Dana VanDen Heuvel: Where is the Corporate-to-Customer Loyalty?

March 22, 2004

Where is the Corporate-to-Customer Loyalty?

My first query deals with the concept of "corporate loyalty to customers". I know, not a new concept, but I have experienced a great deal of cynicism at companies I have worked with when I brought the concept of "corporate loyalty" when discussing "customer loyalty." How can we expect customers to be loyal to us, when we have shown very little in the way of being loyal to them?

The typical responses are:

"With the Internet, customers are just a click away from a lower price, so why bother?"
"Customer loyalty - there is no such thing as customer loyalty anymore!"
"We can't afford services like that for our customers. Let's just start a formal loyalty program with a frequent buyer card."

The most pertinent example of corporate-to-customer loyalty that I have seen is Southwest Airlines' approach to reaching out to customers and coddling their evangelists. But they are but an example, and few (at least that I have seen) have walked in their shoes.

How can companies even think of creating customer evangelists when there seems to be such a lack of corporate-to-customer loyalty? Why would customers even want to be become evangelists for most companies?

According to Ben, "There's compelling evidence why focusing on your most loyal customers makes good business sense:"

Acquiring a customer costs 5 to 10 times more than retaining one (TARP).

A 5 percent increase in retention yields profit increases of 25 to 100 percent (Bain and Co., 2002).

Loyal customers spend, on average, 67 percent more than first-time customers (Bain and Co., 2002).

Do some customers purchase solely on price? Absolutely. But not all do. The objective of customer evangelism is seeking out and embracing customers who not only purchase from you but love you so much that they tell others. That love extends from something that's great, or remarkable, about your product and service. It stands out from a sea of sameness.

Customers who refer you are the ones to embrace. They lower sales cycles, acquisition costs and improve both top-line revenue and bottom-line revenue. The question back to the naysayers is: Why wouldn't you want the help of customers who volunteer to help?