Mythological creatures: Bigfoot, chupacabra, Nessie, and loyal customers.
Maybe you’re taken aback by that statement. But as John Sills, author of The Human Experience, explains, customer loyalty is largely a myth… or at least has its limits.
“I just don’t think customer loyalty exists,” Sills tells us.
“Think of a company you think you might be loyal to. If overnight it tripled its prices and the quality halved, you’d stop using it,” Sills explains.
Sills argues that “loyalty” is really about usefulness.
Sills says that busting this myth is important because when companies count on loyal customers, they get lazy.
“If leaders in organizations believe that customers are loyal, then they stop trying,” Sills says.
“Then they focus all their efforts on marketing and onboarding, rather than realizing they have to re-win their customers every single day. They need to keep being useful to them. Otherwise, they’ll go elsewhere,” Sills elaborates.
Strong Brands Don’t Equal Loyal Customers
In the 1990s, there weren’t many brands stronger than Blockbuster Video. From its humble beginnings in 1985, Blockbuster grew to over 9,000 stores and 84,000 employees. To this day, it’s a brand that people express affection for on social media.
Customers were very “loyal” to Blockbuster, but it went bankrupt in 2010. Now there’s only a single store left in Bend, Oregon.
Despite all of those warm, fuzzy feelings, Blockbuster is all but dead, and most of us probably know why: it simply stopped being useful in the era of streaming.
More specifically, streaming services provided a better customer experience. When you rented from Blockbuster, you had to:
- Drive to the store.
- Either look around to decide on a movie or ask a clerk.
- Wait in line to check out.
- Return the movie a few days later, and if you forgot, you paid a late fee.
Meanwhile, with a streaming service like Netflix, you open the app and choose a movie. There’s no driving, no late fees, and if you hate the movie, you can simply switch to something else.
Blockbuster famously had the chance to buy Netflix, which it declined. Netflix began as a mail-order DVD rental service in the late 1990s and didn’t delve into streaming until a decade later.
In 2011, four years after it launched streaming, Netflix attempted to spin off the DVD business into a new company called Qwikster. Customers revolted and Netflix soon scuttled the plan. Customers had grown very loyal to the Netflix DVD business.
However, Netflix recently announced that it’s ending the DVD business entirely, and the news didn’t even cause a ripple. Why?
It’s simple: customers no longer find Netflix’s DVD rentals useful. And customers who think they’re loyal to Netflix’s streaming service will only be loyal as long as the service has programs they want to watch at an agreeable price point.
Customers were never loyal to Blockbuster or Netflix, they simply wanted entertainment, and they’ll go with whoever provides the best customer experience and price.
Customer Loyalty Is Usefulness
History is littered with dead brands that had “loyal” customers. Have you heard of the Blade Runner curse? The 1982 movie Blade Runner prominently featured many of the world’s then-biggest brands, which all suffered either misfortune or total collapse later.
Speaking of the 1980s, many prominent brands of that decade are no more. Kodak and Polaroid were two titans that stopped being useful the minute the digital camera hit maturity. They were no longer useful.
Radio Shack was once a favorite of hobbyists but saw its end due to a combination of online retail and a famously poor customer experience. Those of us who remember Radio Shack still bitterly lament how you couldn’t buy anything unless you gave them an address. Shep Hyken recently brought that up on his podcast — a full six years after the brick-and-mortar business collapsed.
However, there can be quantifiers for usefulness beyond mere utility.
Status Counts as “Useful”
You might have counterexamples of loyal customers. For instance, Apple’s customers are famously loyal, and its die-hards helped it survive the 1990s. However, Apple products offer more than mere utility, they also serve as a status symbol, and status can be one of the ways customers find a product to be useful.
“This usefulness comes in many forms. For some customers, it’s often a more useful price. For others, it’s ease, with anything that requires leaving the sofa an insult to customer experience. It could even be status,” John Sills writes in The Human Experience.
About Apple specifically, Sills tells us, “Some people use Apple products because they want to be seen as an Apple person. You know, they think it marks them out as a certain type of status.”
Of course, that’s not the only reason many of us use Apple products, but it’s undoubtedly an important reason for much of the population.
Like other metrics of usefulness, such as price or reliability, status can take a nosedive for many reasons:
- Luxury brands pivoting to mass-market products.
- A decline in workmanship.
- The CEO acting like a buffoon on social media.
Status doesn’t have to necessarily equate luxury. A guy might buy a certain brand of truck because it’s seen as “tough.” Or someone might choose a certain brand of outdoor clothing because it makes them appear more environmentally conscious.
Status is a great selling point, but also a fragile one. An organization can take definitive steps to lower prices or improve quality, but status is hard to gain, hard to keep, and nearly impossible to earn back.
It can be difficult to predict what will or won’t ruin a brand as a status symbol. One wrong marketing campaign or statement from a VIP might demolish a brand, but other companies might be forgiven for repeated missteps.
The key to keeping “loyal customers”
The takeaway is that you can never take your customers for granted, no matter how “loyal” they seem. You have to be in tune with their wants and needs and consistently deliver them.
However, one way you can build a facade of loyalty is to deliver a human experience to your customers. Sills writes in The Human Experience:
“The only way for organizations to get closer to genuine ‘loyalty’ from customers is to act in a human way, to create a personal connection, through colleagues allowed to throw off the corporate shackles and communication that shows genuine care not just regulatory compliance.”
It’s really quite simple: if your organization acts like a person—a genuine person—customers will develop an affection toward it. But if your organization acts like a faceless machine, your customers will treat it as one.
Comments and Discussion