Is Customer Loyalty Actually Bad for Business?

By Andrew McDermottSmall

Our best friend just bought a car.

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And he’s in big trouble.

Why you ask? He did it without talking to his wife. He picked it up after work then drove it home. He thought it would be a surprise, that she’d be happy.

But you know how this story ends

His wife was angry, really angry. “How could you do that without me? You should have talked it over with me before making such a big decision.”

And suddenly he’s in the dog house.

When we hear this story it’s easy to see where her husband went wrong. Of course that was a bad idea we tell ourselves. That’s a major decision, he should have talked it over with her first.

Believe it or not, businesses make the same mistake

They work incredibly hard to win a customer. Then they focus their attention on serving their customer. They do everything they can to win their customer’s loyalty.

Then, once they have it, a few simple mistakes destroys that loyalty.

It’s almost always an accident, but that hardly matters to customers. From their perspective these companies aren’t what they expected. They aren’t devoted enough.

The problem is loyalty

Most companies would do almost anything to get a loyal customer. But that loyalty is a huge liability. A disaster waiting to happen.

Almost every company wants the benefits that come with loyal customers. Increased sales, word of mouth, higher prices–the works.

But most aren’t aware of the responsibilities attached to that loyalty. They don’t realize that customer loyalty is a lot like marriage. It comes with responsibilities and expectations.

Ignorance is the real liability

When you go into a relationship of any kind and you don’t know what the other side wants, it can be tough to please.

Businesses form relationships with their customers thinking they already know what they want. When you ask them they list criteria like:

  • Low prices
  • Good customer service
  • A product that solves my problem

And they’re right. But these expectations are the basics.

They’re the sort of expectations new and average customers have.

Loyal customers are better than ‘customers’

At least in their heads. In many cases, they’ve made a mental and emotional commitment to you.

Their expectations are much, much higher. But what kind of expectations are we talking about here?

  • Fidelity. Customers don’t want you to cheat on them. They want to be included in the big decisions you make and they want you to ask for permission.Netflix didn’t ask customers how they felt about spinning off their DVD business into a separate company. They did it behind their customer’s backs. And they certainly didn’t ask them whether it was okay to call the company “Quikster.”Netflix cheated on their customers and they lost 800,000 members as a result.
  • Ownership. With loyalists, your business becomes “our business.” When Coca-Cola changed their secret formula in 1983, loyalists were outraged. Coca-Cola received 1,500 calls per day and more than 400,000 angry calls and letters. A psychiatrist Coke hired to listen in on calls told executives that customers sounded as if they were discussing the death of a loved one.
  • Stability. Customers want a stable relationship they can count on. The want to know you’ll continue to provide them with the care, guidance and protection they expect. Gap decided to change their iconic logo in 2010. To customers, the change was abrupt. Gap felt like a completely different company. The rug had been pulled out from beneath them.
  • Consistency. Customers want you to be consistent, to stay true to who you are.In the beginning, WhiteWave foods, makers of Silk organic soy milk, avoided GMO products. They focused on keeping things organic – until they didn’t. In 2002 WhiteWave sold their company to Deans foods. Suddenly their products weren’t GMO free or organic, they were just “natural.” Customers felt betrayed.

These aren’t the only expectations loyalists have

But it’s common for them to be ignored. Businesses care, but many of them aren’t aware of the fact that these expectations exist, so they’re ignored.

And when they’re ignored, customers feel bitterness and resentment.

They may bad mouth their providers, demand refunds or leave – all because their expectations weren’t met. Instead of being proactive, businesses play the role of “Johnny come lately”, always behind the problem, never in front.

So how do you make customer loyalty work for your business?

Loyalty comes with both privileges and responsibilities. Do the things you need to do to earn your customer’s loyalty. Then, identify the roles, responsibilities and expectations that come with that loyalty.

Once you have that you’ll need to figure out how to act on these areas. You’ll want to have a clear sense of your boundaries and limits from the very beginning.

Customer loyalty is wonderful when you have clarity

Clarity gives you the confidence you need to know your customer’s loyalty won’t backfire. You know what needs to be done and you’re able to give your customers the attention and care they need.

But hey, you don’t need loyal customers, just customers who buy

It’s a common yet mistaken belief.

Take Apple for instance. There’s a big difference between the customer with an iPad vs. the customer that owns every version of the iPhone and iPad, forces their employees to work on iMacs and attends Apple conferences religiously.

The difference is loyalty. If you want customers who buy and buy often, loyalty is mandatory.

But isn’t customer loyalty dead?

Over and over we see naysayers saying customer loyalty is an ancient relic, a thing of the past.

“The internet has given us unlimited options!”

It’s still people who make buying decisions; those people expect loyalty in their day to day relationships. But from who? Who do customers interact with when they contact businesses? Other people.

What about those who don’t care about customer “demands?”

Or, organizations that feel their customers should take what they give them? The ones who state emphatically that those who don’t like it can go somewhere else?

These companies are running out of time.

Odds are good they’ve already lost their customer’s loyalty. It’s common for these customers to operate with one foot out the door, ready to leave as soon as something better comes along.

Customer loyalty is a lot like marriage

It comes with expectations and responsibilities. Our best friend ignored all of his wife’s expectations and it blew up in his face.

You don’t have to end up in the doghouse though.

Identify the roles, responsibilities and expectations that come with customer loyalty. Create a plan to take care of their needs, follow through, and you’ll have the benefits of loyalty without the pain.

Has a business ever lost your loyalty? Share your story in the comments.

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Andrew McDermott is the co-author of Hook: Why Websites Fail to Make Money and the co-founder of Subscribe to his 5-day mini course and you'll learn how to attract and convert website visitors, automatically.