Folk-singing and social activism icon Pete Seeger died a couple of weeks ago at 94. His array of songs – “If I Had A Hammer”, “We Shall Overcome”, “Turn, Turn, Turn”, “Where Have All the Flowers Gone?”, and “Guantanamera” – are golden pages in the 20th century American songbook. Somehow, when I think of Pete Seeger, his 1963 song about sameness and commoditization, “Little Boxes”, always comes back to me. The lyrics begin:
“Little boxes on the hillside,
Little boxes made of ticky tacky,
Little boxes on the hillside,
Little boxes all the same.
There’s a green one and a pink one
And a blue one and a yellow one,
And they’re all made out of ticky tacky
And they all look just the same.”
Seeger meant this song to be an unapologetic critique of conformism and blandness in society. From my perspective, this definitely relates to the kind of commoditization we see in many customer product and service value propositions, and in customer loyalty programs. And, nowhere is this more prevalent than in discount retailing, where apart from companies like Walmart, Target, and Costco, the over-focus on pricing, at the sacrifice of customer experience, has been little short of disastrous over the years.
This put me in mind of another song, with a similar message to marketers. About thirty years ago, Paul Simon wrote “One-Trick Pony.” The song describes a performing pony that has learned only one trick, and he succeeds or fails with the audience based on how well he executes it. As Simon conveys in the lyrics: “He’s got one trick to last a lifetime. It’s the principal source of his revenue.”
I see these songs by Seeger and Simon, and their linked messages, as a metaphor for the non-innovative marketing and emphasis on price-cutting, masquerading as value, that ails many companies endeavoring to create customer loyalty and customer loyalty programs.
A key reason companies have a difficult time achieving customer loyalty is that the fail to sufficiently understand the fundamentals of value delivery through the eyes of consumers. They focus on customer satisfaction, which is often too benign, passive and reactive an approach to create value. They use incentives and promotions in limited, ineffectual ways, as surrogates.
The use of single-element or minimal element tactical approaches, such as pricing, merchandise, loyalty cards, or points-based programs without ever determining whether this is sufficient motivation for long-term purchase is a recipe for eventual failure. Smart marketers know that, for instance, being a low-cost provider and/or inflexible marketer, is a trap. In the United States, retailers like Caldor, Borders, Bradlees, Circuit City, Jamesway, Linens ‘n Things, Ames, Syms, Filene’s Basement, Value City and Korvette’s have all disappeared.
Being a low-cost provider or non-innovative, complacent marketer means that brand strategies got little emphasis, and the pricing and old-style retailing approaches they followed required little investment. Let’s be honest. Cutting costs does not require much imagination. In addition, without due attention being paid to the overall experience, especially the emotional components, it does not produce much loyalty (customer or staff), strategic differentiation, or profitability.
In a 1980 Harvard Business Review article by William Hull (written, parenthetically, about the same time Simon wrote “One-Trick Pony”), he reported study results comparing companies that competed on differentiated customer value versus companies that competed principally on cost. On any important measure – return on equity, return on capital, and annual revenue growth – companies delivering high customer-perceived value beat the price competitors every time.
Customers can almost always locate cheaper products or services. Today, they have many methods, including showrooming, for doing that. Ultimately, they will invest a greater share of their purchase dollars with suppliers who deliver superior value. Competing on price, or any other single dimension, may pull away customers from other suppliers in the short run, but it will be difficult to keep them for long. Price is rarely a sufficient ‘barrier to exit’, and is more often an invitation to churn.
The same thing often holds true for incentive programs. Many consumers participate in programs like supermarket bonus clubs and airline frequent flyer programs, but they often aren’t particularly engaging or effective at producing greater loyalty for any one airline, hotel, or supermarket chain; and, in the supermarket industry, we’ve seen something of a trend toward their elimination (in favor of lower prices).
Customers are often members of several programs, and the most active users tend to be those who would have been frequent purchasers anyway. The incentive and reward structure benefits the already loyal rather than increasing loyalty. Gift programs, travel, dining, entertainment, merchandise, and cash award programs, and other plateau and pre-selected response stimulus programs are having an increasingly difficult time breaking through the clutter to provide unique, differentiated customer value. This does not make me anti-program, per se, but it does suggest that these programs require greater thought and effort in creating personalized benefit for participants.
So, as Seeger and Simon might agree, the best approach may be that of ‘back to basics’ experiential and emotional value for current customers, and less of a focus on customer acquisition and, once on board, benignly commoditizing the offerings in the belief that these customers will be retained.
