Is Loyalty About the “First Click,” Or Does That Happen Much Later?

That’s the question that’s been banging around our brains since reading an article on the front page of the Wall Street Journal on Microsoft and PC makers negotiating on the “first-boot sequence.” The article argues that in the first five to ten minutes after an OS is first installed, most consumers choose software and services they will often use for a lifetime. The comments from Microsoft suggest they think “loyalty is won at set-up.”
The quality of loyalty is an interesting one. We don’t think it’s as simple as this article suggests. We would argue that loyalty is won over time. Let’s be clear that what Microsoft is doing is using its market power to facilitate customer acquisition at the time of initial system set up. This is a huge advantage, as consumers rightly have a difficult time selecting options that are not present, and the options presented may very well satisfy their basic needs. Making subsequent changes is not easy for many users.
Yet the fact is that loyalty is a much richer emotion. And requires more work to build. It’s funny to us that when marketers start to talk about consumers, they often start using the jargon such “customer relationship management” (CRM), “relationship marketing,” creating “life time value,” and “cross selling” offerings. All of these terms are meant to talk about specific ways to drive and create loyalty. But in all the jargon, the basics seem to be lost on the technology industry. Let’s hope our industry refocuses on what creates real loyalty. Here are some ideas:

  1. Be generous. Customers are like all of us. We don’t want to be nickel and dimed, and we don’t want to do that to others. We know the people who trust us and are generous with us are going to get a lot back in return. Generosity is much like love: the more you give, the more abundance there is. At up-market retailers, personal shoppers will record customers’ preferences in sizes, styles, brands, colors and price ranges and notify them when new merchandise appears or help them choose accessories. Some people could view this analytically and say this builds the business. Our answer: Duh. But it is the way in which that business is built that makes sense. Using these models builds relationships for customers whose values align with what the company offers. Thus, building relationships should focus on customers who are currently buying, are likely to remain with the company for the foreseeable future, and have acceptable levels of profitability.
  2. Resonate. Sales and service is more than a process by which we get our needs met. It is an experience that resonates with our heart, a rendezvous that engages our emotions. We’re amazed that a local vendor with well over 500 customers remembers our names, and another with less than 100 customers never does. Want to know which one we go to? Whether you’re a local provider, or doing business with millions of customers over the internet or call centers, remember that a connection can be created with many different types of tools and technology. Notice what the customer wants and then reflect that. With the increased use of the internet, companies have more opportunities to learn customers’ preferences and behavior transparently. Information that can be easily collected includes: words used in search engines to find your site (these can help understand how to categorize your services); source of visit (search engine, other sites, directory sites, portals, banner advertising and so on); individual customer measures such as number of monthly visits; time spent per visit and search patterns; orders from site; conversion (from visitor to purchaser); spending per order; and spending per visit. When marketers engage with customers collaboratively to learn customers’ preferences they engage in dialogue to help customers articulate their needs and identify how to meet those needs. Ultimately, this method should result in an ideal offering, but it can take time. The goal of the marketer in learning preferences collaboratively is to determine a way to maximize learning without frustrating customers by offering nothing back. Again, the web can be useful with online questionnaires and forms.
  3. Include. Good feelings about an offering can increase when customers have a chance to put some “skin in the game.” Think about when Netflix asks for movie feedback or when Amazon asks about “store” preferences so they can customize what you see next. The secret is to know how and when to leverage their information without violating privacy. But I promise that every customer from grandma-the-consumer to the ponytail-IT manager wants to be included. One business advantage of learning a customer’s preferences is that the company then has a record that can be used to cross-sell other products or services. For example, if a customer used personal finance software such as Quicken, then a marketer could (as a service) offer to provide credit card information in that format. This information would be useful to the customer for financial planning and would provide a rich information bank for the marketer. Marketers need to be careful with this information and build a relationship based on trust. Some businesses have natural advantages: People are more likely to trust a doctor or a bank than a supermarket. However, if relationships can be built and if the marketer provides value in return such as useful suggestions, the customer is likely to be loyal. It is easier for a customer to stay with a trusted company than to switch to a competitor.
  4. Delight. Service as it’s come to be expected is so minimal that we all get a smile on our face when we get cared for. The person who sends the thank you note still stands out in this day and age. Remember to appreciate your customer. They help you each day to do what you do. Think about how to show them that. Go above and beyond. Take the extra five minutes, leave ’em a voicemail, or send them a software update at no charge. Arrange for a book deal for your clients. In Los Gatos, where it seems you need a cute dog to own a home, the bank has dog biscuits at the counter so pets can snack while customers wait. Café Sienna, a local coffee shop owned by a man and his wife, leaves out fresh water so dogs (and their owners) can stop for a refreshing moment as they hit the trail. A hotel in London remembers the size bed, the park view, and the extra pillows Nilofer likes. She doesn’t have to ask but they always assign her to the same room if it’s available. And she stays there maybe one night a year. All of the delightful experiences stand out and form our decisions going forward. Technology companies, we have to say, get really short-sighted and have forgotten what it takes to create delight. They price optimize and forget to create delight once they have a certain amount of market momentum. And that creates opportunities for new vendors to enter the space. If you haven’t done it lately, let every client of yours know how much you appreciate them. And then think of a way to create delight.
  5. Educate. Customers need to know more and more each day. They expect service providers and software vendors to teach them. For example, I think of the latest security threats and I really want my vendor to tell me what I need to be doing to make sure my identity (and my bank savings) aren’t stolen. This is ultimately about empowerment. I thought that word got overused in the late 90’s but the fundamental concept is valid. Show customers what they can do, make them more powerful with knowledge, and they will remember you for it. It is possible of course that if you educate them, they will use that knowledge to go elsewhere. But the chances are you will learn in the process what true business needs your customers have. Hopefully, your engineering team can use these insights to keep on innovating.

But for now and for your own business, remember that customer acquisition should not be confused with loyalty. It is the first in a long series of steps. Once you’ve got a customer, you’ve got some chance to build a relationship, some chance to engage them more deeply, and work towards delight. The near-term reward in managing customer relationships is loyalty and the longer-term one is when a company can transform those same customers into advocates.

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