Breaking News: “Loyalty Programs Are Working”

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The reporter of a Wall Street Journal Market Watch recapped the findings of Accenture’s 2010 Global Consumer Research, the sixth in a series dating back to 2005, this week. Accenture, a technology consulting and outsourcing company, annually surveys 5800 consumers in 17 “mature” and “emerging” markets for their perceptions of service, quality, and satisfaction with companies in 10 service industries ranging from retail and banking to mobile, cable TV, hotels and airlines, all the way to insurance, among others. If you’re interested, you can read an executive summary of that report, too. Here’s the link.

COLLOQUY does a lot of research and we work hard to “tell it like it is” by carefully designing, analyzing, and reporting the facts as objectively as humanly possible. As near as I could tell, Accenture was doing that, too. Their conclusions sound both familiar and quite challenging to anyone concerned about delivering great service that causes customers to stick around and remain loyal:

The bad news: Customers, especially those in emerging markets, are more demanding than ever, and companies don’t seem to be delivering the kind of service experience that meets their expectations. 64% of them said they had switched from at least one company in one of those ten indistries last year because of “poor customer service.”

The good news: Reported churn was down for the first time since Accenture began the studies. In 2008 and 2009 respectively, a record 67% and 69% reported switching. Then again, maybe it’s not such good news: in 2005, only 49% switched for poor customer service…

The decrease in churn last year could not be tied to higher satisfaction. Consumers reported a decline across the board in all 11 service characteristics Accenture measures. Meanwhile, loyalty program adoption was up slightly across all 10 industries, and more loyalty program members reported that the programs were one reason they decided to stick with their provider, despite a poor service experience. This was the finding that caused the Market Watch reporter to conclude that these poor wretches were being held hostage–”handcuffed”–to the incredibly vast value of their accumulated points.

Or maybe not.

Maybe it was the easing of the global recession, and therefore less intense pressure to find the lowest price option. Or maybe it was that so many customers had switched in the last two years that fewer switchers were “in the market.” Or maybe something else entirely. What do you think? Could there be other reasons besides “handcuffing?” Let us know.

The trouble, as Mark Twain observed with those who would use statistics, is that they can be misinterpreted so easily. It’s obvious to us that a little digging into the data would have revealed that not all consumers are created equal; that a significant portion of any company’s customers are in the “Churn and Burn” segment of low-price seekers; that many if not most of the loyalty program members like the brand and its service and may be loyal enough to it that they’d give the company a second chance, even if they had experienced a “service hiccup.” Aggregating the findings in a study like Accenture’s tells us nearly nothing about what’s really going on. You need to look deeper into the data if you hope to identify the behavioral segments that differ in their attraction and attractiveness to the brand.

And, dear readers, you know that the value of the loyalty currency cannot hold or handcuff customers on its own. A fundamentally broken brand will not survive, despite even the richest loyalty program. As some of us like to say, “the points are not the point.” What IS the point? It’s the objective analysis of the data on best and high-potential customers that is created from the loyalty program, and the skilled use of the insights to create a superior customer experience for those who matter most to the current and future growth and profitability of the brand.

If “loyalty programs are working,” it’s more about handshakes than handcuffs. That’s what we think. What do YOU think?

Jim Sullivan
Jim directs the advancement of enterprise loyalty at COLLOQUY, an endeavor guided by his almost 30 years of managing in marketing, strategic planning, business development, innovation, and communications. Jim also assists with COLLOQUY's loyalty workshops, seminars and conferences, and serves as an academic liaison for colleges, universities and thinking institutions performing research on Enterprise Loyalty.

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