Saturday, June 19, 2004

Loyalty versus Appreciation

Consumer companies tend to mistake customer loyalty for customer appreciation, and lose money, time, and customers in the process. An article about their subtle differences, and why you should pay close attention.

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In responding to an RFP for a major consumer retailer today, I was struck by a definition that’s deceptively simple: Loyalty Programs incent customers towards positive future behavior. Appreciation Programs reward customers for past loyalty to the brand. These definitions highlight the problem with a number of existing consumer brands. Take, for example, <a href="http://www.attws.com">AT&T Wireless</a>, with whom I have been a customer since 1998. My average monthly wireless bill is around $600.00. I have three separate wireless phone numbers with AT&T, and upgrade my phone at least every six months, paying full retail value. Traditional “loyalty” thinking will tell you that AT&T Wireless should not spend any additional money giving me incentives because I’m going to continue to spend the same amount of money whether they give me a rebate, or points, or anything of the sort. They would, in fact, be right. What AT&T Wireless seems to have forgotten, though, is that I happen to know that I’m a damned important customer of theirs. I happen to know that I’m in the 90th percentile of their high-spend customers. I also happen to notice that I get absolutely no special treatment. No occasional email or letter thanking me for my business. No special phone number to call so I don’t have to wait 20 minutes in a call-queue. No appreciation. As a result, I have decided to take my business elsewhere—I’m courting other carriers, armed with my AT&T Wireless statements, and seeing what they’ll offer. I’d do it even if I were getting miles for my dollars spent; or a $10 rebate for every $1000 spent. I don’t want discounts, I want appreciation. Consumer companies that subscribe to the logical segmentation of customers, and identify “high value customers” who don’t need a lot of communication will do well to consider fixed-cost high-perceptive-value appreciation programs that help keep the customer happy. http://www.brutalclarity.com/index.php/7/
 

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