During the past two decades many companies, including some of the world’s largest, have discovered the importance of loyal customers.
These companies, however, have experienced increasing difficulty in differentiating their products and services from those of the competition so that customers have a reason to remain loyal.
In earlier times, when media and information channels were fewer and simpler, it was much easier for the providers of products and services to manage and manipulate the information about their offerings that consumers received and assimilated. The better they managed and manipulated, the more they increased their chances of developing a loyal customer base.
Now, with a mountain of offerings in every category and information available 24/7 from myriad sources, including the Internet, today’s consumer is no longer at the mercy of the corporate party line. A competing product, or a second opinion, is just a click away. The information bandwidth has increased. And the result is that loyalty is more difficult to create and maintain.
What is interesting is the way in which many companies are dealing with this situation. In the absence of any meaningful or differentiating product values, and with traditional communications programs producing somewhat less success than desired, more companies are turning to added value programs, such as last century’s continuity or rewards programs.
Someplace, somewhere in the market plan you will find them listed under loyalty programs, which is a misnomer. While these programs sometimes produce short-term market activity, and even profits, they infrequently result in actual increased levels of customer loyalty. Unless loyalty programs — real loyalty programs — are based upon real customer values, the programs will have no real long-term effects. More precisely, the customer values these programs are based upon should be ones about which customers have high expectations.
Compared to 1997 studies, our company has found that customers’ expectations have increased by an average of 24 percent in the information-intensive categories (categories in which consumers tend to require, and receive, information prior to making a purchase decision), while consumer assessments of what these brands deliver have also risen, but only about 60 percent as much as have their expectations. Conversely, customers’ expectations have risen much less — an average of 3 percent — in categories that are not information-intensive, while the assessment of what these brands deliver has exceeded those expectations, rising 14 percent.
The information-intensive categories are Internet-based products and services, telecommunications, rental cars, office copiers, airlines, athletic footwear, consumer banks, package delivery and credit cards. The noninformation-intensive categories are light and regular beer, diet and regular soft drinks and fast food. These are the categories we have been tracking since late 1997.
And what is the significance of the growing gap between expectations and brand delivery in these categories?
Regardless of why people think the brands they buy do not meet the standards of the ideal brands of their imagination, the important point is this: The gap between expectation and reality is proof that marketers are increasingly incapable of identifying and leveraging rapidly changing customer values. This is a situation that results in a less loyal customer base.
Some marketers will wring their hands and wax nostalgic for the good old days. These are the ones who will see their brands continue to lag the expectations of the marketplace and who will increasingly rely on continuity programs to provide some short-term differentiation and some level of increased profits.
The marketers who succeed will do whatever is necessary to understand what customers want. They will incorporate customer listening processes that identify and track the most important purchase and loyalty drivers in their category. They will build in ways to identify and track real levels of customer expectations. And — to increase customer loyalty, market share and profitability — they will build a means of incorporating these findings into their development, manufacturing and marketing functions.
Those who succeed will not lament that consumers are more fickle. Rather, they will do their best to listen to their customers and prospects, track their values, follow their lead and be there with the products and services that meet their rapidly changing needs and engender true loyalty.
