Is Customer Loyalty Dead?

Loyalty is in decline across the board, not only by audiences and consumers but also employees, private healthcare patients and even with banks. Studies in the last couple of years have shown a decrease of market share in 90 out of the top 100 consumer package goods brands, that’s 90%.1

The reasons for loyalty decline are many but they primarily fall into two categories. The first, I would term evolutionary change and includes technology, media and social drivers. The second category as a negative result from unmet expectations, declining trust, and irrelevance.

Developmental change is inevitable

We are in an age of fragmentation, driven by technology providing overwhelming choice and information. In just three decades, we have gone from a handful of terrestrial TV channels to millions available via broadcast and online with live streaming growing in popularity on social media. Showrooming is common place, as is online product research when instore advice and knowledge fail to deliver. Consumers are becoming more and more savvy accustomed to price checks, reviews and information at the tips of their fingers. Potential employees are able to research companies on sites like Glassdoor, prior to interviewing for a job.

Rewind to the 90s, a big age for the introduction of own branding in physical stores, now there’s not only premium and own brands for choice but with cross-channel reach we now have availability to every single brand and every single product. We have been sold on newness since the dawn of advertising, but now, with the vast amount of choice and technological advances of manufacturing, newness is the norm. When faced with the option of experiencing the next new thing, or staying loyal to the same tried and tested product, in most situations, loyalty is now seen as old fashioned and stagnant. The fickleness of youth has never been so true, representing a major shift in social attitude towards change.

In a study by LinkedIn, Millennials were found to change jobs a lot more than their parents, in fact, as much as double. Typically, amounting to four times in their first decade at work from leaving university.2 One can argue that as humans, we are actually getting better at change. This is a great thing, change is critical for the survival of our species. Adaptability to change is the basis of advancement, innovation and future success.

The escalating downslide

Despite the advances of technology, customer satisfaction is falling across most industries. According to the Temkin Group, it may not be down to failing customer service. Their research suggests that it is customer expectations that are rising. While most companies benchmark themselves on competitors in the same industry, customers are benchmarking companies on experiences they receive from other businesses in other areas of their lives.3 While this is undoubtedly a challenging situation, it can be seen as another indicator of societal progression. Our communities and enterprises are under more pressure to improve, which in the long term is good for all of us.

In contrast, a different survey has found that we are entering the age of distrust. In the Edelman’s Trust Barometer, published earlier this year, the research found that for the first time in 17 years, trust has declined across the four institutions of business, media, government and NGOs. In the majority of countries surveyed, the general population did not trust these four institutions to do “what is right”.4 This has serious emotional impact on our wellbeing in all areas of life. For example, lack of trust in our employer means lack of job security hence younger generations are moving on more frequently. A job for life has become an outdated expectation with both the employer as well as the employee.

As an industry, mass media has been shaken up by the advancements of digital. Declining trust is an obvious consequence of the false reporting, sensationalism and political bias experienced by the public. Interestingly, last May, NPR wrote how the nature of digital algorithms are creating consumer shared-belief bubbles where views are re-enforced and alternative opinions diminished.5 The commercial value of clicks has taken power over impartial journalism.

At least trust, or a lack of it, requires the presence of an emotion. Another reason for waning loyalty is the complete void of preference. We are caring less about the products we use, the companies we work for and the services we choose. A major concern, as it indicates that substitution is becoming easier. According to McKinsey, only 13% of consumers are loyalists who do not shop around.6

Playing a new game

This current state of loyalty means it’s time for to review and redefine what it means to your business then writing your own loyalty playbook for your people and customers.

  1. Go beyond demographics to the emotional needs that drive the behaviour

Whether you are looking to increase satisfaction with your staff or your customers, their behaviour is driven by their intention to meet their conscious and unconscious needs. Demographics (nationality, age, religion) is only part of their story. Consider the purpose of their behaviour. Even negative actions have a positive intention for the person doing it.  Connect the behaviour to the unmet need and look at clever ways you can address that need.

When conducting surveys, be sure to ask accurate questions that help you get the level of detail that will be helpful to you. In 2002, Target hired Andre Pole, a statistician, who was, through his analysis, able to identify the 25 products bought by a customer that would indicate she was pregnant. Now a well-documented case study of pre-empting consumer needs, Target were able to recognise a teen-age pregnancy before she had told her father.7 

  • Concentrate on the goals before solutions

Steve Jobs once famously said, “You’ve got to start with the customer experience and work back toward the technology — not the other way around.”

Gimmicks and short term solutions are not enough to drive long term satisfaction. Once you have dug deep into the psyche of your target group, create a goal where success means meeting their emotional need and your commercial one. If you regularly hire new expats from their home country it often means time out of the office dealing with housing and banking issues. The goal could be to get new residents properly homed and settled within a month, reducing distraction and disruption to their work. Two weeks or even a month in a hotel will not be enough. However, adding the formation of a volunteer mentor group of long term expats who live in different neighbourhoods costs will go much further to help them deal the challenges of the unfamiliar.

  • Focus on service, think 360 solutions    

Do you serve your employees and customers, or do they serve you? What lifestyle solutions do you provide to make it easy for them to stay with you?

In Saudi Arabia, the Ministry of Labour has a target of 28% of the workforce to be female by 2020. While this is a great opportunity to improve service to female customers, it has been a logistical challenge for private companies to implement. Many have seen an extremely high attrition rate from this new female segment, largely due to workplace conditions.

Research what role your company, service or product plays in the life of your target group, specify your goals and then create additional ways to simply and satisfy their needs.

  • Be open to experimentation

Experimentation is very different to trial and error. Often a joint responsibility between marketing and R&D department, experimentation is a critical part of the innovation process of larger organisations.

Set aside a budget for testing and follow a controlled testing process with goals and metrics to be able to measure the impact. As with any experiment, run a control. Be focused and specific to what defines a success. If your results are unclear, it means you need to clarify your metrics.

References

  1. Kathleen Kusek, The Death of Brand Loyalty: Cultural Shifts Mean It’s Gone Forever, Forbes, 2016, retrieved from https://www.forbes.com/sites/kathleenkusek/2016/07/25/the-death-of-brand-loyalty-cultural-shifts-mean-its-gone-forever/#197af6a74dde
  2. Heather Long, The New Normal: 4 Job Changes Before You’re 32, CNN Money, 2016, retrieved from http://money.cnn.com/2016/04/12/news/economy/millennials-change-jobs-frequently/index.html
  3. Terri Blake, Declining Customer Satisfaction: Who’s to Blame and How to Fix It, Workspace Today, 2015, retrieved from http://theworkspacetoday.com/2015/07/17/declining-customer-satisfaction-whos-to-blame-and-how-to-fix-it/
  4. Matthew Harrington, Survey: People’s Trust Has Declined in Business, Media, Government, and NGOs, Harvard Business Review, 2017, retrieved from https://hbr.org/2017/01/survey-peoples-trust-has-declined-in-business-media-government-and-ngos
  5. Elizabeth Jensen, Looking To The Future: Restoring Public Trust In The Media, NPR, 2017, retrieved from http://www.npr.org/sections/ombudsman/2017/05/15/528158488/looking-to-the-future-restoring-public-trust-in-the-media
  6. Ashley Autry, Customer Loyalty Statistics: 2017 Edition, Access, 2017, retrieved from http://blog.accessdevelopment.com/customer-loyalty-statistics-2017-edition
  7. Charles Duhigg, How Companies Learn Your Secrets, The New York Times Magazine, 2012, retrieved from http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?_r=1&hp=&pagewanted=all