My friend Bob told me the other day, “Delta Airlines is my preferred frequent flyer loyalty program, but I sure hate flying on Delta Airlines.”
There is something rotten in the state of Loyalty Programs. Notions like “customer-centric” and “loyalty” have gotten so far from their original intent that they have perverted the way we use language.
Worse yet—we don’t even notice it.
But let’s just try anyway.
When Fred Reichheld wrote The Loyalty Effect in the early 90s, the word loyalty tapped into a rich meaning—evocations of “semper fi,” or “’til death do us part.”
Beyond the intuitive appeal of treating people in a manner worthy of their loyalty, this book demonstrates the bottom-line benefits of such a leadership philosophy. It provides the bridge between the world of corporate ethics and the world of hard-core economics.
Well, that was then. The book described the paradoxical payoff of loyalty—if you do good, you end up doing very well. As long as you remember that doing well is the outcome, not the goal.
Fast forward to today, a scant 15 years later. First, from Wikipedia:
Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behaviour – behaviour which is potentially of benefit to the firm.
Notice the shift—from behaving in ways that people reward, to rewarding people’s behavior. The outcome has become the goal. Behavior trumps intent. Do unto others in order to get yours.
Here’s The Wise Marketer, an online loyalty research and news service:
Leading loyalty practitioners are now putting as much energy into deselecting their most unprofitable customers as they are putting into maximising the loyalty of their profitable ones. Even in the supermarket sector, US research has found, seven out of every ten customers cost more to serve than they provide in profits. Using loyalty data correctly allows you to avoid this trap.
The ads on the page reinforce the message: “how to increase retention and drive ROI.”
What is happening here is epidemic in business today: we are twisting the outcome into the goal; we are mistaking indicators for the things they were supposed to indicate.
We have gone from “loyalty is good” to “customer retention is an indicator” to “let’s tweak our customer retention rates—and see if we can’t get them up by next month.”
Pretty soon, there is no trace left of Reichheld’s “bridge between the world of corporate ethics and the world of hard-core economics.”
We have turned a profoundly other-directed, mutually beneficial, human relationship into yet one another opportunity for short-term self-aggrandizement.
Who are the culprits?
I nominate several, starting with all of us who put up with it.
One is the huge influence of behavioralism on business. We have come to believe truisms like “if you can’t measure it you can’t manage it” (flatly false on the face of it). The world of training buys into this heavily (“participants will master the behaviors of fill-in-the-blank”). Behavioralism renders intention irrelevant—destroying not only "loyalty" but most human relationship descriptors.
Another is focusing on transactions, not relationships. CEOs, salespeople and Wall Street are all guilty here. If everything is one-off, then the game is get as much as you can now. Whether or not you think that’s unethical—it’s economically stupid.
But the biggest is a continued insistence that business is solely about Me Me Me. I-bankers, strategists, and too many business and economics academics have twisted Adam Smith’s Invisible Hand into its opposite, thinking that a world of people behaving selfishly will magically produce virtue and prosperity for the whole. It won’t and it doesn’t. What it produces is a world where "customer focus" has come to mean what a vulture does.
My friend Bob spoke truth. In 15 years, we have gone from “treating people in a manner worthy of their loyalty,” to hating the company who buys us off—and calling it loyalty. Vocabulary assassination is bad enough; destroying the concept it refers to is far worse, for all concerned.
And irony of ironies: it doesn’t even work. From Forbes:
Reward points, discounts, free shipping and gifts—it’s all there for the taking, as the big players in the hypercompetitive retail industry fight to outdo each other to buy off the loyalty of customers blessed with more choices than ever. Many stores now fear that customers not formally rewarded for their patronage will walk out the door.
OK, this loyalty thing, we had a good run with it, OK, what’s next? How much can we make off of "friendship?" How about taking a shot at love—that oughta really juice up the old ROI!