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To the American ear, the British occasionally come up with the most delightfully curious expressions (I suppose it works both ways).
Some of my favorites: a “cheeky pint,” and “chuffed,” as in, “I was bored to tears at the ballet—but then I caught Prince Charles’ eye, and he motioned to me to sneak outside and join him for a cheeky pint of Guinness. We had a blast—I was really chuffed about it!”
Add a new one (new to me, anyway). The BBC TV breakfast show recently introduced a story on credit cards by saying, “There’s no point in being loyal anymore—it only pays to be a rate tart.”
A rate tart. So that’s what it’s come down to.
It shouldn’t really be surprising.
Fred Reichheld’s 1991 book The Loyalty Effect summarized work in the 80s by himself, Bain & Company, and several thoughtful Harvard Business School faculty. Re-reading the preface 15 years later later is enlightening:
We found we could not progress beyond a superficial treatment of customer loyalty without delving into employee loyalty. We found there was a cause and effect relationship between the two; that it was impossible to maintain a loyal customer base without a base of loyal employees; and that the best employees prefer to work for companies that deliver the kind of superior value that builds customer loyalty.
We then found that our concern with employee loyalty entangled us in the thorny issue of investor loyalty, because it is very hard to earn the loyalty of employees if the owners of the business are short-sighted and unreliable.
Finally, predictably, we found that investor loyalty was heavily dependent on customer and employee loyalty, and we understood that we were dealing not with tactical issues but with a strategic system.
The credit card industry was a prime example for early loyalty research (MBNA in particular, if I recall), and “loyalty” is a term used heavily in financial services these days.
How, then, did a focus on “loyalty” yield today’s “rate tarts?”
Very simply, the case of “loyalty” is Exhibit One in a lemming-like rush by business to over-stress three simple concepts:
1. Profit is a measure of business activity effectiveness
2. Measurement is a valuable tool for management
3 . Activities can be disaggregated into smaller, measurable activities.
Those reasonable beliefs have metastasized into these distorted versions:
1a. Every business activity has value only insofar as it increases profit
2a. If you can’t measure something, you can’t manage it
3a. Anything worth measuring is even better measured in shorter durations and smaller units.
This extreme thinking has meant that the management of business these days is centered on short-term profit manipulation—not on long-term value creation.
Ironically, this is an area where political “liberals” and “conservatives” agree—their only difference is whether they consider it a sin or a virtue.
It was only in 1991—just 17 years ago—that we saw a different view entirely, a view that “we were dealing not with tactical issues but with a strategic system.” In only 17 years, that viewpoint is nearly gone.
In that time, almost every major strain of business thinking has moved in the direction of shorter measurements, more separation between employees, customers and investors, and more emphasis on reducing everything to its impact on the bottom line. Think CRM, collateralized debt obligations, outsourced recruiting, private equity, synthetic hedges, flipping companies, IPOs.
Most ironic of all: go back to the creators, the originators of loyalty programs—the airlines’ frequent flyer programs. Since frequent flyer programs’ profitability is measurable and separable, profit-challenged airlines are now thinking of selling their own frequent flyer programs to third party buyers.
This is the end-game; not just to outsource the management of “loyalty,” but to literally put a price on it and sell it. The buying and selling of “relationships”—it’s beyond absurd metaphors.
A Rumanian expat in the 70s explained to me the difference between the Russian KGB and the Rumanian Secret Police: “The Rumanians think they can corrupt you with sex, blackmail and money. The Russians are more experienced; they just cut to the chase and lead with money—it trumps the others.”
As credit card and other companies give customers more experience in the cynical management of "loyalty," why should anyone be surprised that the result is "rate tarts?"