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Insight/ Lifecycle Marketing

What Loyalty? Customers Are Free Agents

by Bart Foreman
Founder & President
Group 3 Marketing

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The business of business is selling something. Since the days of the Grand Bazaar, buyers and sellers have danced to close a sale.

But marketing is not sales. The most straightforward definition of marketing is “influencing the next sale,” and that prompts us to re-evaluate how we look at customers. Stepping back a couple of decades, the idea of loyalty was created because business naturally believed that if it could develop marketing programs that rewarded loyal customers for their patronage, they would keep coming back.

Thus was born the original stamp marketing programs, such as S&H Green Stamps. They faded quickly, however, especially in the grocery business, when retailers realized that they all had stamp programs and had lost a competitive advantage. When the first retailers pulled their stamp programs, it was like a falling house of cards as they began competing on price discounts. Marketing has never been the same since.

Electronic loyalty programs were born in the ’90s and have continued to evolve, but they have all been based on a faulty premise: that customers are loyal. They may be enticed by the opportunity for rewards and perks, but they are not loyal. In fact, loyalty is the most overused and overworked word in the marketing dictionary. In spite of that, marketing experts continued to rally around loyalty as a key marketing focus.

Over lunch last summer, my team and I were discussing customer dynamics when someone asked what we should call a customer when she leaves a restaurant. Happy, satisfied, pleased if her expectations were met, or just the opposite if expectations were not met, were our early ideas. And then we realized it did not matter whether her expectations were met. It didn’t matter whether she was showered with rewards. When a customer walks out the door, hangs up the phone, clicks the submit button, or any of the myriad ways a customer can do business, when the transaction is complete, she is a free agent.

Who’s In Control?
Indeed, when a customer, client, or guest leaves, the contract to do business is done, and we have to begin the process of marketing all over again. Free agents are in control of the buying equation.They always have been in control, but thanks to social media and the evolution of engagement as a strategy, their control is more apparent and impactful on the brand.

The business (or brand) is in control of the selling equation, and it is marketing that has to take responsibility for crafting the selling dynamics that will keep the customer engaged to buy again. This is where the marketing equation unravels. Because marketing has not considered customers as free agents, current customers have been traditionally overlooked and replaced by management’s calls for new-business and product-focused marketing rather than being consumer-focused and engagement-ready.

Yes, customers have many choices. Customers also have a multitude of ways to search and learn about products, from Google’s Zero Moment of Truth (ZMOT) to smartphone users who comparison shop for price and availability while in the store. Retailers wring their hands in anguish rather than tackle the tough challenges of keeping customers buying in store or at least buying from their own Internet sites. There’s a simple reason why Amazon is No. 1: Its competitors let it be No. 1.

This suggests that free agents may already be free in the stores, and sometimes they don’t even wait to leave before being free.

New Focus Needed
During the past year we interviewed owners of professional beauty salons because they are usually up close and personal with their guests. In addition, we did our own research and found that 70 percent of first-time salon visitors never came back. We asked owners to identify one word that best described their guests. We found three common words that paint a disturbing portrait.

1. Busy: You already know this, but do you realize the impact it has on your business and that it opens the door to free agency? When customers are busy with life and work, they will take shortcuts, go longer between purchases, or even grab a competitive product because it’s more convenient to buy it somewhere else.

2. Stressed: You can make your own list of stress-generating factors, and it will be a long one. The most common are time and money pressures. Both can lead to free agency.

3. Frugal: This is the most visible outcome from the Great Recession, and while we continue to see marginal improvements in the economy, it will probably be a long time before the impact of frugal spending will change. There is evidence that as unemployment remains high, the middle class continues to be redefined, and economic and political uncertainties plague the world stage, consumers will continue to be more frugal across many consumer categories. No business is immune, leading to more free agents.

But the real marketing challenge is retention, not loyalty. The goal of marketing is to influence the next sale, and your marketing needs to begin as soon as the customer concludes the last sale. We offer the following strategies to combat free agency:

1. Stay connected with your customers. Use your database as a marketing tool, not just an inventory and financial management system. Free agents are less likely to defect if you stay connected with them.

2. Be relevant and don’t waste time in your communications. Customers want information that applies to them. If you are not their source, then they will Google it. They will probably Google it anyway, so be accurate, honest, and transparent.

3. Reward ongoing patronage. Rewards can be very powerful. Most are done poorly, with more emphasis on operations and finance and less on influencing the next sale.

4. Finally, know who your customers are. Identify high-value versus low-value customers. Identify underperforming customers and develop an ongoing tactical plan to better engage them.

These four strategies, when linked together, will have a definite impact on free-agent defectors. Turn your strategies into a powerful data-driven marketing focused initiative that will deliver positive results in the battle of free agents.

Source: http://www.cmo.com/articles/2013/1/25/what_loyalty_custome.html