Why Loyalty Matters

USA Today has recently published two articles discussing hotel loyalty programs.  The first article discusses Hilton Hotel’s devaluation of their beloved customers loyalty points, and the second article discusses loyalty programs top complaints.  Neither article presents a pleasant picture for hotel loyalty programs.  One article focuses on taking away a benefit, a form of punishment, while the other article focuses on the loyalty program as an annoyance as opposed to a benefit. 

The author claims that “hotel chains are targeting their most loyal customers because they tend to travel more.”  Is this really the case?  There are several possibilities: (1) a consumer may travel a lot and join several hotel chains loyalty programs as reader, racer03 commented that he belongs to Hilton Diamond and Marriott Gold or (2) a consumer may travel a significant amount and belong to only one hotel chain.  I believe that most loyalty programs target the second type of consumer.  However, these loyalty programs are missing the true value of the first type of consumer who belongs to several loyalty programs.  If the loyalty program was truly effective, then members would not join multiple programs. 

InterContinental Hotels Group’s (IHG) Chief Marketing Officer for the Americas region, Eric Pearson, strongly believes in IHG’s loyalty program.  Pearson makes the assumption that “an average-level PCR [IHG's loyalty program] member is twice as profitable as a non-member, and an elite-level member who stays more often is 12 times as profitable than an average member.”  The logic that high volume consumers are profitable is a misconception.  A strong inward cash flow does not equal a profit if there is an equally strong outward cash flow spent on  loyal consumers through perks, rewards,  and discounts.  In reality, an average consumer who may not create the most revenue, may be the most profitable.  

USA Today Articles:

Loyalty Programs: Study Reveals Top Complaints; Spam Tops List http://content.usatoday.com/communities/hotelcheckin/post/2010/02/marriott-rewards-hilton-hhonors-intercontinental-priority-club-rewards-choice-wyndham-loyalty/1

 Will Other Hotel Chains Follow Hilton in Devaluing Loyalty Points Next Year?http://content.usatoday.com/communities/hotelcheckin/post/2009/11/will-other-hotel-chains-follow-hilton-in-devaluing-loyalty-points-next-year/1

Arnold Schwarzenegger’s wife — California’s first lady — Maria Shriver’s website just featured Lerzan Aksoy about what women bring to the table.  Please go to Shriver’s website to read Why Women are Missing on Corporate Boards at http://www.californiawomen.org/mia/

A mission statement defines what an organization is about or aspires to be about.  An organization’s culture, goals, and policies are derived from its mission statement.  Many organizations, corporations in particular, are in business to create value for shareholders.  Logically one would then assume that a corporations mission statement should reflect its goal to create value for shareholders.  In theory this makes sense, but in practice could a manager deny a consumers request based on the grounds that the request would diminish shareholder value without upsetting the consumer?  The book Loyalty Myths suggests that not all consumers, even loyal consumers, are profitable and that in fact  a firm may benefit from turning away conspicuous consumers.  However, the real challenge is converting a non-profitable consumer into a profitable consumer.  Providing superior value or added value to the consumer will assist in converting a consumer. 

Loyalty at its essence is about sticking with one another.  It means that organizations, such as firms, shareholders, and consumers, strongly intend to keep the relationship going and envision a future together.  Thus a firms mission should be to create value for shareholders by creating value for consumers. 

By contrasting two apparel firms mission statements it becomes clear that a firm can bring value to both shareholders and consumers.  First, Zappos appeases consumers by delivering “WOW through service” and appeases shareholders by pursuing “growth and learning” and  doing “more with less.”  In contrast, Foot Locker states its mission is to increase “value for our shareholders” by enhancing our base business,” generating positive cash flow,” and “redeploying excess cash.”

Which company would you want to invest in as a shareholder, buy from as a consumer, or work for as an employee?

Zappos Mission Statement: As we grow as a company, it has become more and more important to explicitly define the Zappos core values from which we develop our culture, our brand, and our business strategies. These are the ten core values that we live by:

1. Deliver WOW Through Service
2. Embrace and Drive Change
3. Create Fun and A Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Honest Relationships With Communication
7. Build a Positive Team and Family Spirit
8. Do More With Less
9. Be Passionate and Determined
10. Be Humble

 Foot Locker Mission Statement: We remain committed to increasing value for our shareholders by:

• Enhancing our base business
• Expanding in the global marketplace
• Pursuing new business opportunities
• Generating positive cash flow
• Redeploying excess cash

Wayne Hurlbert, founder of Blog Business Success, a leading blog about current business topics, discussed why loyalty matters. 

 The entire interview is available as a free on demand podcast and can be downloaded here:

http://www.blogtalkradio.com/waynehurlbert/2009/11/25/timothy-keiningham-lerzan-aksoy-why-loyalty-matters

To find out why Wayne Hurlbert recommends Why Loyalty Matters “to anyone seeking a fresh approach to improving corporate productivity, employee engagement, customer satisfaction, and enhancing personal happiness,” read his full book review at:

http://blogbusinessworld.blogspot.com/2009/11/why-loyalty-matters-by-timothy.html

The last thing anyone would want is to jeopardize their job or relationship by creating a false reality with lies. Rachel Zupek, a writer for careerbuilder.com discusses ten common fibs told at work in her article, Should You Ever Lie at Work? “I’d be happy to,” “I was thinking the exact same thing,” and “Oh yeah, I’ve done that before” are three common fibs from Why Loyalty Matters that made Zupek’s top ten list. To see what other fibs are on the complete list go to

http://msn.careerbuilder.com/Article/MSN-2048-Workplace-Issues-Should-You-Ever-Lie?ArticleID=2048&cbRecursionCnt=1&cbsid=4a8a656d565146408a25be8f68da0786-309968137-w6-6

William Lawrence, Dean and Professor of American Church History at the Perkins School of Theology within Southern Methodist University, presents the argument that “denominational loyalty has gone the way of brand name loyalty in the market place,” as pertaining to the increasing number of Americans who change denominations or who classify themselves as “nones,” people who do not associate with a religion. Dean Lawrence points to the fact that when a Methodist family moves to a new city they may not seek a Methodist church, but rather seek a church based on their “self-perceived needs, desires, wants, and lifestyles.” If people loyalty remains, then this trend can be reversed. Professor Philip Kolter, acclaimed as “the world’s foremost expert on the strategic practice on marketing,” defines four patterns of loyalty behavior. First, there are the “Hardcore Loyalists,” who consume only one brand (or denomination). Second, there are the “Softcore Loyalists,” who consume two or three brands. Next, there the “Shifting Loyalists,” whose loyalty moves from one brand to another. Finally, there are the “Shifters,” who have no loyalty and constantly look for bargains or variation. As long as people remain in one of the first three categories (Hardcore, Softcore, or Shifting Loyalists) then this trend can be reversed. It is when people fall into the last group, Shifters, that there is a true problem.

From a corporate stand point this trend can viewed as a “share of wallet” dilemma. It is not advantageous to capture 100% of consumer’s consumption, of a consumer with minimal consumption. Rather, it is much more advantageous to capture 50%, or a share, of a consumer with heavy consumption, or service usage. Thus, as long as people remain loyal, even to a small degree, there is still hope.

By viewing the trend from the “share of wallet” methodology, the question now becomes, “How can churches increase their share of consumption?”

William Lawrence’s original posting can be found at http://religionblog.dallasnews.com/archives/2009/09/why-are-fewer-americans-identi.html

If you were to ask anyone what factor contributes most to being successful and happy, you can be virtually certain that not one of them would mention loyalty. And that’s a problem. Grounded in the most comprehensive study of loyalty ever conducted, Why Loyalty Matters proves that when it comes to business success, relationship success, and even our overall happiness, loyalty is the difference maker.

Read more at www.daxle.net

Reprinted with permission from The Free Press

Around Town by Mary Giuliano September 13, 2009 (Fernie, Canada)

Faith has been a constant in my life yet recently when asked how I start my day as I replied “with prayer” I realized that I had just set myself up for criticism.

Prayerful people should have attributes of a saint but reality tells me I’m far from that designation.

But a routine of scripture readings with petitions for help and guidance is equivalent to a good meditation that is definitely good for spiritual, emotional and physical health.

This introspection resulted from a conversation with a retired attorney who casually told me he’d begun his professional life as a devoted Roman Catholic monk. After six years he left disillusioned holding the belief the Bible wasn’t the word of God and wondering if God even existed.

So what brings an individual from a deep place of Faith to having none? Could it be that Faith really is a choice?

The Catholic missal says “We choose to believe, this involves risk, to believe in nothing is a form of death, to risk nothing is to die as a human being.”

A book titled “Why Loyalty Matters” has caused a lot of thought as well. “Loyalty”, say authors Timothy Keiningham and Lerzan Aksoy, “like any virtue can go too far and become toxic but it’s still an important fundamental value of life.”

Society has become less loyal today but research finds people believe they are loyal but are surrounded by not so loyal friends. The authors say that if we don’t find our friends to be loyal “odds are that we arent either.”

In the workplace long time workers are no longer valued. Companies going through tough times downsize and layoff although it has been proven that in the long run companies downsizing rarely realize the “cost savings or efficiencies despite the corresponding pain to customers and employees.”

Regarding loyalty in politics, government is successful when those entrusted with the honor of representing people work for the betterment of society, “compromise and honest discourse are the nature of political life, politicians shouldn’t practice extreme partisanship. Adding that sometimes loyalty to a group or cause can become evil, “never, ever ignore your moral compass.”

About religion, “emphasis on religious differences has led to some of mankind’s greatest sins such as the desire to root out heretics and to convert or eliminate heathens that ultimately led to an out group brutality. All too often, we have just enough religion to make us hate, but not enough to make us love one another.”

In ending the authors state, “The most valuable thing you can give is not money. It’s you. There’s nothing more powerful than the human will, nothing more precious than the human spirit.

Through loyalty, we literally invest that will and spirit to create something greater than we can achieve alone.

Loyalties are signs of the types of people we choose to be, the foundation of our character; demonstrating what we value, believe and what we want our world to be.”

And so I choose loyalty to faith, family, friends and community.

 

© Copyright 2009, thefreepress.ca

 

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Not too long ago people would work at a company for 30 years and then retire with a gold watch.   However, in recent times people typically work at a company for just a hand full of years before embarking on other endeavors.   In a sense regular working people have become free agents in the workforce.   People are no longer “IBMers” for life; there is a decline in loyalty over the past 50 years, whether it be in our personal or professional lives. 

Similarly, people used to be loyal Yankee fans or loyal Red Socks fans.   However, die hard fans are now Jeter fans or Beckett fans.   Brett Favre is the perfect example of both points.   He was drafted by the Atlanta Falcons in 1991 and played for one season, his “opportunity” year out of college if you will, similar to accepting your first job offer.   From 1992 to 2007 Favre played for the Green Bay Packers, a long career in the NFL.   Then, staying with the recent times of company hopping, he played in New York for one season and now in Minnesota for his first season.   My heart goes out to his bewildered fans who started out as Green Bay fans and then became Favre fans.   Favre’s trade to New York was fine; one could still be a Favre fan and a Green Bay fan.   But, now can that same fan still be a loyal Favre fan in a purple Minnesota jersey and a loyal Green Bay fan?

Do you always buy one brand of gasoline?   According to a recent study by The NPD Group, a market research firm, which asked consumers just that question, only 28 percent of respondents in the first quarter of 2009 answered yes, as opposed to 34 percent of respondents in the first quarter of 2000.   Further analysis by NPD reveals that the most loyal consumer strata (those over 65) choose one brand of gasoline because of the firm’s credit card loyalty program.  

But this is not necessarily real loyalty.  Customer loyalty requires an emotional bond, connection with the brand in addition to purchase behavior.  The least loyal consumer strata (those 18 to 29) reported that loyalty is driven by convenience store offerings.  

David Portalatin, industry analyst for NPD’s automotive unit, said, “It’s going to take best-in-class retailing, including fresh food offerings and a diversity of products and services to attract and retain drivers’ fuel purchases in the future.”   This is an interesting observation in that the over 65 strata is loyal because of discounts and perks provided through the loyalty program, while the 18 to 29 strata is loyal because of convenience store offerings, not price.  

One convenience store chain, QuikTrip, offers 24 different fountain products and encourages consumers to play with their drinks by providing drink recipes, such as: Kiss the Rooster, Blue Thunder, and Shake It Up Baby.   Just as important, QuikTrip’s mission includes a commitment to quality and a commitment to do things right through quality employees, quality store facilities, quality management, quality store precautions, and quality in community support.   Just in case they missed anything, the mission also includes, “Quality in everything we do.   We guarantee it.”   How many stores, let alone convenience store, do you know that are committed to quality store precautions (such as brightly lit lots and stores), provide endless drink options, and even have a mascot named “Wally,” who is labeled as “a certain kind of kid we all know”?   While Quiktrip has yet to expand to the East Coast, whenever this author is in the Southwest, you know where this author is going.    

http://www.npd.com/press/releases/press_090921.html

http://www.quiktrip.com/