WHAT DO YOU MEAN, 'LOYALTY'?

loyalty is not bought simply by offering rewards; it is earned by consistently delivering better value!

Can you resist articles about how much money people make? I can't. My deep-rooted insecurity always drives me to discover how I'm doing compared to other people. So much so that recently I was reading about Asian salaries in World Executive's Digest.

Despite frequent requests I'm not emigating to Jakarta just yet; but in the same issue was a letter which I started reading because it came from Mary Carse, who used to work with me, and kept reading because she made so much sense. She is clearly biased: her firm runs loyalty programmes; but you may find a precis of her views valuable.

A rewards programme, she maintains, can only work as part of a loyalty management strategy. Many firms institute them, wrongly, as a quick fix. But loyalty is not bought simply by offering rewards; it is earned by consistently delivering better value. To do that your company's culture must be so customer-focused that you can guarantee to deliver that product or service promise everytime and at every point of customer contact.

That has implications across your entire organization; from the staff reporting sturcture and how employees are trained, to the type of computer systems and procedures. Companies do not consider these crucial when they see a rewards programme as a marketing tool to deliver results in the short term. This leads to a me-too format, developed to get programmes going quickly regardless of how this may affect their existing operations.

Take some practical examples. how will points or miles be alloted, captured and communicated to the customer? How will redemption be handled? These processes are not part of many firms' present sturcture, so they don't appreciate what skills you need to manage them. Moreover, many programmes fail to tailor the type of reward to the customers' status. For example, 'soft' rewards which focus on privileged service and recognition tend to become more importantthe more loyal a customer becomes, whereas 'hard' rewards like free flights are more important to first-time or infrequent customers.

Another feature of such programmes is that 'success' is measured by volume of membership rather than value. So money is wasted trying to convert persistent promiscuous users into loyal customers. This is particularly true where expensive statements and newsletters are mailed regularly to customers who haven't bought for long periods. Why not spend less on those people and use money more sensibly by rewarding those most likely to become loyal?

Companies that do not understand that rewards are no substitute for consistently delivering value may actually create programmes that create more, or less, promiscuous customers. Such customers and prospects begin to expect an incentive to purchase or respond, thus diluting profit margins. They start to compare offers and buy depending on the best offer.

I agree entirely. I'm sceptical about these schemes; your competitor can always outbribe you. To me they are merely frills unless you are near perfect. Until then, invest your money in better service and communications. As a friend who runs the world's largest wine club observed; 'We sell service as a profit: it just happens to be delivered as grape juice in a glass."

Dated: June 1996

Key words: Articles, World Executive's Digest, emigate, rewards programme,marketing tool, redemption,  promiscuous

Source: Marketing: Insights and Outrages, Drayton Bird 

CONFUSED? YOU WILL BE!

Are the talents needed to rise to the top in these huge firms those required to run them?

Have you been following, as I have, the thrilling adventures of 'Big Ed' Carter, who has been brought over from the United States by BT to introduce their Friends and Family programme? For the life of me I can't think why; the idea started in the United States with another firm he worked for. Why didn't someone from BT go over, study it and just knock it off? It's not that complicated. They're too lazy, I suppose.

Carter is 1.9 metres tall. Suppose he were like a certain type of US citizen - as vast in girth as height. He would be a very barrage balloon of blubber - overweight, overpaid and over here, to adapt the old line. Maybe he's lean, lithe and magnificent, but one thing is for sure: he has quite a name for thuggish behaviour - his physical violence caused BT's agency, AMV-BBDO, to ban him from their premises. We should salute them: it takes courage to do that to somebody influential at the country's biggest advertiser, whereas it takes very little to thump people if you're built like a Sherman tank.

They have not reaffirmed the ban, because of their clients, Simon Esberger of Cellnet, has hired Carter to start a Friends and Family type programme and help them 'escape the industry's looming price war'. This may be a good idea, even if it's a shame he can't get somebody house-trained to do it, but the logic escapes me. Joking apart, friends, what would you call a scheme whereby you pay less when you ring several specified numbers? In Ashton-under-Lyne where I was brought up, folk would say it is about price. In fact even in London, where they like to complicate things a little, I imagine most people would say it is price-led. So what is Mr. Esberger talking about, or to be more exact what is he talking through?

Here's something else I can't quite get my head round. Lloyds Bank-TSB is getting out of estate agency. Ten years and God knows how many millions (billions?) later they've decided it was all a bad idea and are looking for a management buy-out. But was the idea so bad? A network of financial service firms cross-selling to each other makes perfect sense. I suppose not enough thought was applied to the boring details. You have to ensure every likely relevant opportunity is exploited and every appropriate communication sent.

These people think strategies execute themselves. When they fail to do so, the solution applied often puzzles me. They squander shareholders' money to buy some firm for more than it's worth. Lots of people lose their jobs - 'economies of scale'. Things go wrong. Then the very people they employed - who failed - borrowed the money to buy the firm back and end up making millions each. Why couldn't they do it before? Maybe they were just badly managed.

Are the talents needed to rise to the top in these huge firms those required to run them? And why do these precious economies of scale never reach as far as the top?

Dated: February 1998

Keywords: Adventures, 'Big Ed' Carter, United States, programme

Source: MARKETING Insights and Outrages, Drayton Bird, 2000