Loyalty is a two way street, or it should be Direct Magazine June 28, 2000

The scene is childhood in the 1950’s. You’ve just come home from a trip to the supermarket with your mother. She passes you a sheet of little green stamps and a book to stick them into. Finally, after weeks of collecting and licking and sticking stamps enough books are full to warrant sitting down with the catalogue of all the neat stuff you could “buy” with the books of stamps.

For those of us too young to have participated in that primordial, philatelic pastime, let’s fast forward to the mid ’80’s. In droves we joined the ranks of”frequent flyers”, flitting from airline to airline to take advantage of the latest promotion for triple miles between Oshkosh and Oshawa. It was fun…for awhile.

Then came the ’90’s   sales slid…costs climbed…profits peaked.

Suddenly, like a virulent contagious disease that remains undetected until the emergency wards fill up, the dernier cri was unleashed on an unsuspecting consuming public…customer loyalty programs! Things to collect like membership cards, points and more points. Stuff to receive like newsletters, free samples, special services. Places to belong like clubs and circles. Wonderful words to describe you like Premium, Select, Priviligé. You and your peers, whoever they are, from kids to seniors.

Cookies, coffee, cat food, credit cards or cars, it seems no product is immune (or not for long) from the scourge of customer loyalty programs. In fact, I’m sure it could be a full-time occupation just keeping up with them all.

” But, but, but…”, I hear the marketing managers sputtering. “We have to get customers to stay with us. We have to compete. We’re building a database that allows us to track customer behaviour around the clock. We have all this information at our disposal. Look at this powerful new program, these prestigious new premiums, our bountiful new benefits. We’re giving away gifts. We’re giving away goodies. We’re giving away margin…”

You’re giving away the farm.

Know why? Loyalty can’t be bought. At least, not for long.

Not to mention it may all just be getting to be a teensy bit much too much for people to take. In medicine, when the disease takes over the patient dies. In marketing, when the customer reaches overload…you know what happens next.

Let’s put on our consumer hats for a minute. I ask, “Hey, Marketing World! This is not only about my loyalty to you! What have you done to deserve my loyalty? You’ve pushed merchandise at me. You’ve mailed me more stuff than I ever care to read. You’ve invaded my privacy. I’ve got a wallet full of every conceivable form of membership identification. Every breath I take, every move I make has been data captured, data processed and data based (or may be it’s de-based). Hello, out there. Anybody home?”

All I, and, I think, most consumers really want from a “loyalty program” is:

  1. To perceive that what you’re trying to get me to do has some genuine substance and relevance for me…personally. Too often marketers seem to assume people are just sitting waiting for their first next bright idea. Wrong. My life has context and texture and a lot going on in it. That wonderful database will tell you all about it. Now, what are you going to do for me that ninety-nine others won’t do?
  2. Not to have to work at this loyalty thing. Just make it easy for me. Don’t ask me to remember to carry goofy little cards around, or make me wade through encyclopedias of instructions and wait weeks and weeks before collecting “my rewards”. Relationships with my nears and dears keep me busy enough, thank you. Don’t ask me to go out of my way to work at one with you, because I simply won’t.
  3. A little love in your heart, as the old song goes. OK, that may be pushing it, so I’ll settle for a little empathy…human being to human being. The target market of one. What that looks like is well-researched, substantiated approaches, real thought put into the use of technology, delivered through tactics that aren’t intrusive in an obvious way.
  4. Delivery on your promises…and then some! You earn the right to receive my loyalty and maybe, just maybe, I’ll stick around.

 Charles de Gruchy remembers how it was

Relationship marketing…is it relevant Strategy Magazine January 06, 1999

I get a lot of mail. Probably because I go out of my way to get mail. But, I can count on one hand the number of commmunications I’ve ever received that you might call “relationship building”. Sure, I’ve had lots of newsletters and sample packs and special offers and shiny plastic cards and mailings trying to sell me more stuff.

But, remember we’re now dealing with consumers who are reducing the contents of their wallet to one piece of plastic and spending more time thinking about how to cheat on the next round of tax grabs rather than figuring out how many points it will take to “earn” a new set of tires?  Think about it. What’s the key to a good relationship? For starters, there’s the issue of what kind of relationship the two of you want. And, isn’t it also about conducting yourselves in a way that is relevant to what you’ve agreed the relationship will be?

I’ve often used the following bell curve to illustrate the different points in the “lifeycle” of customers during their tenure with a company. The relationship they have with you depends on where they “live” on the curve at any point in time. In a multi-product or services environment, a customer could be living at multiple stages. The problem is that most companies treat all customers the same. The solid line represents the current value of customers. The dotted line represents the objectives in targeting communications to each stage.

Here are some simplified examples of customer communications that address the stages on the curve. I don’t know about you but I’ve never received letters like these:

  1. Activation–

“Dear New Customer–

Thank you for selecting your new XYZ product model. We hope it performs to your satisfaction and you enjoy it for many years to come. Please remember that if you have any difficulty of any kind all you have to do is call 1-800-###-#### at any time. ”

That’s it. No sales pitch on more products, no special offers, no envelope bulging with irrelevant paper.

  1. Grooming–

“Dear New Customer (who matches the profile of your best customers)

(Starts with the same first paragraph, as above).

It might interest you to know that, along with the XYZ product you purchased, we offer a complete XYZ family of products. We’d be happy to send you more information about them. Just give us a call any time at (the same toll-free number) or return the enclosed postage paid postcard”

This way the customer let’s you know whether they want those glossy brochures…instead of wasting money (and trees) just mailing them out.

  1. Maintenance/Loyalty–

“Dear Best Customer

Thank you! We really appreciate the business you’ve given us over the past year (or six months or five years or whatever relevant time frame). To show our appreciation, we invite you to accept the enclosed gift (no strings attached and it’s not a coupon). You’re also invited to receive the following Best Customer benefits for the next 12 months. (Here’s where you can profitably give away all those goodies you’ve been wasting on the undeserving masses–newsletters, special services, gift with purchase offers, etc.–go ahead be generous). Only people like you, who have spent $500 per month for the past five years (or whatever you calculate as the appropriate criteria) will be eligible to receive these special offers and services. Because we only want to give these benefits to customers, like yourself, who truly deserve special attention, we invite you to call 1-800-###-#### today to let us know what you think of the Club and its benefits.”

Don’t you think this might get a customer’s attention better than one more tedious points program for everybody giving away nothing but margin in the end? And, what a great way to gather positive customer comments for future use in testimonials.

  1. Retention–

“Dear Customer (who matches the profile of best customers who’ve stopped buying at this point in their tenure)

Thank you! We really appreciate the business you’ve given us over the past “x” period of time. We hope you’ve enjoyed being part of our Best Customer Club and we hope you want to keep your special privileges. Remember, only people who have spent $500 per month for the past five years (or bought from you 35 times and spent at least $100 every time–or whatever you calculate as the profitable criteria) are eligible to receive the special offers and services in our Best Customer Club. To show our appreciation for your past business, please accept the enclosed special offer (this time it is an incentive to buy again) which you can use any time before (deadline date). If there’s any other way we can be of service, we’d love to hear from you at 1-800-…”

By the way, I’m curious whether any one else out there had the same problem recently as a friend of mine. He received a fancy new plastic card in the mail from Petrocan. He promptly, cut up his old Petrocan credit card (Isn’t that you’re supposed to do?) and next day found himself in the embarassing position of trying to pay for gas with a points program card. Why would any company (unless it also likes to burn money) decide it needed a separate points card for its credit card customers?

Charles de Gruchy remembers how it was

Loyalty — I’ll be back! Strategy Magazine December 13, 2007

Everywhere you look it seems someone is talking about building customer loyalty and using database marketing. What I don’t see is very many people doing anything meaningful about it from a consumer point of view.

Recently, I experienced an example that gave me new hope.

But, first, scene one…the flip side.

I have been a faithful customer of the same hair salon for at least a decade. But, I’ve been faithful in physical form only because, in one way or another, I’ve left after almost every visit feeling irritated. It always took several hours. Everybody moved at a snail’s pace. The place was rampant with prima donnas. Not to mention that they had the worst and oldest selection of magazines with which to kill the inordinate waiting times! And, it seemed as though just about anything was more important than serving customers…talking to friends who happened by, taking the dog for a walk, finishing lunch, going outside for a cigarette…believe it or not, I’m not exaggerating, these things actually happened. Complaining had no effect.

And, in all that time, not once did I receive anything in the mail, not once did I receive any special treatment, not once did anybody ask whether the service was satisfactory.

So, why did I keep going back for so long? Habit…inertia…procrastination…masochism…who knows?  But, aren’t those all wonderfully positive loyalty-building attributes?

So guess what finally happened? I switched to another salon.

Scene two: first visit to the new salon. I was asked to fill in a form with my name and address which were entered into the computerized appointment system. I was told how long I might be waiting. The stylist brought me a choice of beverage and a selection of recent magazines to look at while he worked on my hair. Every hour an attendant came around selling snacks for those (like me) who might have missed lunch to fit in a hair appointment. But, all that is not the best part. My appointment was on a Thursday afternoon. The following Tuesday I received a mailing from the salon. All black and white. Good quality paper but nothing fancy. The note inside was dated the preceding Friday: Dear Mr. de Gruchy: I would like to thank you for visiting our salon recently. I trust that your service and experience was a pleasant one. We welcome any comments, positive or negative and hope to see you again in the near future. I am enclosing a scale of charges for you indicating the range of services and prices we offer. Also, if you present the enclosed business card on your next visit, you will receive a free bottle of MK shampoo. “The note was hand-signed by the owner. It was enough to make me think they valued my business and really wanted me to come back again! And, guess what? I will.

I use this simple example to illustrate that building customer loyalty and using a database in a marketing mode requires neither rocket science nor alchemy.

Let’s look at the elements:

  1. Timeliness: My experience at the salon was still fresh in my mind and within less than week I was reminded of it and pleasantly surprised by the speed of the communication.
  2. Acknowledgement and appreciation of the customer’s business: Thank you is such a simple thing.
  3. Request for feedback: Remember, the average business never hears from 96% of its unhappy customers and the average customer who has a complaint will tell 9 or 10 people about it. 13% of them will tell more than 20 people! On the other hand, 95% will return if they feel the complaint is resolved quickly and they’ll tell an average of 5 people about that. And, asking your customers for feed back doesn’t mean you formulate a self-serving questionnaire that only gives you the news you want to hear. Recently, I examined the feedback survey used by a major hotel chain. My conclusion was that they didn’t want to know what I really thought otherwise they would have asked different questions. Be careful your questionnaires and surveys don’t just tell you what you’re prepared to hear.
  4. Invitation to re-purchase: Turning a one-time buyer into a two-time buyer is a direct marketing adage is as old as the hills and twice as enduring. Not to mention that the only way to finance the cost of constantly acquiring new customers is by having sufficient profitable repeat customers.
  5. Suggest additional products and services: Every communication with a customer is a selling opportunity. There are those who may have trouble with the notion of constantly selling customers, but keep in mind that today’s consumers are looking for information and, in the case of my salon story, they were simply letting me know something that I wouldn’t have known otherwise. The result is that I am now a better informed customer.
  6. Incentive for re-purchase: Keep it simple. Make it relevant. Give it value. A bottle of shampoo for a salon visit. Bingo.
  7. Accountability: Here’s one that many forget. Untold dollars are spent writing glowing customer service letters which are then signed by a non-existent, made-up person. The president or owner doesn’t have to answer all customer correspondence personally but it sure leaves a warm fuzzy feeling when he/she cares enough to personally endorse the outgoing message to the customer.

 Charles de Gruchy remembers how it was

“intelligence”, “intimacy” and “integrity”. Strategy Magazine, June 19, 1995

On the flyleaf of The Great Marketing Turnaround Doctor Samuel Johnson is quoted from 1759, as saying, “The trade of advertising is now so near perfection that it is not easy to propose any improvement.”

Now, I don’t know really what advertising was like in 1759, but I do think it has probably been perfected somewhat in the 236 intervening years and, further, I do honestly believe–Sam–you ain’t seen nuthin’ yet!

But, as Canadian direct marketers we face more issues, stiffer challenges and tougher competition than ever before and from all directions of the globe. Are we up to it? Are we going to be able to handle it?

A few years ago, I chose three words which, for me, seemed to characterize the future of, not only advertising, but marketing and, most particularly, its blood relation direct marketing.

Those words are “intelligence”, “intimacy” and “integrity”.

As marketers–intelligence –about our markets, our competitors, our customers, –is now, more than ever, our life blood. But, the biggest risk is death by overdose of data.

Intelligence makes it possible to find true prospects and turn them into loyal customers without creating waste; to drive advertising by end user behaviour and attitudes instead of the latest trend in creative brainstorms; to benchmark our companies against our competitors and see how we measure up.

But, how are we going to sift through the almost overwhelming amount and speed and changeable load of stuff that comes at us every day and get at only the sparkling gems?

It’s simple—If you can’t act on it, use it in dollars and cents decisions or use it to make some positive things happen…it’s not intelligent information, it’s clutter. And, you’ll drive yourself crazy if you try to treat it all otherwise.

The word, intimacy, has several connotations, one of which can remain where it belongs in the bedrooms of the nation.

In another, more public, sense intimacy implies friendship–familiar personal friendship.  The competitive scramble is on to forge the bonds of customer relationship like never before. It’s a concept that goes far beyond the buzz words of quality management and customer service.

The technology is here and now in every form imaginable ready to make possible the “high touch” of total emphasis on the customer.

It’s up to us to put it to work with the objective being to get to know our customers and potential customers–intimately, individually–and, to truly communicate with them in the same way–as human beings!

My third word is integrity. It’s become, perhaps, a little old-fashioned with it’s implications of ethics and high standards. But, look around, at companies who are really applying the golden rule to their customer service, continuing to take the proactive High road on environmental issues and sharing their wealth with the underprivileged. Many of them are succeeding, even in these hard times.

Another connotation of integrity is that of totality or unity. Integration only coordinates. Integrity as a unified approach to strategic planning is comprehensive. It’s deep, not wide. It’s authentic and considered, not superficial. Integrity has as its driver the true understanding of customer wants and needs. It builds personal relationships in an increasingly fragmented world.

Need proof? Just go for a “surf on the net” as “they” say. It’s all happening–intelligence in the meeting of minds, instantly, intimacy (in all its connotations) and the integrity of many channels of sale, industry sectors and individuals from every walk of life all sharing, buying, chatting, selling and having, we hope, a wonderful time. Hey, Doctor Johnson–are you spinning in your grave, yet?

 Charles de Gruchy remembers how it was

Keep them coming back. Strategy Magazine December 13, 2007

Everywhere I go it seems someone is talking about building customer loyalty and using database marketing. What I don’t see is very many people doing anything meaningful about it, from a consumer point of view.

Recently, I experienced an example that gave me new hope.

But first, Scene One:

I have been a faithful customer of the same hair salon for at least a decade. But, I’ve been faithful in physical form only because, in one way or another, I’ve left after almost every visit feeling irritated. It always took several hours. Everybody moved at a snail’s pace.  And, it seemed as though just about anything was more important than serving customers…talking to friends who happened by, taking the dog for a walk, finishing lunch, going outside for a cigarette…these things actually happened! Complaining had no effect.

And, in all that time, not once did I receive anything in the mail, not once did I receive any special treatment, not once did anybody ask whether the service was satisfactory.

So, why did I keep going back for so long? Habit…inertia…procrastination…masochism…who knows?  Aren’t those all wonderfully positive loyalty-building attributes?

So guess what finally happened? I switched to another salon.

Scene Two: First visit to the new salon. I was asked to fill in a form with my name and address which were entered into their computerized appointment system. I was told how long each stage of my procedure would take. The stylist brought me coffee and a selection of recent magazines to look at while he worked on my hair. Every hour an attendant came around selling snacks for those (like me) who might have missed lunch to fit in a hair appointment. But, all that is not the best part. My appointment was on a Thursday afternoon. The following Tuesday I received a mailing from the salon. All black and white. Good quality paper but nothing fancy. The note inside was dated the preceding Friday: “Dear Mr. de Gruchy: I would like to thank you for visiting our salon recently. I trust that your service and experience was a pleasant once. We welcome any comments, positive or negative and hope to see you again in the near future. I am enclosing a scale of charges for you indicating the range of services and prices we offer. Also, if you present the enclosed business card on your next visit, you will receive a free bottle of MK shampoo”. The note was hand-signed by the owner. It was enough to make me think they valued my business and really wanted me to come back again! And, guess what? I will.

I use this simple example to illustrate that building customer loyalty and using a database in a marketing mode requires neither rocket science nor alchemy.

Let’s look at the elements:

  1. Timeliness: My experience at the salon was still fresh in my mind and within less than a week I was reminded of it and pleasantly surprised by the speed of the communication.
  2. Acknowledgment and appreciation of the customer’s business: Thank you is such a simple thing.
  3. Request for feedback: Remember, the average business never hears from 96% of its unhappy customers and the average customer who has a complaint will tell 9 or 10 people about it. On the other hand, 95% will return if they feel the complaint is resolved quickly. And, asking customers for feedback doesn’t mean you formulate a self-serving questionnaire that only gives you the news you want to hear. Recently, I examined the survey used by a major hotel chain. My conclusion was that they didn’t want to know what I really thought otherwise they would have asked different questions. Be careful your questionnaires and surveys don’t just tell you only what you’re prepared to hear.
  4. Invitation to re-purchase: The objective of turning a one-time buyer into a two-time buyer is a direct marketing adage as old as the hills and twice as enduring. Not to mention that the only way to finance the cost of constantly acquiring new customers is by having sufficient profitable repeat customers.
  5. Suggest additional products and services: Every communication with a customer is a selling opportunity. There are those who may have trouble with the notion of constantly selling customers, but keep in mind that today’s consumers are looking for information and, in the case of my salon story, they were simply letting me know something I wouldn’t have known otherwise. The result is that I am now a better informed customer.
  6. Incentive for re-purchase: Keep it simple. Make it relevant. Give it value. A bottle of shampoo for a salon visit. Bingo.
  7. Accountability: Here’s one that many forget. Untold dollars are spent writing glowing letters to customers which are then signed by a non-existent, made-up person. The president or owner doesn’t have to answer all customer correspondence personally but it sure leaves a warm fuzzy feeling when he/she cares enough to use their own name in messages to customers.

Conclusion: I can’t wait to find out what happens after my second visit!

 Charles de Gruchy remembers how it was

What price loyalty? Strategy Magazine July 16, 1995

While marketers can always come up with a brilliant rationale for their strategies, I was particularly intrigued by the following quote from a Globe and Mail article on Zellers’ Club Z loyalty program

“While Zellers hasn’t put a number on how much Club Z has boosted sales, they know that a great deal of business would be lost if the program was discontinued”.

So, let me get this straight. They don’t know whether the program is delivering additional business but they do know that if Zeddy the bear (the ClubZ mascot) went into permanent hibernation tomorrow sales would decline dramatically.

Call me simplistic, but I still have trouble understanding how my loyalty is supposed to be inspired by giving away (in one form or another) a percentage of the sale every time I make a purchase or, in another example, a free book every time I buy 10 books no matter who I am or how much I buy.

Maybe I’m just not a typical consumer. Or a typical marketer. It seems the objective of most loyalty programs is still simply to drive traffic, build market share or move inventory rather than delivering profit to the bottom line by changing (for the better) pre-existing customer behaviour.

Since I travel fairly often to Ottawa, a year or so ago I joined the Westin Hotels Premiere Club by filling out an application left in my room. Many weeks later I received a splendiferous oversize Cadillac quality mailing package complete with plastic membership card and an extensive questionnaire asking me to select a variety of preferences such as what type of pillow I prefer. Pillows in hotel rooms happen to be an issue with me as I’m highly allergic to feathers. Now, I don’t know about you but when I’m away on business and crawl, exhausted, into my hotel room at the end of the day, the top thing on my mind isn’t whether the pillows are feather or not. But, inevitably, the subject comes up. Usually about the time I start sneezing. After that, unless in a hotel thoughtful enough to leave a synthetic pillow somewhere in the room, it’s a matter of calling housekeeping and waiting for twenty or thirty minutes until someone shows up. I have a few stories about that experience, too!

In any event, I was most impressed by the Westin wanting to know what kind of pillows I like and entertained visions of walking into my room next time and finding that the pillows had already been changed in anticipation of the visit of me, a repeat customer. Not so. In fact, since receiving that beautiful package, absolutely nothing whatsoever has happened. No communication, no recognition. No benefits. No delivery on my stated preferences. Nada!

Would it cost the Westin hotel any more to pre-select my room prior to check-in and have synthetic pillows waiting versus having to bring them later anyway at my request? And, think what I’d be saying right now if they did! I can only conclude that the purpose of the questionnaire was nothing more than glorified market research. Not to mention, membership in the Premier Club is available to anyone able to fill out the application…from small children to once-in-a-lifetime travelers. I wonder how clean their membership database is!

How about some genuine benefits in belonging, collecting, repeat buying, card carrying or whatever? Delivery on promises, even implied ones and impeccable delivery at that has to be the minimum performance level to maintain customer loyalty. Why? Because meeting consumer expectations (especially if you’ve raised those expectations in your communications and promotions) is merely the price of entry in the market today. Now, where are your unique points of difference going to come from?

Once upon a time, about 1981 to be exact, American Airlines launched the AAdvantage program , the granddaddy of frequent flier programs, as a temporary promotion to identify frequent travelers and keep them brand loyal.  According to Inside FlyerI magazine, airlines in North America have now accumulated more than a trillion award miles in liabilities, equivalent to about 50 million free domestic flights. In fact, award miles have grown more quickly than overall traffic thanks, largely, to the many “partnering” programs with hotels, rental car companies, phone services, cruise ships and credit cards. That means it’s possible to accumulate all the “rewards” of using the brand without ever having purchased one single solitary product! What’s wrong with this picture?!
A recent article in Direct magazine stated “financial benefits for these programs are pretty much intangible. To ask airlines what these promotions have meant to their bottom line is to be met with silence, or remarks along the lines of ,”We don’t track it, but we know it’s successful.”” Huh? There’s a lesson to be learned from frequent flyer programs and too few have paid attention.

It’s called long-range planning. Too often programs are launched with great hoopla and fanfare, loaded up with all the possible benefits, tangible and otherwise! But there’s nothing left for an encore to keep the program alive in subsequent months and years., let alone a plan for true reckoning of the ongoing return on investment, if any.

Admirably, the intent of many loyalty programs is to target best, most loyal customers and reward that loyalty. In practice, over and over again, I see reward programs broadcast holus bolus to the masses with warm and breathing being the extent of membership criteria. And the results? Everyone warm and breathing is eligible to take advantage of the rewards without having to do anything whatsoever to deserve special treatment. Net, net the more things change the more they stay the same.!

Leonard Lee  founder of Lee Valley Tools, a cataloguer of woodworking and gardening products has a simple philosophy based on treating people fairly and honestly. For example, when Lee was first starting his company he had some difficulty keeping inventory in stock on a particular item. He responded to the situation by writing customers a cheque for the interest they would have earned on the money tied up waiting for the back order to be delivered. And now, seventeen years later, customers still talk about how impressed they were by that small gesture. Those cheques probably amounted to only a few dollars. But, think of their loyalty value!

In the end, I believe, building genuine loyalty is not about giving away what you’ve already got. It’s more about keeping what you don’t have yet!

Charles de Gruchy remembers the way it was