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February 2016

At Purple Carrot, choosing the right customers

Over at Fast Company online, food writer Mark Bittman is blogging about his startup Purple Carrot. As his customer grows and as he interacts with more of them, he's starting to realize that a good customer base is selective. We cannot be so desperate to keep every customer that we lose sight of our profit plan... the way we expect to succeed with our customers. You can't be all things to all people, 2016-Feb-11 by Mark Bittman

The bottom line is that I’ve realized that much as we want to be responsive to customer feedback, we can't be all things to all people—not just because that is impossible, but because I have my own values about food, values that I believe in and am expressing through our products. And there's something to be said for sticking to your values in a business—after all, we’ve successfully reached our first big goal: We’re shipping really good food that produces delicious plant-based meals. Now it’s time to fine-tune.

Photo by William Murphy (infomatique on Flickr)

Understand the challenges of growing loyalty

Leaders of the company must be loyal to customers... Points 4 and 5 of our loyalty pledge are

4. Become a better partner

5. Share our plans and dreams.

Unless the sales team are truly partners (not employees), they are unlikely to perform on 4 and 5 as well as the senior management team would do if they stayed in regular contact with customers. 

If customers don't experience 4 and 5 from our company, they won't have an incentive to do more business with us. 

Gallup: B2B Barriers to Organic Growth, 2015-Feb-11 by Craig Kamins 

Customers tend to have a strong status quo bias, or a preference for keeping things the same. Even if a B2B company delivers perfectly on its current contracts and takes measures to address or minimize problems, the customer won't necessarily give the company more business. Convincing customers to take that next step into new or existing territories or product lines often requires building a different kind of relationship with them.

Image by Tony Foster:


Customer loyalty programs evolve to include experience

We can get customers to sign up for a loyalty program with the promise of discounts and perks, but to keep them, we have to integrate excellent experiences. To compete, we have to make sure we've integrated all the customer contact points. 

eMarketer: Loyalty is an emotion, not a transaction, 2016-Feb-3, interview with Mark Taylor of Capgemini 

Consumer expectations are set by the Googles, the Amazons, the Zappos and the Starbucks of the world. ...Two-thirds of loyalty programs are abandoned by consumers within the first year, because the value isn’t there. Consumers look for a seamless experience with brands more than they look for future discounts. ...Starbucks, for example, integrated the loyalty experience with the whole brand experience. Once I download the Starbucks app, which I may use to pay for my purchases, the loyalty program is embedded in the overall experience. This will increasingly be the case and critical for the value exchange. 

The Wise Marketer: Insight: Is loyalty a transaction, or an emotion?, 2016-Feb-11 by Rick Ferguson

The key to a successful customer strategy: Don’t focus on loyalty—focus on relationship value. Learn which customer segments offer the highest current or potential value, and which type of loyalty—emotional or transactional—motivates those segments to spend more and remain with you longer. In some cases, you may drive relationship value through rewards and discounts; in others, you may drive value through delivering unique and personalized experiences.


To profit, manage customer experience toward a purpose

Photo by Nicholas A. Tonelli on Flickr

When creating great customer experiences, we have to keep sustainability in mind. Once we've decided our purpose to benefit our customers... then we can improve customer loyalty in a profitable way. At Steady CRM, our purpose is to establish loyalty as a widely understood management tool. 

Purpose also helps us find a path between maximum profits and maximum customer service. When we create tangible goals for our employees to keep customers for a purpose... we have better control. 

Financial Times: Companies with a purpose beyond profit tend to make more money, 2016-Jan-24 by Simon Caulkin

Because satisfied customers are the only source of long-term success, measures need to be related to purpose as defined from a customer point of view. When they are, employees can see how well they are doing and how they might do better. The Toyota Production System (TPS), whose purpose is to deliver an individually specified car to a customer in the shortest possible time, may be the best-known example of such a well-honed, feedback-driven system....

On its own, purpose is nothing more than an aspiration. It is its sidekicks — measures and methods — that make purpose tangible and keep managers on the straight and narrow. But it cuts two ways. Last decade, Toyota subordinated its customer purpose to a growth push in an attempt to overtake GM in size. Overexpansion led to quality problems and some spectacular vehicle recalls.... Purpose is an unforgiving taskmaster: forget it at your peril.

Loyalty and forgiveness

Photo by Roy Luck on Flickr

Some of the most sophisticated research about customer loyalty is being done by Temkin Group, which focuses on customer experience (rather than reward programs) as the primary driver of loyalty. Recognizing that long-term loyalty requires forgiveness, they have rated some major consumer product and service companies. 

USAA blew past their competition in credit cards, insurance and banking, but I think the most interesting ratings came in for Amazon... mostly because I personally find myself unable to forgive them for playing hardball with publishers about ebook pricing, even though I know Apple did the same thing... I think the management of Amazon can often be tone-deaf about the values of its customers. Yes, we want low prices and fast delivery, but from a company that is run by compassionate human beings. I often feel that Amazon is run by a computer. 

Anyway, kudos to Temkin for studying this important dimension of loyalty. Visit their web site and see how a company like AOL can coast on years of good customer service. 

Temkin Ratings: 2015 Forgiveness Ratings

Temkin Group asks consumers to identify companies that they have interacted with during the previous 60 days. For a random subset of those companies, consumers are asked to rate companies as follows:

  • How likely are you to forgive these companies if they deliver a bad experience?
    Responses from 1= “extremely unlikely” to 7= “extremely likely”.

  • For all companies with 100 or more consumer responses, we calculated the “net forgiveness” score.

  • The ratings were calculated by taking the percentage of consumers that selected either “6” or “7” and subtracting the percentage of consumers that selected either “1,” “2,” or “3.” 
Rank Company Industry Temkin Forgiveness Ratings (TFR) Company TFR vs Industry TFR
1 USAA Credit cards 61% 30
2 USAA Insurance 60% 25
2 USAA Bank 60% 24
4 ACE Rent A Car Car rentals 57% 23
5 Retailer 55% 14
5 Publix Supermarket 55% 8
7 Apple Computers 53% 12
7 Amazon Computers 53% 12
7 Aldi Supermarket 53% 6
7 H-E-B Supermarket 53% 6

How Caesars helps customers be loyal

Photo from Apple and Pear Australia on Flickr

At Caesars Entertainment, they have recognized that customers don't want to "be in the loyalty program" as much as they want to connect and enjoy the relationship. The company competes by aggressively trying to be the easiest to work with. 

Loyalty 360: Caesars Entertainment Wants Customer Loyalty to Be Simple, 2016-Jan-12 by Jim Tierney

Michael Marino, Senior Vice President of Loyalty and Digital:

"A key company objective is to make it easier for customers to do business with us. In Total Rewards, Caesars Entertainment’s loyalty program, we’ve simplified our partner relationships from many broad relationships to fewer, more meaningful partners. We’ve also tried to provide guests with options to earn credits and build status with Total Rewards on days when they aren’t able to visit our properties.  We like the phrase: 'Anywhere, Anytime.'...

Our business doesn’t have a silver bullet. We have customers who still prefer engaging with us via the mailbox, and I don’t mean the one on your computer, tablet, or phone.  For many of our customers, their preferred engagement is to pick up the phone and call one of our VIP hosts. We’ve found that to engage our guests, we need to have a comprehensive omnichannel approach which enables us to personalize our engagement approach."

Boxer Property gets multi-dimensional loyalty


Photo by Ted Drake on Flickr

 One of Houston's most innovative companies is Boxer Property in the commercial property market. We asked President Justin Segal how they experience loyalty in the business-to-business arena, both as a supplier and a customer. In his own words… 

We have a customer named Dino Marcaccio who runs Texas Tax Group. He was a Texas State Tax Auditor, spent many years working for the comptroller’s office, then started his own consulting firm. I met Dino when he posted an video on YouTube about how much he loved his office. I went to meet him and was blown away by his enthusiasm and creativity. He shot a new video on the spot, taking me around to meet the other tenants on his floor. On my way out he gave me a stack of his CDs. It turns out he is an amazing and extremely versatile singer – standards to country – and has opened for Willie Nelson! Dino appreciated our approach to our customers so much that he told the whole internet, and we appreciate him for that. 

Another standout is Kimberly McCright. My brother Andrew, our CEO, met Kimberly when she was touring space at our first major Workstyle project in Clearlake. 1322 Space Park is a property with lots of collaborative space, a dog park, a food truck ramp, and other cool elements. Andrew told me that I had to meet Kimberly and that she was exactly the kind of customer we wanted. I met her a few weeks later and he was right. She really “got” what we were doing, and she became our property’s biggest supporter. In parallel to her primary business (Verbatim Court Reporting & Transcription), Kimberly set up an incubator and began recruiting other tenants to fill up the space around her business. She built a community around her, and has been very patient and understanding when construction and other issues arise. 

One of our favorite partners is a company called M-Files. At the time we signed up with them, M-Files was a somewhat unknown provider of document management solutions. We took a risk on a lesser-known vendor because we liked their technology. They appreciated our faith in them and dramatically overcame any concerns we had by providing over-the-top customer service. They were flexible and helpful with training and implementation, and have been very quick to help with any issues that arise. In return, we have provided many testimonials for them, discussed our experience with industry analysts and journalists, and even shot a promotional video for them in our office. Since we selected M-Files, they have made huge gains in the market and are becoming a major player in the content management space.Even though they have customers that are much bigger than us, they have continued to give us the same excellent service as when we started with them years ago. That’s how to get and keep our loyalty!

Loyalty built with friendliness at Gold's Gym

Garden Photo
Photo by Brant_Kelly on Flickr

After recently lamenting the lack of steady CRM from gyms, I found a this story about Gold's Gym. They approach the problem scientifically, but end up with a very friendly solution. 

Loyalty360: Gold's Gym Embodies the Definition of Customer Experience, 2015-Dec-1 by James Loy

"We are trying to change hearts and minds, and we need to do a tremendous amount of effort and work on our human capital side,” [Senior Director of Member Experience Brad] Bean said. "So we try to find team members that see value in what they do. And we have found that friendliness, by far, is the most impactful score that we can measure."

Working with InMoment and through a comprehensive analysis of data, Gold’s Gym found this to be true almost independent from any other factor. This one metric held true, regardless of many other factors including facility cleanliness or even the condition of the equipment. Friendliness consistently increased and enhanced the brand’s customer experience across all levels, and at every turn.

The Loyal Bank of Favors

Photo by Smabs Sputzer on Flickr

Loyalty gets tangled up with reciprocity. Loyalty is about making a long-term commitment, a commitment to weathering the storms in a relationship. In contrast, reciprocity is "tit-for-tat," and it's much more fragile. Rory Sutherland recently did a good job of teasing apart the difference. The more mileage in your relationship, the more slack… giving both sides permission to make mistakes and to get favors as well as forgiveness. 

Wired UK: Relational capital will drive business in 2016, 2016-Jan-16 by Rory Sutherland

Any non-anonymous transaction involves more than the exchange of money; it also entails the exchange of an invisible and unquantified mental "trust currency." If I keep an Uber driver waiting on my first ever journey, the likelihood that I am a bad customer is quite high; on the other hand, if I force a 20-minute wait after a long, unblemished record of punctuality -- well, he should probably forgive me that one.

You could call this currency "the benefit of the doubt." Over time, we expect businesses to which we have been repeatedly decent to reflect that in their treatment of us. Loyal repeat customers believe that, with each transaction, the seller should add a mental credit to the favour-bank. If this tacit rule is broken, and the favour-bank proves to be empty, moral outrage may cause the scandalised customer to defect -- even at some cost to himself.

At IHOP, loyalty program leads to even more valuable conversations


For success, a loyalty program isn't required, but it's an opportunity. For International House of Pancakes, the 2010 launch of its program led to many surprising conversations and a deeper understanding of its customers. 

Loyalty 360: IHOP Loyalty Program Helps Company Learn How to Better Interact with Guests, 2015-Dec-17 by Jim Tierney

Kirk Thompson, VP of Marketing, IHOP told Loyalty360 that the company has learned from many key insights gleaned from its Pancake Revolution loyalty program....

The biggest learning was how to involve and interact with our guests rather than simply send out or post a message or email—our brand voice has changed and evolved with our learnings to address the strong emotional ties guests already bring to the brand, which is a distinct competitive advantage few other brands have.