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Loyalty Myths

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Loyalty Myths

Hyped Strategies That Will Put You Out of Business - and Proven Tactics That Really Work

Wiley,

15 min read
10 take-aways
Text available

What's inside?

You don't need loyal customers; you need profitable ones.

Editorial Rating

6

Qualities

  • Innovative
  • Well Structured

Recommendation

Many business people believe in Pareto’s principle, which states that 80% of your business comes from 20% of your customers. As a result, businesses have invested a lot of time and money developing that crucial minority of loyal customers. However, according to Timothy L. Keiningham, Terry G. Vavra, Lerzan Aksoy and Henri Wallard, some of the customers you’re working so hard to retain may actually be costing you money. Even worse, if you follow the advice of many marketing experts and focus narrowly on retaining old customers rather than on finding new ones, you can kill your business. The authors effectively demolish each of 53 myths about loyalty using helpful statistics and case studies on the one hand, and some enigmatic charts and corny cartoons on the other. However, in the end, you may wish they’d spent a little less time on demolition and a little more time on presenting the "proven tactics" they promise in the second half of their subtitle. Nonetheless, getAbstract recommends their book to marketers who wonder why their customer loyalty programs are not working and who want to make a change.

Summary

First National Thumbs Its Nose at Customers - And Wins

The First National Bank of Chicago, like most banks in the 1990s, was searching for ways to improve the abysmal 5% return on equity that it had begun to suffer as more financing options became available to customers. The bank decided to decrease its costs by encouraging customers to transact their business by phone or ATM. It began charging $3 for each transaction with a live teller.

The media went to town making fun of the policy, and competitors took advantage of it by offering to pay customers, rather than penalize them, for using tellers. Obviously, the bank’s decision flouted conventional wisdom about customer loyalty. However, in the end, the bank’s profits increased by 28%. More than 80% of its customers began to transact their business electronically, and two-thirds began using ATMs to make deposits.

No one would argue against investing energy in understanding and meeting your customers’ needs. However, customer loyalty isn’t everything, and focusing on it too narrowly - especially to the exclusion of acquiring new customers - will hurt your bottom line.

Myths about customer loyalty come ...

About the Authors

Timothy L. Keiningham is the senior vice president and head of consulting at a customer-loyalty consulting firm. Terry G. Vavra is a public speaker, and a consultant on loyalty and customer satisfaction. Lerzan Aksoy is an assistant professor of marketing at Koc University in Istanbul, Turkey. Henri Willard is the CEO of a customer-loyalty consultancy.

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