Revealed: The two secrets to customer loyalty
Do you know what drives me mad? When organizations talk about loyalty, what they mean is, “the customer gives me all of their business.”
Customers giving you all their business isn’t customer loyalty on its own. They could give it to you out of habit, or because you are a monopoly. It could also be a product of their apathy.
Customer loyalty is more than automatic or indifferent behavior. Understanding Customer Loyalty and the secrets to creating it is vital to your Customer Experience.
We discussed the two secrets to Customer Loyalty in a recent podcast. We revealed the secret of creating loyalty and gave examples of how it benefits your relationship with customers—and all that business you want of theirs.
Secret #1: Loyalty is a product of our emotions
The first secret is loyalty is a product of our emotions. There are two parts to understanding this first secret to Customer Loyalty:
Loyalty is an emotional attachment. During a conference speech, I often ask the audience who they are loyal to, and the answer is always some form of family or friends. That’s because you are emotionally attached to them.
Loyalty forms because of what you do. Your actions build an emotional attachment with people. For example, if you have a significant other, you did something that made that person fall in love with you.
So, let’s take a closer look at that emotional attachment part of Customer Loyalty. Let’s say you feel an emotional attachment to your family, which, let’s face it, I hope you do. If I were to approach you with a new family that was much cheaper to have than your own, you wouldn’t go for it. Family is not transactional. Cheaper family is not a better family, even if they do cost you less.
Family has an emotional attachment built over your lifetime. It takes time and is about the history you have together and the relationship you have.
Now, that leads me to the second part about actions. You have the emotional attachment because of the things you did over time. The trust and the love you have shown for one another. It built up the family to which you feel loyal.
Families also do things that you don’t like, but you still love them. That’s because you have a history with them and (hopefully) there is way more good than bad.
Secret #2: Loyalty is a function of memory
The second secret is something that we wrote about in our latest book, The Intuitive Customer, that customer loyalty is a function of memory. Consider when you go back to a place to repurchase. By definition, you would need to remember that previous interaction to attribute your return to feelings of loyalty.
Embracing the fact that loyalty is a function of memory ties into how memories form, which is a favorite topic of mine. Professor Daniel Kahneman and Barbara Fredrickson came up with how memories formed and called it the Peak-End Rule. The Peak End Rule says what you remember about an experience is the peak emotion that you felt and how the experience ended. Those moments can be positive or negative.
The memory then ties back to the emotions of customer interaction. Understanding the emotions in interactions is vital to your success at building Customer Loyalty.
Unfortunately, most organizations define loyalty in purely transactional terms. To these firms, customer loyalty means customers buy frequently or in large volumes. These are both wonderful things from a business perspective, but they're not loyalty. Habit works the same way. Habitual purchases and loyalty purchases look the same, but they are rooted in different psychological processes.
Defining loyalty in terms of emotional connection is an essential place to start. To illustrate further what I mean, let’s talk about one of my favorite subjects and least favorite companies, Internet providers.
Based on my purchase history, my Internet provider could think I am a loyal customer. I've been with my Internet provider for five years, and, therefore, I'm a loyal customer. However, as my regular readers know, nothing could be further from the truth. I would leave them in a heartbeat given a chance.
The problem with loyalty programs
Furthermore, firms use loyalty programs that are not designed to encourage loyalty as we've defined it. It reveals that these organizations don't understand what they're doing, and it can damage their long-term prospects.
Loyalty, as a rule, can't be bought. As we said, you wouldn't trade your family in for a more efficient model. You also can't be paid off and create loyalty. Loyalty is based on these intrinsic motivators that you genuinely like something or appreciate it or feel obligated towards it.
Research suggests that extrinsic motivators, including paying people off, destroy intrinsic motivation. For example, there was a blood bank in the US that wanted to increase donation rates. So, as any rational economist would tell them, they started paying them. What they found was blood donation rates tanked.
People were donating blood before because of this intrinsic motivation. They felt like it was the right thing to do; it makes them feel good. When the blood bank starts paying them for it in cash, they turned it into a transaction where now it's more utilitarian.
You have the same problem with customer loyalty at your organization. When your loyalty program gives cash back, or points, or upgrades, etc., it does the same thing to their interaction with you. The customer may still shop with you, but not because of loyalty. They are shopping with you because they are getting paid off.
When it comes to measuring Customer Experience, I am a fan of Net Promoter Score®, or NPS. NPS is a measure of how likely you are to recommend the brand to a friend or family member. I like the use of the word “recommend” in the question as it suggests an emotional connection and a certain amount of responsibility. Let me explain.
Imagine if a friend of yours came to visit your town, and wanted a restaurant recommendation, and you gave them one. When you asked them about it later, they said, “Um…it was…fine.”
Now, you can tell they didn’t care for it, how would you feel? Most of you (except for the sociopaths) would feel at least a little bad about it. You feel responsible for giving them a recommendation that was, in their opinion, bad.
So, because of your feelings of loyalty, you will only send friend and family to your sure-bet referrals because you care about those people and want them to have a good meal. Your recommendation will have more emotion to it, and NPS gets to the heart of that (punny).
Signing the emotional bank account with the emotional signature
In Stephen Covey’s Seven Habits of Highly Effective People, Covey introduces the idea of the emotional bank account. In relationships, when you are doing something positive, you pay into that emotional bank account. When you do something negative, you make a withdrawal. Covey’s point was that the most effective people had far more deposits than withdrawals in their emotional bank accounts with other people.
Organizations have emotional bank accounts also. One of mine is with Apple. Everybody knows that I love Apple (I always recommend them to family and friends. And listeners and readers, too, it seems.).
That said, there are times that Apple does things that I don't like. When they do, they take a couple of units out of that emotional bank account. However, it never gets to zero. They keep filling it back up.
Most organizations, in my opinion, don't even consider that emotional bank account and the danger is they're already at zero. Then, something happens, and the customers leave.
More organizations are looking at this emotional aspect, but they haven't tied it to loyalty. However, we know that through research, you can link the two. We call it an Emotional Signature®. The Emotional Signature measures the level of emotional engagement your current Customer Experience provides. It also helps you define which emotions you want to offer moving forward to increase customer loyalty.
When it comes to managing loyalty, there are no secrets. There is no trick to getting there. It’s consistent excellence in your interaction with customers. Therefore, Customer Loyalty is the single most important reason, in my opinion, to care about Customer Experience. Customer Experience drives loyalty. When you buy from somebody and the experience is so excellent that it forms the emotional connection you remember, that memory is what makes you loyal.
Therefore, the design of your entire Customer Experience program., the whole strategy is the best way of managing loyalty. Short-term tricks and loyalty programs are not going to do it —and in some cases, they will make it worse.
Customer loyalty is a long game of consistent service, an outstanding product, and an excellent experience. That's what people will remember and create these emotional connections that will lead to loyalty.
It is vital to embrace the fact that Customer Loyalty is an emotional attachment. You have to know what emotions drive that loyalty. The, you need to deliberately design moments in your experience that evoke these emotions consistently for your customers, so they remember you as “their” brand.
Lastly, it would be best to stop thinking that Customer Loyalty is the customer giving you all of their business. Don't confuse inertia with loyalty.
To hear more about The Secret of Creating Loyal Customers in more detail, listen to the complete podcast here.
What customers say they want and what they really want are often different things. It is vital to know what drives value for your organization. Our Emotional Signature research can tell you where you are compared to other organizations and what to focus on to drive value for your customers. To learn more, please click here.
Hear the rest of the conversation on The Secret of Creating Loyal Customers on The Intuitive Customer Podcast. These informative podcasts are designed to expand on the psychological ideas behind understanding customer behavior. To listen in, please click here.
If you enjoyed this post, you might be interested in the following blogs and podcasts:
- WHAT TYPE OF RELATIONSHIP DO YOUR CUSTOMERS EXPECT FROM YOU?
- DO YOU USE THE RIGHT MEASURES FOR YOUR CX?
- HOW FRICTION CAN BE GOOD FOR CUSTOMER EXPERIENCE?
Colin Shaw is the founder and CEO of Beyond Philosophy, one of the world’s leading Customer experience consultancy & training organizations. Colin is an international author of six bestselling books and an engaging keynote speaker.
Follow Colin Shaw on Twitter @ColinShaw_CX