I agree totally with Bodie Le Monz's post where he writes, "loyalty does not create satisfaction (but can create repeat purchases) but satisfaction creates loyalty."
All loyalty programs, no matter the mechanics, are designed to increase switching costs. (Switching costs are the costs that a customer would incur if they choose to switch their business from one company to another.) For Bodie, his switching costs of changing his trans-Atlantic airline of choice are steep because he has racked up too many frequent flyer miles to even consider switching airlines. For that half-caf, double tall, one pump vanilla, two pumps hazelnut, extra hot, non-fat latte drinker, their switching costs are also steep because if they switch espresso shops then they will have to train a different barista to make their convoluted drink to perfection and that will take some time.
I've always viewed loyalty programs as either transaction based or relationship based.
Frequent flyer programs are an example of a transaction-based loyalty program. It's designed to get you to buy a round-trip ticket in order to receive xx # of frequent flyer miles. If you choose not to make that transaction then you do not get the miles.
Having the barista at your neighborhood espresso shop know exactly how to make your drink is a loyalty program that is relationship based. It's the high-touch, low-tech way to developing customer loyalty because it requires a personal connection between the customer and the employee.
I believe the path to creating real customer loyalty needs to have some element of a relationship-based program to generate endearing and enduring customer loyalty.
Now, to answer Bodie's question of - "do companies tend to equate loyalty driven by these programs to customer satisfaction or are these two separate issues as the company views them?" For the airlines, I sense they measure, to some extent, customer satisfaction by how their customers vote with their wallets. And for Bodie, since he votes with his wallet by continuing to give one airline his money, I reckon that airline would view him as a satisfied customer... thanks to their loyaty program.
Related Stories: | Topics:Management, guest hosts: williams + moore, Culture and Lifestyle, Beverages, Food and Cooking, Coffee, Transportation |
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Recent Comments | 4 Total
December 9, 2003 at 8:53am by Mark Zorro
Not trying to be foo-bar to happyland people , but satisfaction can lead to addiction, not necessarily loyalty. You can be satisifed with a temporary experience without being loyal to it but you can always evangelize an addiction. Can one be manipulated into loyalty? Rasputin's in visual age? Tell me that this still cannot be so, tell me that we have moved at least an inch closer to global intelligence.
Anyway what are a loyalty programs other than a cute paranoia that you are going to leave me.
M.
zorromark@consultant.com
(Mark Twain wasn't Mark Twain, Mark Zorro isn't Mark Zorro)(Mark Twain wasn't Mark Twain, Mark Zorro isn't Mark Zorro)
December 9, 2003 at 8:59am by Bodie Le Monz
I have 4 Starbucks to chose from (along with a Cafe Nero) within a 10 minute walk from my home. The reason I tend to go to the same Starbucks location (I do think that Starbucks is a better product than Nero plus Nero allows smoking) rather than the other 3 is that I now know the people behind the counter. They know me, they recognise me, and tell me my order before I can tell them. Also, they throw in a free drink every once-in-awhile. That makes all the difference. You are right, the relationship creates the true loyalty. If Nero offered me a
buy-one-get-one-free, we would go and take them up on the offer. But to get the repeat business, they would have to continue to offer the promotion to us. That is not loyalty.
December 9, 2003 at 2:57pm by Mark Zorro
Agree with Bodie, humanity isn't a textbook theory, it is a relationship.
M.
December 28, 2005 at 12:30pm by Sumit Oberoi
I believe satisfaction alone cannot induce loyalty. A consumer choses a particular brand over another for one reason : Value .This value can be in form of functional benifits or emotional. Consider a low involvement product where the decision to purchase is obviously not thought over and is mostly impulsive. Now consider three brands A,B & C on the shelves of a super market to which this consumer is exposed. Now obviously he is going to pick one brand say A. The reason being he derives more value in buying A tham B or C. All three have the potential to satisfy the customer but A gets a preference for a sole reason that some association with the brand makes him believe that this transaction is more valuable.This may be because of the advertisements he saw on television or some friend would have referred the brand. But the word is VALUE not Satisfaction