Consumers interact with corporations in one or more of three ways - by purchasing a product or service, or by patronizing corporate retail outlets. In each three of these types of interaction, consumer loyalty is critical to long-term corporate success. But if consumer loyalty is important then change - at least change for the sake of change - may be a very costly indulgence, according to Ned Barnett, Adjunct Professor of Marketing and PR at UNLV and MTSU.
However, all too often, corporations make changes that - instead of securing long-term success - actually drive away loyal consumers. Understanding what change is good - and, even more importantly, what change is bad (and why), can make a significant bottom-line difference.
Whether a company makes a product, offers a service or provides consumers with a retail environment, that corporation typically invests from five to 20% of its revenue in marketing, advertising and promotion to both attract new clients and build a loyalty linkage with their consumers. In the face of those substantial and ongoing investments in client attraction and retention, any "change" that creates a wedge between the consumer and the corporation risks not only losing future transaction revenues, but that change also risks losing at least some of that company's marketing investment as well.
New products, new services and new retail operations must invest heavily to attract new customers, but even the most successful and well-established firms still choose to invest heavily in sustaining consumer loyalty. For instance, in 2014 McDonalds - one of the world's best-known brands - still chose to invest $988 million dollars in advertising to "remind" customers to remain loyal.
What smart companies already know involves the relationship between "change" and "loyalty." McDonalds is - again - an excellent example of a company which doesn't allow "change" to degrade "loyalty." While they routinely bring onboard new products and new promotions, they do not remove items from their core menu to make room for these new, promotional offerings. The new items are intended to encourage not-quite-loyal customers to come back - but the core menu is intended to keep the most loyal customers coming back.
There seem to be two schools of corporate thought when it comes to "change." One school says, "If it's not broken, don't fix it;" while the other school takes a different view: "If it's not broke, break it."
However, when it comes to customer loyalty, "breaking it" is an excellent way of canceling out even decades-long loyal relationships.
While I often welcome needed change, I tend to be conservative in my views toward change for the sake of change. Recently, I experienced at first hand three specific examples of apparently arbitrary change impacting loyalty. One example was from a product manufacturer, one was from a service provider and one was from a retail outlet. Two of these companies are headquartered in the US, while the other one is a UK-based multinational.
The names of these corporations are irrelevant to the loyalty lessons to be learned here.
Fragile Customer Loyalty: Customer loyalty is hard-won, fragile and remarkably powerful when it comes to supporting a business or product. For example, while back, I did a survey of 3,000 retired individuals in a major Florida metro area who'd been seeing the same doctor for more than 11 years. Of these consumers, (the doctors who sponsored the survey were horrified to learn), a clear majority of those 3,000 seniors who participated in the survey would change doctors (breaching that long-term loyalty) for what the doctors considered ridiculously small factors.
The majority responding to the study said they would doctors in order to cut their in-office wait-time by just 15 minutes, or their out-of-pocket co-pay by just $25. Clearly, the loyalty those doctors assumed was theirs (allowing them to keep customers waiting or charging them all the market would bear) was only skin-deep.
If that.
If nothing else, that survey was a wake-up call for the metro area's doctors who'd been taking their long-term patients' loyalty for granted.
Real Customer Loyalty: On the other side of the coin, real customer loyalty has people automatically choosing - without thinking about it - the store they'll shop at, the fast-food drive-through they'll patronise, or the product or service they'll buy and use. That's what sellers want - loyalty so bone-deep that customers won't even consider other options before laying down their magic plastic.
That is loyalty worth having.
Yet when companies adopt change, just for the sake of change, they risk destroying the too-fragile link that bonds customer to product or vendor. That can have ruinous financial implications.
Example One: Retail - A National-Chain Grocery Store: I have been shopping at one grocery store for 16 years, for two reasons. First, it is the closest to my home, making it convenient. However, there is another grocery store that's less than a quarter-mile more distant from my home, so location-based loyalty is not a big issue here.
The second, and most important reason for patronizing this store is simple: After 16 years, I am comfortable in knowing that I can instantly find any product I might want, because I already know where it can be found on the shelves. I don't have to think about it, I don't have to go searching for it. It takes me less than 30 minutes to find my weekly $200 worth of food items, check out and head back home.
However, within the past month, the store (presumably at the behest of some time-and-motion-study "expert" at "corporate") experienced a total storewide layout make-over. Suddenly, the products I sought out were no longer where they were supposed to be. It took me more than 45 minutes longer - basically doubling my time in the store - to do the family's weekly shopping in this "new" store.
Presumably, this change was supposed to make the store more attractive or functional, but it clearly ranks among the "change for change sake" kind of change.
That experience was frustrating. But more important, I found that it shattered my own bonds of loyalty to that supermarket. As soon as I realised this, I ran through my mind why I'd been loyal to this store for nearly two decades.
I didn't shop there because I knew the people - turn-over in that line of work is just too great to build relationships with cashiers or clerks. And I didn't shop there because of quality. Grocery stores in America are essentially "generic" outlets. Store vs. store, the brand items are the same.
Finally, it wasn't the distinctive quality of their bags. Frankly, this company's shopping bags are so flimsy that - presuming that I didn't want to chase canned goods down the driveway after the bag ripped - I had learned to routinely request that everything be double-bagged.
In short, my primary reason for shopping there was the convenience of knowing where items I generally buy can be located. With this "change for the sake of change," that convenience was gone. With no important reason to remain loyal, I decided I might as well check out the competitor a couple of miles down the street.
Bottom line: Because "change for the sake of change" meant I no longer had the bonds of loyalty to hold me back, I'm now "shopping" a five-mile radius for a new grocery store. It might wind up being the one closest to me, but don't count on that.
Example Two: Service - a National Cable/Internet Provider: I have used the same local cable/internet service provider for seventeen years, and my monthly bill for the "bundle" of services I get runs right at $202 per month - $2,220 per year. Considering the millions of dollars this company spends in advertising to attract new customers in my local community, such loyalty should be prized. However, it clearly isn't, and I know that loyalty isn't as a result of a couple of recent changes they've made to their customer support services.
The changes made significantly reduced the level of tech support offered to customers, even as it canceled out any sense of accountability those providing tech support might feel.
These changes were presumably made to reduce the cost-per-tech-support experience, and perhaps to lower HR costs by eliminating a mechanism for screening out "bad apples," but considering the down-side cost, this set of changes (to a system that wasn't broken) was a set of changes for change's sake.
I learned about these changes the hard way. One morning last week, I went into my home-office to find that I had no connection to the Internet. I confirmed that we still had cable service, so I initially focused on trouble-shooting the equipment myself, but without success.
So I called for tech support. I should say here, as an aside, that for 17 years, I'd been satisfied with the quality of tech support - they had knowledgeable and apparently motivated-to-be-helpful people on call. These were geeks who were also personable, an excellent combination. That service had been, for 17 years, a major element in my loyalty, because I am not a techie.
Apparently, neither was this tech support person. First, after I'd told him what was wrong, and told him what I'd done, he acted as if he hadn't heard me. Instead, he instructed me to repeat all the steps that I'd already just taken.
Albert Einstein once defined insanity as "doing the same thing over and over again, but expecting different results," and by that definition, my tech support guy clearly wasn't playing with a full deck. Even when I pointed out to him that I'd already done all the steps he'd asked me to take, he ignored me and insisted that I repeat the rebooting of my modem and router.
When that didn't work (again), he directed me to plug my laptop into the modem - and it worked. Then (without direction) I went the extra step and plugged my laptop into my router, and once again, it worked. The problem wasn't in the modem or the router. However, despite this test, the tech guy determined that the problem had to be my router. Then he told me I'd have to contact the manufacturer for tech support. He even had the phone number right at hand.
However, I had no interest in contacting a multi-billion-dollar tech manufacturer for tech support on a product that, new, had cost under $100. I knew what that would get me.
More important, I knew I'd purchased the router from my internet service provider. I also knew that they had previously tech support to resolve router problems. More specifically, I bought that router from them when they declined to help me with a "big box" router I'd bought for around $50. At that time, I'd bought "their" router with the promise that they'd provide service.
I mentioned this to the tech guy, but he insisted that there'd been a "change" and they no longer provided this kind of support.
I didn't know whether he was being truthful or just lazy, but this response was nothing like what I'd experienced before from his company. After a few unsuccessful go-rounds, I asked for his name and employee ID number, so I could contact his supervisor. He refused outright, saying the company had changed and no longer required him to give this out.
Another "welcome" change.
However, when I called a supervisor, she was able to identify that the tech support was "Stephen in Twin Falls, Idaho." So I asked to be connected to "Stephen's" supervisor so I could raise the issue with someone who had the authority to take action - and, presumably, get me a competent tech support specialist. I was told that supervisor had been "pinged" and would contact me shortly. A week later, I am still waiting.
Frustrated, I contacted the supervisor I'd spoken to previously, only to find that due to changes in their tech-support structure, she could no longer just connect me to the person I needed - and worse, that this unresponsive person's supervisor "would not talk to consumers."
I had but two conclusions:
First, their tech support changes, while clearly lowering their costs and improving their bottom line, had been changes for the worst. They no longer provided tech support I might need; and, their tech support people were no longer being held accountable for their actions - or lack of actions. And �
Second, the bond of loyalty - a bond stretching over 17 years and putting into their coffers roughly $40,800 - had been broken. As a direct result of this change, I am now shopping for another service provider.
Example Two: For decades, I have been a loyal customer of a UK-based company's particular brand of wax-free lip balm, which comes in a soft-plastic tube. This tube fits easily in my pocket, and because it has a screw-top lid, I don't have to worry about the lid coming off. That prevented the petroleum jelly from getting all over my wallet and pocket knife (the other two "residents" of that pocket). This product is important to me because I live in the American Southwest's Mohave Desert, where the average humidity here is about nine percent.
For 24 years, this firm's wax-free petroleum jelly lip balm has been essential to my day-to-day comfort.
The product was right, and so was the packaging.
I chose brand because it was based on petroleum jelly, rather than wax. Several decades ago, I'd learned that other major lip-balm brands use a kind of wax that shuts down the body's natural production of lip-lubricating oils.
In effect, the competitors' products are addictive. If you use one of them regularly, you'll eventually wind up having to use it all the time, since your lips will no longer produce natural lubrication.
However, this is not the case with petroleum jelly. So I chose this preferred product, and I'd stuck with them since 1991 because I was a satisfied, loyal customer.
Not anymore. Last week, when I'd gone to a couple of drug stores looking for replacement tubes, I couldn't find any. Eventually, I asked a clerk for help and was told that this company had stopped making the tubes in favor petroleum jelly packed inside of a small plastic box. This box was about the size of two sugar cubes side-by-side. While such a container might be convenient in a purse, it was not convenient in a pocket, for several reasons.
Still, this company apparently expected me to happily make the switch-over. However, there are several problems with that extension-of-loyalty to the new product:
One - Use: To use this box-packaged petroleum jelly, I have to swipe the jelly with my finger, then apply it to my lips. This means that:
· My finger really ought to be clean before I apply it, and;
· Every time I use it, I'll wind up with a finger coated with petroleum jelly - I'll need to have something to wipe it off.
Taken together, this suggests that to use this "convenience" product, I need to access a public restroom where I can wash my hands both before and after each application. That takes the product out of the "convenience" category. Alternatively, I can take my chances on finger-cleanliness, then - after use - wipe my applicator-finger off on the inside of one of my socks, or the inside of a pocket or pant-leg.
Two - Packaging: The new lid is snap-on, rather than screw-on. I immediately found that the lid easily snaps off in my pocket. That's one packaging problem.
The other is that, apparently because of its hard-shell cube-shaped design, the lip balm container often pops out of my pocket (unnoticed) when I grab my wallet, pocket knife or keys. Within days of purchase, I'd already lost my first two jelly-cubes.
Three - Flavor: The old stand-by petroleum jelly had essentially no taste, which suited me just fine. I didn't want a lingering flavor. However, the product now in the stores is flavored with cocoa butter. To give them the benefit of the doubt, perhaps the cocoa butter is supposed to enhance the product's lip-protection quality. But regardless, it definitely imparts a taste. Which I don't want.
Four - Customer Support: I contacted this company to express my concerns about this unwelcomed set of changes-for-the-sake-of-change, and received the following letter:
Thank you for contacting us regarding (Product Name) Lip Therapy.
Please accept our apologies for the difficulty you're having in finding our Lip Balm.
Unfortunately, it is no longer available. Marketing can be very complex, and many factors are taken into consideration before taking this step. Consumer demand is a major factor. If the level of demand is insufficient to ensure that consumers receive high quality products at an affordable price, the product will likely be discontinued.
Thank you for taking the time to reach out to us. Please don't hesitate to contact us again with any questions or comments.
We truly appreciate your loyalty to our brand!
Sincerely,
(Product Name) Consumer Services
Note several things about this letter that work against sustaining loyalty.
· First, it is unsigned - clearly, I am not even worthy of a "fake" sig-file that might make me believe that I was a valued customer.
· Second, the letter's tone is condescending, assuming that I have no ideas about marketing. To put that condescending tone into perspective, in contacting them I identified myself as someone who'd worked on the marketing side of healthcare-related products and services for nearly 40 years.
· Third, several competitors continue to sell products in the kinds of tubes that have screw-top lids and direct applicator-to-lip delivery systems. This suggests that a market for this product remains, which further suggests that this really was just a "change for the purpose of change," without any concern for customers' preferences.
· Finally, read the last line - they are thanking me for a loyalty that I no longer feel. Are these people for real?
This company will lose my business eventually. However, several smart online entrepreneurs have stocked up and are offering the balm-in-a-tube for higher, but hardly "too-high" prices. I just ordered a ten-pack, and will continue to do so for as long as these remain available. I am gratified that this won't help the company, as the product I buy going forward had already been sold by the manufacturer - my purchase, though small, won't touch their bottom line.
Bottom Line: And speaking of bottom line, thanks to "change for the sake of change," I am now in the market for a new grocery store, a new internet-and-cable service provider, and (eventually) another brand of petroleum jelly.
· My loyalty to the store would never have been in play without this unnecessary and (for me) unwelcome change - relocating all of the products to "enhance consumer experience."
· The cable company, by short-cutting their support services, has me actively looking for a replacement - and there are several companies in this market who are eager to offer me a new way of getting cable and the Internet, presumably with better customer service tech support.
· As for the lip-balm, I was perfectly satisfied with the "old" product, but (except online) I can no longer find it anywhere, and I'm not wild about its replacement. The loyalty is gone, and I'm now trying other manufacturers' products, as long as it's petroleum jelly-based and sold in a tube. So long, lip balm.
In each case, loyalty would not have been "in play" if the companies involved had not tried to create change for the sake of change.
For every marketing rule, there is always an exception, and when it comes to the loyalty-eroding aspect of change, that exception revolves around a product or service monopoly. This can be found most dramatically in the area of computer operating systems.
There are essentially just two OS providers, and each has a virtual monopoly on its share of the market. In part, this is because the two systems are so different that even dissatisfied customers refuse to switch brands. This occurs even in the face of dramatic changes to the operating systems, which seem to take place with metronome regularity, and which seem to embrace the idea of "sake for the sake of change."
However, unless your company has a monopolistic (or, as in the case of operating systems, "virtually monopolistic") relationship with your consumers, the lessons presented here about change for the sake of change still apply.
The Risk of Change Change - especially change for the sake of change - has several specific and predictable negative impacts on loyalty.
First, a change that levels the playing field will cause consumers to reconsider their personal loyalty; those who do will then go looking for other products, services or retailers.
Second, a material change in a product or service is going to lose those customers who either valued the previous design, or who just do not welcome the new design. In some cases, the change can be so different that loyal customers will completely miss the new-design/new-formulation product on a crowded store shelf.
Finally, a material change that downgrades the consumer's experience - including a "hidden" downgrade of customer tech support - will encourage previously-loyal customers to look elsewhere. Not because the playing field has been leveled, but because the quality of the goods or services have decreased, without a compensating drop in ongoing costs.
These three lessons, learned at the expense of three different corporations, cost them, in just my case:
· $10,400+ per year in grocery sales
· $25+ per year in lip balm sales
· $2,200+ per year in internet/cable sales
Multiply those numbers by the tens or hundreds of thousands of customers who've found the reasons for their product, service or store loyalty have been tossed into a cocked hat and you begin to see the real cost of change for the sake of change.
These three examples highlight the risks of change for the sake of change (or even of change in general).
· When I lost my bearings in the grocery store, I no longer had a reason to maintain my loyalty. The "change" this firm instituted might also result in my "change" to a competitor's store.
· The change in the quality of customer support has me actively looking for another cable/internet provider - after 17 years and $40k+ of loyalty - for a service provider that will provide me with acceptable customer service.
· The "change" to the lip balm was actually two changes, to the packaging and to the product composition. Neither of these reflected respect for my near-25-year loyalty to their product, and I am already have me scrambling for an alternative product. For them, "change" means "we've just lost a long-term client, probably forever."
Beneficial Change: However, not all change is bad. Many times, the right change at the right time can either grow your market share or road-block competitive moves to erode your market share. For example:
· Necessary change is good - if the government says "change your formulation," complying with that mandate is both necessary and good.
· Change that adds to the product/service mix (without robbing loyal customers of their "old" choices," if they prefer) - such as those for which McDonalds' is so famous - can also be very good.
· Changes that dramatically reshape the market (by offering a product or service vastly superior to anything on the market) can be a game-changer, and very much to the good.
So marketers beware - change for the sake of change will cost you customers and revenues you don't need to lose.
Instead of eliminating one product package (and formulation), continue to offer both in a bid to grow market share without losing loyalty.
Instead of redesigning a store's layout all at once, do it incrementally over time, with helpful supplemental shelf signage to direct consumers to the new locations of their favorite products, even while extolling the benefits of this slow-but-steady transformation.
However, there is no either-or for dramatically downgrading customer tech support. Short-term, this will save money on staffing costs. Long term, however, and the word will get out. Customers will migrate to other providers who offer better support, often at a lower cost as well.
Change is good, when done right. When done wrong, change is still good ... but only for your competitors.
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