in a sensitive and professional manner that leads to repeat business and referrals. This should be a rally cry for organizations: never lose site of the customer, for without them companies are doomed to extinction.

Customer Stickiness

I make a distinction between customers that are but mere transactions versus relationships defined over time that lead to repeat business. For example, my cable company is the former type; my State Farm insurance agent is the latter. By choice, I am stuck to State Farm based what my agent does to keep me loyal, as it will take more than just a lower price for a competitor to lure me away.

So how does a company to generate customer loyalty through being “sticky?” Among several ways of doing this, I offer the following approaches for consideration:

  • As noted in Part I, companies need to do an extraordinary job in servicing customers, to excel beyond what the competition does to maintain a positive experience. I love it when the company employee gets sticky with me —the customer—by asking if there is anything else needed to earn my business. This is a great example of what a simple question can do to promote customer satisfaction when implemented throughout the organization. (Is my cable company reading this?) Customers want to feel a “human connection” or a sense of empathy and trust from companies.
  • Companies should routinely engage with customers through a variety of touch points over time, i.e., social media. There is no better source for coming up with good ideas than customers themselves. A great example of this is coffee retailer Starbucks through its “mystarbucksidea” interface over the Web.

Robert Bornhofen-MyStarbucksIdeaAs illustrated, Starbucks gets sticky with its customers by asking: How can we make your customer experience better? Not only is this source a steady supply of ideas, which is especially valuable to product innovators, but the simple act of asking for input generates a deeper relationship with the customer. This gets even easier for the small “mom & pop” companies where more direct opportunities exist to get sticky with customers, to ask for and act on ideas to strengthen loyalty. There is no excuse for a company not to get sticky with its customers.

Other examples of touch points include social media sites Facebook, LinkedIn, & Twitter. In terms of electronic messaging, both RSS and SMS feeds to customers can keep the company relevant through information shared. Technology aside, the content needs to be of interest to the customers while doing a subtle sell of the brand. Many stock brokerage firms connect this way and do so relatively well to get sticky with investors.

  • Companies should develop and leverage communities of users as a basis to get sticky while promoting their brand. Three great examples come to mind that underscore the power of social networking:
  1. BeingGirl (Proctor & Gamble). Analogous to being a “digital big sister,” P&G provides a worldwide online forum for young, teenage girls to connect and find out answers to sensitive questions. This exchange generated over 2 million hits per month (2010) between P&G and its young female customers.
  2. H&R Block. The public is able to connect with H&R’s community of tax experts to seek answers to questions. To date, over 1 million customer questions have been addressed, creating a sense of stickiness with H&R Block and contributing to a 15% increase in business since its inception.
  3. Harley Owners Group (O.G.) – Harley Davidson Motorcycles. Another great example shared of how Harley Davidson uses an online forum among over 1 million enthusiasts. To attract enthusiast, the forum addresses H.O.G. rallies & events, chapters, H.O.G. Ladies, and merchandise for sale to promote public awareness.

I argue that virtually all companies that pursue non-private customers need to create similar user communities. It should be part of their strategy. Unlike the past, technology is inexpensive and readily accessible to support this type of stickiness between company and customer. Deeply embedded ways to marketing need to be transformed, they need to leverage new technologies and trends toward social networks as a means to bridge companies to customers, and in a manner that is interactive, informative, and influential.


In my opinion, marketing is everything a company does on a daily basis to influence customers to buy. Many companies fail to realize the frequency by which this needs to occur: daily. Core to marketing is the ability to create AND convey value directly to the customer. Most leaders know about the 4 P’s to marketing (i.e., product, price, placement, & promotion). Within the context of this posting, focus is placed on the first “P” (product) as seen through the customers’ eyes.

To create value, companies need to sense and capture the specific customer needs, as segmented into different customer types (e.g., age, gender, & education level). For instance, how do the needs among the Millennial generation differ from the Boomers when selecting household furniture or a new credit card? Having this answer can be invaluable in knowing how best to promote the brand and service customers. If done right, well-defined customer segments can reveal unique insights that might otherwise go unnoticed at the macro, one-size-fits-all level. Companies should periodically analyze these segments to stay current on customer needs, trends, and concerns. With customers in mind, marketers need to align consumer needs to what the company can offer to create value. Getting the product right and sustaining its relevance to customer needs will strengthen loyalty. Though outside the scope of this post, the other 3 P’s (i.e., price, placement, & promotion) need to be performed well in order to keep the customer coming back, while providing economic value to the company.

Loyalty Programs

Many confuse the term “loyalty” with “rewards.” Loyalty denotes advocacy and commitment, not points or discounts. Consumers may be influenced by points/discounts without being loyal to a particular company. While many of us may admit to being hooked on rewards (e.g., frequent traveler points), I question whether this practice makes economic sense, especially for companies that cannot provide enough value in their products to create customer demand. No doubt, rewards can increase sales volume, but at what cost? The retailer Bed Bath and Beyond is a good example of how generous customer rewards (discounts) can backfire at the expense of profit.

The ideal situation for branding is for companies to differentiate their offerings so that customers are willing to come back for repeat business, where the value exceeds that of the competition without requiring profit erosion. (For companies unable to do this, then the discussion needs to examine its strategy and inability to innovate.) Whereas a company may initially grab a customer’s attention with deeply discounted prices, actual customer loyalty builds slowly and steadily through ongoing experiences. Earning customer loyalty through superior products and services is far more lasting than relying on discounts. Two examples follow where companies are using other types of “currency” to attract customers; in particular, through social causes and online games as a means to create emotional attachment to a particular brand.

In the first example, Starwood Hotels (now part of Marriott) focuses attention on protecting the environment (social responsibility) to attract customers in a program called “Make a Green Choice.” According to a 2010 study, 41% of U.S. consumers claim to have been influenced through a social or environmental clause as part of their decision to purchase an item. I suspect that this percentage has since increased as social causes became more widely accepted among the public. In this case, Starwood is using a popular social cause to turn guests into brand advocates. Other notable companies that leverage social causes to promote their brands include Starbucks, Disney, and Microsoft.

As for online games, this is another way that marketers are attracting, cultivating, and retaining brand enthusiasts. The objective is to create an enjoyable and social online experience – one that generates a desired behavior among customers. In fact, 24% of the U.S. online audiences play branded social games at least once a month (Comscore). My own personal experience involves “competing” in a game that WebMD sends me, to test my knowledge of good health. I now have a stronger affinity for WebMD as a trusted brand, which provides a greater sense of loyalty.

Perhaps the greatest value to loyalty programs is that companies are able to identify individual customers, to measure and understand their specific behaviors. This can be useful knowledge for a smart company looking to embrace the top 10 to 20% of its customer base that represents a sizable slice of revenue. For instance, airlines, hotels, and banks use different metal types (e.g., gold, silver, & bronze) to brand their customers based on economic value. Perhaps the most cherished of brands is the America Express Centurion Card. The recognition and benefits associated with premium loyalty programs can be extremely effective in holding onto customers and attracting new ones.


Robert Bornhofen-Customer-Loyalty-visualTaken together—Parts I and II—we begin to see the emergence of some key themes that contribute to customer loyalty. As depicted in the illustration, I argue that customer loyalty is influenced by the outer ring of variables. In this post, attention is given to leadership, customer stickiness, and marketing within the context of these variables. This is where leaders, strategists, and employees need to focus their attention. Recalling our rally cry around the customer, each of these variables influences buying decisions, when consumers contemplate whether to remain loyal to a brand or go elsewhere.

Clearly more can be done to strengthen brand strength and customer loyalty beyond what is covered in this posting. As said in Part I, and worth repeating, resting on a company’s laurels and assuming customers will remain loyal is a recipe for disaster.

Originally published at Bizcatalyst360


Robert Bornhofen

Robert Bornhofen

Robert Bornhofen is a practitioner-scholar who has held executive and operational positions in multiple industries. His Doctorate degree in Management offers expertise in the areas of organizational change, leadership theory, and sustaining organizational growth. As a strategist, he looks to leverage core competencies and unique offerings to enable new opportunities and business growth. Robert has done research in the adoption and success of social/digital media within organizations. He brings practical knowledge and experience in enabling organizations to transform good ideas to innovative products.

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