Mar 12 2010

From Pudding to Pickles

Why would any firm feel the need to reward consumers with an unrelated service or product in order to increase loyalty? Oddly enough many firms regularly engage in this behavior. Many firms reward their consumers with airline points for consuming their products. One of the first people to exploit this loyalty reward was David Phelps, a 35-year-old Davis, California, engineer who earned 1.25 million frequent flier miles by cleverly exploiting a Healthy Choice promotion that offered air miles for products purchased. Philips ended up with $25,000 to $75,000 in free travel by spending only $3,140 on pudding cups, the least expensive product in Healthy Choice’s brand family. Thus, earning Phelps his nickname as the “Pudding Guy”. Ironically, Phelps did not even consume the pudding cups, but rather he donated them to a local food shelter.

Many more “loyal” consumers have followed the Pudding Guy’s lead by exploiting other offers in order to earn loyalty rewards paid out as through airline miles. According to Wall Street Journal article, Miles for Nothing: How the Government Helped Frequent Fliers Make a Mint, by Scott McCartney, “At least several hundred mile-junkies discovered that a free shipping offer on presidential and Native American $1 coins, sold at face value by the U.S. Mint, amounted to printing free frequent-flier miles. Mileage lovers ordered more than $1 million in coins until the Mint started identifying them and cutting them off.” One patron, “identified by his online moniker, Mr. Pickles, claims to have bought $800,000 in coins.” In all, Mr. Pickles earned over two million miles through American Airlines. Similarly, Mr. Pickles did not use the coins, but rather deposit them at his local bank.

Link to: Miles for Nothing: How the Government Helped Frequent Fliers Make a Mint

Mar 11 2010

Where Does Your Client Loyalty Stand?

Are your clients loyal to you and your firm or to their bottom line?  Donny Deutsch, host of CNBC talk show The Big Idea with Donny Deutsch and author of Often Wrong, Never in Doubt said in his book that, “In advertising, client loyalty is to the bottom line, not to the supplier.”  I am inclined to think that this is true in most industries.  Suppliers of financial services, raw materials, lodging and any other commodity can be replaced.  As Deutsch said, “The buyer can find it down the street better, cheaper, packaged more seductively, and you’re gone.”  To prevent mutiny suppliers will often offer discounts, incentives, terms, promotions, and loyalty programs to increase sales.  In response to this Deutsch asks, “How valuable is your product if you’re willing to discount its value?” 

 Regularly discounting products and services for short term gains may only work in favor of the supplier.  After all, do consumers really want or need to increase their inventory levels just because their supplier is discounting its products or services in an attempt to benefit themselves? Probably not, but consumers can sense desperation and will consume according to their best interest. 

 To break this downward discount cycle firms would benefit by developing mutually beneficial relationships with consumers.  A firm that charges a fair price will not need to discount.  Granted this means for a superior product or service a superior price is justifiable. However, the consumer should never be gouged as this would not be mutually beneficial.  By creating mutually beneficial relationships consumers will come to trust their suppliers and develop a loyalty that transcending a temporary discount.

Feb 17 2010

Loyalty Program or Annoyance Program

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

 Will Other Hotel Chains Follow Hilton in Devaluing Loyalty Points Next Year?

Dec 5 2009

What do women bring to the table?

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

Dec 5 2009

What’s your mission statement?

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

Dec 2 2009

Interview with Wayne Hurlbert

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:

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:

Oct 27 2009

Perception is Reality

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 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

Oct 13 2009

How Churches Can Get The Answer They Want By Changing The Question They Asked

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

Oct 5 2009

Why Loyalty Matters

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.


Sep 27 2009

Around Town



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,


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