Book busts loyalty myths & explains strategies

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By: Wise Marketer Staff |

Posted on September 20, 2005

In their new book, a group of researchers from Ipsos debunk 53 accepted loyalty marketing practices and offer alternative strategies to set businesses back on track, concentrating on six strategic business areas including management practices, loyalty programmes, and profitability.

The book 'Loyalty Myths' (subtitled 'Hyped strategies that will put you out of business, and proven tactics that really work') asserts that most companies have not updated their methodology for capitalising on customer loyalty, and that many managers throughout the world are finding that their strategies aren't easily translating into business success and, worse still, may actually be costing them billions of dollars in missed profits.

The authors examine the most popular maxims of customer retention, explaining why the faulty strategies fail, how they detract from effective management practices, and how they affect the bottom line.

Going to extremes
Although it's possibly an extreme generalisation, the authors boldly warn the business world: "Most of what we have been told about the relationship between customer loyalty and financial outcomes is false. The difficult truth regarding customer loyalty is that how it links to growth and profitability is far more complex than we have been led to believe. An improperly directed programme can result in keeping the wrong customers and ironically deflating an organisation's profitability. A blind pursuit of customer loyalty is at best a case of misallocated resources. But at worst it is a recipe for financial disaster."

Seven strategies
The book offers seven strategies for those businesses whose loyalty and retention efforts aren't producing the desired level of results. In summary, they include:

  1. Management style: Don't manage for customer retention before you manage for customer selection.
  2. Patience and planning: Customer loyalty takes more time to grow than most management teams have to give, so careful planning and much patience are required.
  3. Share of wallet: Focus on the customers' share of wallet, and don't disregard those customers with currently low shares - consumer polygamy is the rule these days, according to the authors.
  4. Mutual benefit: True loyalty requires mutually beneficial interactions, while many loyalty programmes are tilted in the company's favour.
  5. Response patterns: The chain of effects from loyalty to profit is twisted and complex, so you need to learn the specific response patterns of your customers and your industry.
  6. Employee relations: Satisfied and loyal employees can make a difference, although customer satisfaction and loyalty can also happen in the absence of employee satisfaction and loyalty.
  7. Branding and loyalty: Customer loyalty and brand imagery are far from independent, so they must be managed together.

Timothy Keiningham is senior vice president and head of consulting for Ipsos Loyalty, and has written much about customer satisfaction and loyalty. Terry Vavra is chairman emeritus for Ipsos Loyalty, as well as being a customer satisfaction and loyalty consultant and having been a graduate-level lecturer. Lerzan Aksoy is assistant professor of marketing at Koc University in Istanbul (Turkey), and her research interests include customer satisfaction, loyalty, and relationship management. Henri Wallard is CEO for Ipsos, and has direct responsibility for Ipsos Loyalty activities worldwide.

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