Where’s the Love? Why companies need to invest more in loyal customers

Last night I cancelled my DirecTV service.  I had been a customer for 7 years; I had bought special services and packages from them. The decision to cancel them was based upon several factors: spending too much time watching TV, other cost-effective entertainment options, not enjoying the channels that were available to me, but the largest factor came down to my experience with DirecTV themselves: They never did anything for me; they just didn’t seem to care.

I never seemed to get any incentives from them for being a good, loyal customer.  I got fliers in the mail all the time for them advertising specials like low cost packages or free HBO, but when I called to ask them, it was always the same answer: incentives were for new customers only.

I can understand the need to gain new customers, but why was there no incentives for customers who kept the lights on?  Customers who paid their bills in full on time?  Why once you are in the door, are you forgotten?

The problem of customer loyalty isn’t just with the cable entertainment industry: Airlines, Grocery Stores, Retail Stores, Hotels are all suffering the loss of customers through either poor, non-realistic programs or no customer loyalty at all.

According to consumer advocate and journalist Christopher Elliott, loyalty programs “are not in touch with reality because their judgment is clouded by money. Pay attention to the affiliate links on their sites and you’ll see that their rewards don’t come from the programs they promote, but from the generous bonuses they receive when someone signs up for an affinity credit card they hawk.

The cheerleaders will continue pushing these programs until the bottom falls out of them. A vast majority of them don’t care about you. They are the emperors fiddling while Rome burns. They are like the last men standing at the top of the pyramid scheme, insisting that everything is fine. But everything is not fine.”

Loyalty just isn’t what it used to be

One theory about why there is decline in the incentives for customer loyalty is there is lack of loyalty not just with the companies, but also with the consumers.  According to Forbes, 46% of consumers believe they are more likely to switch compared to 10 years ago. Accenture conducted a study entitled “The $6 trillion opportunity: How digital improves customer experience” which noted “Consumers continuously evaluate providers and have become nonstop customers. The tangible result is a growing “switching economy” that accounts for an estimated $6.2 trillion in revenue opportunity for providers across 17 key markets today—up 26 percent, from $4.9 trillion, in 2010.”

Another reason some loyalty programs are being shunned by consumers is the rewards being offered are not really rewards at all.  Elliott notes that many rewards programs do not offer rewards as much as they give you a currency you must spend;  and even that isn’t really worth it to the loyal customer.  Speaking specifically on the travel industry: “For most travelers, loyalty programs are not worth the effort anymore. That’s because, as I’ve previously explained, they have a negative value. Put differently, by the time you’ve collected the points, and gone through the effort of redeeming them, you will have spent more money than if you’d just bought the product without any consideration for loyalty.”

Spending on the 20%

So what’s the solution?  It maybe simply to change the mindset of the company from to how to milk more money from their current customer base to offering real incentives.  According to Pareto’s principle, 80% of your sales come from only 20% of your customers; so why not spend more on the 20 %?  An infographic from the B2B community website shows that the benefits for spending on the 20% are literally endless.

Or how about the radical idea of eliminating the loyalty program altogether and give the savings to all customers – old and new?  Time magazine writes about the supermarket company that runs the Albertsons, Shaw’s, Acme Markets, and Jewel-Osco brands announcing the elimination of all loyalty programs.

“Shaw’s, for instance, has been pushing the change as “Card Free Savings,” in which “Everybody gets a low price,” regardless of whether the shopper is a loyalty program member or can produce a card to get zapped at the register. “The card isn’t so special anymore,” the grocery company announced via its website. “Everyone has one. So we want to take the special step of not requiring one anymore.”

DirecTV lost a loyal, good customer in me.  It was never about the money I was spending as much as it was about the company not really caring about me and the investment I had made.  Even a little incentive might have kept me there.  As they are learning, as well other companies, in the digital age when there are hundreds of more options to choose from, consumers may start voicing their dissatisfaction and letting their large companies know they are there by hurting them in the place they will notice: the bottom line.