By: Barry Kirk and Wise Marketer Staff
How important are your customers to your company?
Put that question to any corporate executive and they’re likely to answer, “It’s one of our top priorities.”
I wish there was a way to quantify the number of companies proclaiming just that, committing to customers, shareholders, and market analysts that a core element of their mission is to become “customer centric.” Alas, we’re still looking for that intern willing to cull through thousands of public filings to catalog all mentions of “customer centric.”
While I would like to see that actual percentage documented, there are probably more useful assignments to give that valued intern. Why? Because I can confidently say, based on anecdotal encounters with dozens of CMO’s and brand executives, that the topic comes up in almost every conversation on brand and company strategy.
Brands have clearly heightened their focus on “the customer” – or are at least giving the topic more lip service — yet their actual approaches to creating sustainable customer loyalty are all over the map. The challenge to bring a uniform approach to how your brand, or any brand, could envision a holistic customer loyalty strategy was my primary inspiration for a model I originally called “The 4D Loyalty Framework.” When first published in 2015, it was positioned as a “new map for the journey to lasting customer relationships.” I’ve since updated and renamed this approach as “The Multi-Loyalty Framework.” The change represents an evolution in how we’ve learned to apply this model as both a diagnostic tool and design methodology in the real world with dozens of brands. This series is about sharing insights into how you can use this model to find success in your own business.
A Deeper Understanding of Customer Loyalty
The evolution of loyalty programs in the market has ironically paralleled higher levels of ennui, even discontent, among customers. Today’s customers want more connection and authentic human touch from the businesses they choose to buy from and to whom they offer their loyalty. The reasons behind this desire tie directly to a fuller understanding of human motivation. Looking to the work of Dr. Paul Lawrence and Nitin Nohria of the Harvard Business School (Lawrence & Nohria, 2002; Lawrence, 2010) we find a compelling theory on the core biological drivers of human behavior drawn from scientific experiments in the fields of neuroscience, psychology, sociology and anthropology. This theory argues that nearly every individual on the planet is imbued with four core biological drives:
- Drive to Acquire
- Drive to Bond
- Drive to Create
- Drive to Defend
The revelation of this “4-Drive Model” is that experiences that authentically and artfully include elements that appeal to our multiple drives can deepen relationships and influence choice. When your brand can connect with customers on an emotional level as well as a rational one, you strengthen that bond because you are satisfying more core human needs.
Taking inspiration from this foundational work, we created a matrix of strategy considerations specifically for customer loyalty, based on two key axes:
- Transactional-Relational – this dimension charts the spectrum of how your brand chooses to appeal to customers. Are you predisposed to be predominantly price and offer focused, or are you developing a more comprehensive and emotionally-satisfying relationship?
- Passive-Active – this dimension gauges the style of interaction that you ask from your customers to have with your brand. Do customers take a passive approach to brand interactions or are they highly active and intentional in relating to your brand?
At the intersection of these axes of Transactional vs. Relational and Passive vs. Active, we find four quadrants that act as signposts pointing the way to more meaningful understanding of customer loyalty. By mapping the continuums between these four signposts onto our existing consumer landscape, we see that loyalty is not monolithic as we have long treated it. Rather, loyalty reveals itself in four distinct types:
- Inertia Loyalty
- Mercenary Loyalty
- True Loyalty
- Cult Loyalty
This article is the first in a series that will define each quadrant in the Multi-Dimensional Loyalty Model and hopefully brings clarity to how you can evaluate where you will thrive best in developing your own customer strategy. We’ll start today with Inertia Loyalty.
Inertia Loyalty – A Viable Option?
Let’s address one very large elephant in the room regarding the Multi- Loyalty Framework: The four quadrants of the grid are not a scoring system. Brands that run programs and campaigns in the Inertia quadrant are not “worse” than those in neighboring quadrants. Is there higher magnetic appeal, a “cool” factor, among the brands that can tap into “Cult” Loyalty? Maybe, but not every brand can be successful with a True or Cult strategy, nor should they necessarily strive to do so.
The utility of the Multi-Loyalty approach is that it helps to identify the type of customer engagement your brand is engendering today and then provides a pathway to a more holistic loyalty strategy. This methodology works because an honest self-assessment of brand positioning on the Transactional/Relational and Passive/Active axes leads to a stark assessment of which of your customers’ biological drivers you are currently engaging, and which you have an opportunity to use more effectively.
Inertia Loyalty focuses on optimizing barriers to exit and primarily engages the drive to defend. If your customer might be frequently overheard saying “I am loyal because it is too much trouble to go somewhere else, or there are no other good options, or because you make it difficult for me to switch” then you’re probably in the Inertia Loyalty category.
Subscription-based businesses, mobile phone and cable companies, insurance companies and some airline carriers are likely to find themselves in this category. Essentially, anywhere that retention is primarily driven by contracts, cancellation penalties, or a lack of viable alternatives will land you in the Inertia category. Airlines don’t always belong here, but competitive aspects of specific markets are the determining factor. For example, an airline might assume you are loyal, but you may not like their service and only fly them because no one else offers a direct flight to your most common destination. If a competitive carrier offered a direct flight tomorrow, you’d likely switch.
At times, these businesses generate a passive-aggressive relationship with their customers by resigning to do little beyond the acquisition phase of the relationship. In the mobile telephone and cable television markets, we see an almost exclusive focus on acquisition promotions, with little attention to developing and strengthening customer relationships once a service agreement is in place.
Additionally, the investment in marketing communications is usually minimal, with most marketing messages piggy-backing on an invoice, whether sent on paper or via email. One-time incentives might be used occasionally — e.g. “$10 off next month’s bill if you opt in to paperless billing” or “$25 credit is you add a payment method and select auto-renewal for your account”—but these are almost always used to shape the nature of the relationship in favor of the brand with the customer as an afterthought.
These approaches create barriers to exit, but the type of “stickiness” that results is more like customer friction. This friction may be effective for a time at preventing attrition but can also result in a sense of customer urgency to explore competitive options when contracts expire. In fact, it’s common to witness customers concluding that the only way they can gain an edge in the relationship (even just to maintain current pricing) is by threatening to defect to a competitor.
The primary weakness in the Inertia model today is that pinning hopes for customer retention on maintaining a barrier to exit only works if the barrier itself remains viable. Once it falls, little remains to retain the customer relationship and the customer becomes highly vulnerable to competitive offers. This paradigm was highlighted when T-Mobile initiated a trend to “no contract” mobile service a few years back. As customers realized they could switch carriers without penalty (a removal of the competitors’ barrier to exit), a wave of attrition took place. That initial campaign resulted in a step-change in mobile phone service marketing, where time-limited contracts are nearly obsolete, and customers are absorbing the full price of their handset via installment plans with the ability to upgrade as the initial cost is amortized.
Is there, then, any opportunity to excel in Inertia Loyalty? There is, but only if inertia is leveraged as a tactic, not a strategy. As a strategic approach to customer retention, inertia is simply too susceptible to market disruption, as evidence by the impact that Uber and Lyft have had on traditional taxi cab companies simply by removing most of the inertia from that customer experience. However, inertia can be effectively used as a tactic to drive brand stickiness, particularly early in the customer life cycle when attrition risk is often highest. For example, many banks employ inertia effectively with new customers by encouraging them to setup online banking and online bill pay, knowing that you are significantly less likely to switch banks once you have put in that level of personal effort to customize your banking experience. The trick with inertia is to use it artfully while resisting the temptation to overuse it.
Optimizing one quadrant of the framework is a worthy goal at the start, but inertia alone will not be the shield to protect you from customer defection in a competitive market. Combining the diverse elements of the four quadrants into an experience that activates our four biological drives and connects members through shared identity is the optimal approach that will maximize the benefits of the Multi-Loyalty Framework.
NEXT UP: Mercenary and True Loyalty – Should your brand seek to thrive in its native “zone” or chart a journey across the quadrants?
Barry Kirk is Vice President, Customer Loyalty Strategy at Maritz Loyalty.