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Are You Building Customer Frequency, or Loyalty?

Dan Bobinski
September 13, 2006 -- By Dan Bobinski 

More and more companies are rolling out programs to create customer loyalty. But in many instances these programs only generate frequency, not loyalty.
The programs I’m talking about are the type found in sandwich and coffee shops: Buy ten sandwiches or cappuccinos and your next one is free. Other programs include using club cards, which are popular at most supermarkets. Those with a card get special pricing on selected items. As an extra perk, by spending so many dollars in a certain period of time you can be rewarded with a percent-off coupon or some other carrot. 
Such programs can generate repeat customers, but are they creating true loyalty?
To examine the human factor in this question, let’s consider how a person might look at an airline’s frequent flyer program. He might choose one airline until he reaches 50,000 miles for the “gold” level, even if some flights are more expensive or inconvenient. But toward the end of the year, when he knows he won’t be flying enough to reach the next level, his “loyalty” to that airline goes out the window and he’ll fly whatever airline is cheaper or more convenient.
The same tendency occurs in a sandwich shop. You might return to a shop ten times to get that one free sandwich. It’s not that you really want to eat there, it’s just that you want that free sandwich. Even if they issue you another card, you may have grown tired of frequenting the place, so you simply stop going there.  
Again, all of this is frequency, not loyalty. To clarify by using a trusty Webster’s dictionary, frequency is the number of times something occurs within a specific period of time. Loyalty involves a steadfast devotion to someone or something.
Obviously, frequency programs have their value, but rarely do they create loyalty. In other words, when a carrot appears, so do people. When the carrot disappears, so do the people.
So what does it take to turn frequent customers into loyal ones?
First, for customers to come back on their own volition they need to be nurtured with more than a carrot. We need to meet their needs in an exceptionally satisfying manner. This is not a buddy-buddy relationship but rather service beyond what they expect. And that requires attention, focus, effort, and a dedication to quality.
To provide high quality service a company must know its limitations. Overextending leads to delivery gaps, which can tarnish relationships. As one business owner I know puts it, “we get more loyalty and more business by providing exceptional service to fewer customers than we do by providing weak service to many.”
Another acquaintance operates his business with the following unwritten motto: “Under-promise, and over-deliver.” 
Secondly, don’t ignore the data you have right before your eyes. In his book Drilling Down: Turning Customer Data into Profits with a Spreadsheet, author Jim Novo teaches how to keep customers engaged by acting appropriately on the trends and cycles of your clients. He outlines what data is important to collect about a customer and what data is not, plus how to set up the spreadsheet and “score” each transaction.
Often we think of such data analysis as being restricted to the big players. It’s not. Even small businesses can capitalize on analyzing data, predicting customer behavior, and then work to build loyalty—if they know what to look for.
Thirdly, celebrate repeat business, making sure customers know their recurring patronage is appreciated. I used to drive two miles to a mail services store because the owner was always glad to see me. What’s ironic is that on that two-mile drive I passed two similar-type stores, but the people at those stores never showed interest in me as a person. As a result of being greeted warmly each time I came in, I became loyal to a place of business that was much less convenient to visit.
There are many more ways to build loyalty, but because of space limitations, let me lastly encourage the quick resolution of customer complaints. One bad experience can drive people away, and we all know it’s much more expensive to gain a new customer than it is to keep an old one.
Bottom line, discounts, awards, and rewards are all carrots, and bigger carrots from the competition will always appear, drawing customers away. But if we treat customers like honored guests when they honor us with their business, we create roots of loyalty that can’t be pulled up too easily.

© 2006 Dan Bobinski / Leadership Development, Inc. You may freely forward this information providing the text is sent as an integral whole and contact information for the author is included, such as using the text that appears below:
Dan Bobinski is a popular keynote speaker, a certified behavioral analyst, and the President and CEO of Leadership Development, Inc. He is also the primary author of Living Toad Free: Overcoming Resistance to Motivation. He can be reached at (208) 375-7606 [toll free: 888-92-COACH] or by Email at dan@leadershipanswers.com
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