The Loyalty Open Definition Experiment: Lessons Learned

I have made adjustments to the way I think about Loyalty.

I want to thank everyone for participating, reading, commenting, and for providing very thoughtful point-of-views that I had not considered before. I went through all the comments and summarized them into six lessons learned:

The choice of loyalty remains with the customer – We knew this, right? This reinforces my view that loyalty is rational – not emotional. Virtually all comments emphasized that loyalty is a decision from the customer to endow to an organization. Decisions are always, always rational in nature – even if they may be nurtured by emotions. It also highlights the organization’s powerlessness in affecting that choice. They can provide better products, more services, better experiences, and fulfill their customers’ needs and demands perfectly. Still, the customer may just choose not to offer loyalty in exchange. Most customers will reward an effective and well-behaved organization with their loyalty — but it is not earned. it is a logical decision.

There are Beloved Brands to whom Loyalty restrictions do not apply – There are Beloved Brands with whom customers identify for different reasons. The cereals from our childhood, the drink from after school activities, items that achieved cult status (e.g. Harley Davidson and Starbucks). If your organization reaches the status of Beloved Brand, then loyalty is not something you need to worry about. Harley Davidson managed to keep their customers connected in spite of the poor quality of their product. A bad cup of coffee at Starbucks won’t tarnish the brand. Customers don’t make rational decisions about buying from Beloved Brands — but unfortunately there is nothing you can do to become a Beloved Brand on your own.

It is time for the organization to step in and be loyal to their customers – Loyalty is an unrequited love from customers to organizations. Worse, organizations have trained their customers to not be loyal. They demand customers have long-term commitments and loyalty towards them but offer nothing but short-term rewards in return. Airlines reward only the last year of business, retail stores reward the last purchase, same as restaurants. Why would customers continue to grace loyalty upon their partners without return? Organizations looking for long-term loyalty must focus on a long-term relationship.

There are different levels of loyalty. Something we already knew. The problem is not that there are different levels, but that there are no rules or preset levels. Organizations that offer different levels (e.g. silver, gold, platinum) are not rewarding loyalty but frequency as they only focus on the last few months of activities. That does not match the customer’s ideas of loyalty, just the organization’s. Customers’ have their own ideas, mostly personal, of level of loyalties and bestow those to organizations based on their own scales of potential benefits.

Loyal Customers expect retribution for their commitment. Loyalty is not a free entitlement that organizations get, there is a cost for them to have loyal customers. The rules are established where customers expect a reward, promised by the brand, in exchange for their “loyalty”. This reinforces the notion of loyalty being a rational choice.

Loyalty has a price barrier. Even though loyalty is professed as an emotional commitment or investment, there is a limit to loyalty (Beloved Brands, again, excluded). I will have my price for switching, it just may be above what a competitor is willing to invest. Then, again, it is the way for organizations to tap into loyal customers their competitors have. And, you know it, reinforces the fact that Loyalty is a rational response.

This is the summary of the “wisdom of the crowds” — and it led me to make some changes to my concepts of loyalty:

Loyalty is not dead and it does indeed exist, but the stalwart emotional loyalty has been replaced by rational loyalty.

Companies would invest their time much better analyzing campaigns that yielded positive results and use those insights to influence customers’ rational loyalty

When done properly, loyalty monitoring and action yield higher levels of loyalty all the way to fans and advocates.

Here is the new definition:

Loyalty is a commitment to purchase a specific product or service based on a rational decision made by the customer at the time of purchase. It is influenced by previous experiences, current needs, expected rewards, and price sensitivity.

What were your conclusions from this experiment? What do you think about Loyalty now? Has it evolved?