I have always been intrigued by company loyalty programs. I have noticed that even in my own behavior, loyalty programs do influence where I go and what I will buy, even to the point of the credit card I use.
Somehow, it seems almost too good to be true to buy a ticket on Southwest Airlines, getting one step closer to a “free” ticket and using an American Airlines credit card on the purchase to get one step closer to a “free” ticket on that airline at the same time. Similar behavior and thinking causes me to purchase all of my office supplies, including computers, from one vendor. That vendor gives me a 10-percent rebate monthly on my total purchases. That makes my next month’s supplies seem to be greatly discounted when I use the rebate coupon.
‘How do you feel about the airlines loyalty program when those “free” seats you “earned” are sold out?’
It seems to me as if these loyalty programs achieve what they were designed to achieve: They cause me to make repeated purchases with the company involved because of the program— even if other objective criteria, such as price, might have otherwise caused me to go elsewhere.
Does the same type of loyalty extend to business-to-business engagements? I am not convinced. I have a client who makes durable goods, hardware for production equipment. When I have done “Voice of the Customer” interviews for this client and others like this client, a different type of behavior has emerged: loyalty to the salesperson!
For these customers, the salesperson is the key. Much of the hardware that is sold is viewed as a commodity. There are several manufacturers in this business, and their products are viewed as competitive. This fact creates a lot of pricing pressure. The customers in this market can differentiate the different products a little based upon customer service and product quality but not enough to generate true “puppy” loyalty to the company. However, these customers could articulate a huge difference in salespeople!
Each of the customers had favorite salespeople. Why? The characteristics of the salesperson that were key were easy to identify: knowledge of the customer’s business and processes, knowledge of the industry, knowledge of the salesperson’s own products and a long-term relationship built primarily on trust. All of these attributes were assigned to the salesperson, not to the company!
Personal loyalty
When the salesperson changed brands, the customers often followed. The trust factor was key, despite loyalty programs that were very similar to the frequent-flier programs and others I patronize as a consumer.
B2B companies have tried formal loyalty programs, getting customers to agree to special service and pricing arrangements. The customer gains access to the latest available technology and products, as well as the opportunity to test new products and ideas. For buyers at the corporate level, such agreements make sense and create the opportunity for the vending company to create loyalty beyond the trusted salesperson. This strategy shows promise for the future. The issue then becomes where the buying decisions are made. If they are made centrally, company-to-company loyalty programs may have a chance to succeed. If the decisions are made locally, the trust factor for the salesperson becomes the key attribute, even to the extent that the customer is willing to ignore some pricing differences.
When my client wanted to enter a new market, the company would hire an experienced and trusted salesperson from a competitor to penetrate the segment. This trusted salesperson could get an audience with the customers in that segment and could be trusted by them to recommend products and services that would work because he or she would know their business and industry.
This strategy worked well for penetrating a market, but the strategy was self-defeating in the long run because the loyalty was to the salesperson, not to the vending company and its products and services. When I interviewed salespeople who had engendered this type of loyalty from clients, they told me that their most important attribute was their ability to listen to the customer. Listening was the key to selling.
How does the vending company transfer this loyalty from the salesperson to the company and its products? The successful strategies involve creating incentives the way airlines and office-supply stores do. When a new salesperson comes on board, give the customers a good reason to continue. But be careful to design your loyalty programs to not only create loyalty but also to avoid dissatisfaction. How do you feel about the airlines loyalty program when those “free” seats you “earned” are sold out? You may see it as a slap in the face, instead of a reward for loyalty, leaving you more dissatisfied and less loyal than you would have been with no “award”.
Similarly, in the B2B world, the loyalty reward must be made available to all who have earned it. Customers feel cheated if they earn an award, such as the “free” airline ticket but then are not allowed to use it because of some arbitrary restriction. The strategies that appear to work in B2B situations are rewards that include: special pricing, extended warranties for service or service pricing and the ability to test new products. The idea of testing products that are uniquely suited to their environment and context creates excitement among customers and fits into the current strategies of “mass customization” in selling: customizing the buying and selling arrangements based upon the customer’s unique needs.
Are business customers as loyal as puppies? I think not! But you can transfer the relationships good salespeople have fostered by developing creative and thoughtful incentive programs.
Chris, When I first read “Loyal” and “Puppies” in the headline of your article, all I could think of was the vendor’s carpets and puppy loyalty. Sorry, couldn’t help it.
Many years ago I was on a panel where the subject was the use of the “Frequent Flyer” promotions. Was it or should it be a way of passing on to repeat customers a consumer version of quantity discounts given to volume buyers/customers. It was, we thought, maybe, it would help generate repeat sales. Repeat sales are more profitable than first time sales because the marketing costs of getting the repeat sales was less than it would be for first sales, some, but not all of that difference could be “passed on” to the customer. That’s what volume discounts are in the B2B world, so why not offer something to consumers?
Where we differed in our approach was if it would do what it was supposed to do. One opinion, as I remember it, was that such a program might cut down on customers asking for a better/lower price. That is certainly not the case today.
Your referrence to the airline loyalty program does what it is thought to do. No only does one earn miles due to the purchase of a ticket, but one also earns miles for making purchases using the affinity card. With airlines, our loyalty is only that we want to get more than we are paying for. Hence, we gather miles as a way to get even with their overpricing . . . yes, overpricing by not just the airlines that are bleeding money, but also the no-frills airlines.
While it is not recognized but people should realize that every seat taken by a FF passenger is figured in the pricing of all tickets one purchases. One of the reasons, maybe, that we have to sit with our knees next to our ears is due to the airlines having to squeeze in more paying customers to make up for the revenue lost due to FF passengers.
When one gathers miles to fly free, there is no need for a personality to become involved. It’s all on done by computer and, other than the brand name of the computer, or the software, computers have no personality until they malfunction . . . and then their name is not said in polite company and they take on a negative personality.
With firs that has salespeople, the relationship is, despite the difficulties some firms do that gets in the way of doing business, with the salespeople, if they are more than just clerks, treat customers with respect for what each customer does with what the salesperson sells. That is why customers follow salespeople.
That customers following salespeople as a salesperson moves from one vendor to another is not a new phenonemon with or without loyalty program. Women, primarily, for years followed their hair stylist from one salon to another, clothing salespeople from one store to another, etc. It was easier to learn about the what the new salon/store had to offer than trying to “break in” a new stylist or salesperson to learn what the customer wanted.
It may be that the day of the frequent flyer type of loyalty program has seen its day and it is getting back to what is important — put that money into hiring, training, and paying true professional salespeople. That will bring on more or better customer loyalty.
Alan
Alan J. Zell, Ambassador of Selling, Attitudes for Selling
[email protected] http://www.sellingselling.com
Winner of the Murray Award for Marketing Excellence
Member, PNW Sales & Marketing Group
Member, Institute of Management Consultants
Member, Linkedin.com
Are Customers As Loyal As Puppies? Then Why Do They Often Follow the Salesperson Out the Door?
Chris Stiehl, StiehlWorks.
I am firstly amazed at the way you talk of the humans as puppies or small, not yet matured dogs’ article appears at al in the CRM?
Call what you want to; I will have no more of the customers following the salesman like the puppies. Do you mean to say that we are in, that we are dogs when we buy and the vendor follows us to see us out of doors satisfied or otherwise? Let us change the seats and see how we feel? Alternatively, is the customer following the salesman?
What you call loyalty is a dog whistle?
I detest the dog biscuits and being called that. I am out of this and please rephrase the article. Say, “Why the vendors chase the customer after the sale. Is it loyalty or just a peep in the pie to see how the customer is satisfied?
The customers do not follow the sales representatives. Why should they. Are you really confused between the customer, the vendor and the salesperson?
On other counts, you call a customer a vagrant. You see the customer will follow the sales representative if there are freebies, something given or obtained free of charge, especially a promotional gift. Here is one ironic remark. I love the gifts during the festival seasons, however when I go to buy a car, I expect the sales force to give me, hand out what is on the table. After paying him a cheque of 76,000 dollars I will not follow him for a ball pan, a paper cutter and a file to keep my petrol bills. I expect the screen shed that protect my steering wheel getting a hot zone. That may have a value of 2 dollars but given, not begged, would make me smile a little. I am not going to follow the saleslady, as I detest following any one. I want them to follow my cash. Therefore, can we rule out the customers following the sale? It is the other way, sale following the customers hence we state that the customer is right. Then we have the corporate entity. The sales person may leave. He is not there the second time I go. He vamoosed to better corporations that gave him more pay and no chasing the customers. Why do I follow one who I may not see again?
May be I am lost.
I thank you
Firozali A. Mulla MBA PhD
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa