Loyalty Means Nothing, Study Finds

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Consumers are far less enthusiastic about being loyal to one company over another, despite an increase in personalized communications and membership programs, according to a study released this week by Harte-Hanks Market Research, River Edge, NJ.

The National Syndicated Study of Consumer Loyalty looked at 2,000 creditworthy consumers across the country who earn more than $30,000 each year and have at least one major credit card. More than 70 percent said they don't see a clear benefit in being loyal.

"Most definitely, rewards programs have strong benefits and they can be successful drivers of customer behavior," said Laura Rifkin, vice president of Harte-Hanks Market Research. "But it's not necessarily loyalty that companies are generating from loyalty programs. Often, it is behavior. Many businesses are simply missing the mark when it comes to keeping customers loyal."

Some airline travel programs fall into that category, she said, noting that consumers participate in a number of membership clubs in different industries. But many of those companies are merely driving certain purchasing behaviors, not necessarily a commitment to one given company. One of the most interesting findings, she said, was the clear indication that customers need to feel like company communications are genuine and not feigned.

Louis Ramery, executive vice president of marketing at Brierley & Partners, Dallas, a direct marketing agency specializing in the development of consumer loyalty, agreed with the study's results.

"Yes, customers can be satisfied but not necessarily loyal," he said. "You have to have an understanding of who the customer is and then go about working to keep that customer -- and keeping an existing customer costs less than finding a new one."

The Harte-Hanks study's method included three parts: interviews with loyalty experts, focus groups and a quantitative mail questionnaire. A review of its Executive Summary and the key discoveries it details will strike some marketers as questionable, particularly when comparing results with their own internal corporate research on loyalty, membership program renewal rates and customer satisfaction. However, the study reflects 2,000 actual participants, which the company said were chosen at random from all areas of the country.

The project started with nearly twice as many participants in full expectation that there would only be a certain number who would be qualified and then only a portion of those would fully respond. There also was collaboration by David Schmittlein, chairman of the marketing department at The Wharton School at the University of Pennsylvania, and David Reibstein, professor of marketing at the Wharton School.

The key to creating and maintaining a customer's loyalty involves more than timely customer service and membership rewards programs, Rifkin said. There are plenty of examples of companies placing a strong emphasis on membership programs, "but when it comes to the rest of the equation, they just go about conducting their business as usual."

Within the study's questionnaire was a request for the respondent to identify his five most preferred membership programs from a list of 11, including hotel and car rental upgrades, airline miles, free merchandise, discounted merchandise and cash rebate programs. Fifty-two percent chose cash rebates first. Airline frequent flier miles programs ran a distant second with only 23 percent choosing the category as their first choice. Movie passes and contributions to designated charities and local schools were the least favorite.

"You can have customers that are totally satisfied," Rifkin said, "but there may not be the added motivation or connection to move them from satisfaction to loyalty."

Ramery said his agency's experience with 12 different industry sectors shows that loyalty is about context as well as customization. In addition to having good products and services, he said a marketer has to really know how consumers think, what they want and how to go about truly meeting their expectations.

"You have to keep all communications to consumers not only personal," he said, "but fresh and very relevant."

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