Why We’re Not As Loyal As We Used To Be

1:1 magazine ran a cover article not long ago titled If You Want Loyalty, Get A Dog (the site tells me the article is no longer available), and now, in my inbox, comes an article from a company called Vox that poses the question “Is customer loyalty a thing of the past?”and claims that “old business tactics don’t work on today’s savvy customers.” The article goes on to say:

Today’s customers don’t hesitate to switch where they do business if they feel their expectations aren’t being met. In fact a recent survey conducted by Thunderhead, found that 61% of insurance, and 63% of banking customers polled planned to switch providers during the next year. The reasons? 76% want more personalized options when it comes to how providers communicate with them.”

My take: First off, no where near 63% of banking customers are going to switch providers during the next year. Second, among those that actually do switch, the desire for “more personalized options when it comes to how my bank communicates with me” is not going to be at the top of the list of reasons why they left.

There’s no shortage of articles and blog posts proclaiming the death of customer loyalty. While it may very well be true that “today’s customers don’t hesitate to switch” and that people want “more personalized options,” these articles rarely explain why.

The reason, in my opinion, is impacted by — but not caused by — the Internet. No, the root cause of this goes back well before the advent of the Internet, and social media, and all the other so-called “disruptive” technologies that some people like to rant about.

Instead, the reason is rooted more in societal changes and globalization. As we’ve become a more affluent and highly educated society, we’ve had an increasing desire to have more control over our lives. It’s an insult to our intelligence to think that we can’t make decisions for ourselves and that someone else has to tell us what products and services to use. Globalization, however, has had a negating impact on that feeling. As news from around the world reaches us daily, hourly, and now on the minute, we’ve increasingly felt that things are happening so fast that we’re losing control of what goes on around us.

Switching providers — whether it’s banks or firms from other industries — is an act of independence. We switch because we can. We switch to make a statement. We switch to demonstrate that WE are control of our lives and our business relationships.

While having the ability to “personalize communication options” is a demonstration of personal control of the relationship, let’s get real here — in the scheme of things, it’s simply not that important. Despite all the market research that purports to show a decline in customer loyalty there are still plenty of examples of firms with fiercely loyal customers. Do they all allow “personalized communication options”? Doubtful.

Successful firms approach customer relationships as just that — relationships. A two-way street. It goes far beyond “customization” and “personalization”.

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13 thoughts on “Why We’re Not As Loyal As We Used To Be

  1. You’re right, Ron. People switch because either they’re not happy with the service they’re receiving, or they find a better product/price. The Internet just facilitates research into alternatives–it doesn’t change the ultimate dynamics of retention.

  2. I actually heard the term “loyalty is dead” used at a recent council meeting here and it blew me away. I don’t think it is so much that loyalty is dead, but that people are more selective of the companies they are loyal to. If you are worth the people’s loyalty they will give it to you, but like you said Ron, it isn’t because “customized communication options”. Maybe its not the options that gain the loyalty, but the communication itself, regardless of channel.

  3. I agree with you, Ron and Andy. I just spoke a Cooperative Communicators Conference — people who are dedicated and loyal to cooperatives. However, what kept coming up…people have more choices today. It challenges loyal consumers. Can you purchase a food item cheaper at a chain grocery store or a food cooperative? Are you going to shop where you are going to getter a better price or pay more because you are a member-owner of a food coop? Choices…

  4. I agree that the internet is a huge reason for a lessening in consumer loyalty. We have more choices and fewer incentives to remain loyal.

    I’m reminded of a client, from many years back. They managed a huge and highly successful travel site. But they had a policy of not linking off of the site to ANY other — even if it was done using a “target=new” to open a daughter window. The misguided thinking was: Let’s not give them any option to stray. That’s like trying to stay dry when you dive into a pool by wearing a raincoat !

    As quaint and hoary (No, not THAT meaning! Look it up!) as their advice seems today, I still agree with the authors of the 1-to-1 Future that your only recourse is to try to build a fence around your best customers. Tie superior customer service to the user’s supplying personal information (“The more you tell us, the better we can help you.”)

    Once you’ve hit a critical mass of customer knowledge, this customer will have a huge disincentive to switching. They’d have to teach a whole new provider.

    Financial institutions already rely on this to a great extent. But only their imagination limits them from taking it farther (and we all know how imaginative THIS industry tends to be!)

  5. I also think that some organizations believe that being a member or customer for X number of years equals loyalty. My definition of loyalty is that when a company makes a mistake or doesn’t have the the very best price, the member/customer still chooses you because of the lifetime value you have given them. It may be that loyalty is harder to earn than it used to be but it still exists. Consumers sometimes don’t give firms enough time to earn their loyalty or show their value. Most lasting relationships, personal or business have to grow over time. I agree with you, it is all about the relationship.

  6. @TheLarch Thinking about loyalty in terms of building fences is misguided. The last thing anyone wants to feel is that they are trapped in a pen or a cell. Having a history/personal past data tied to your company is indeed a strong bond… but not nearly as strong as having your friends also tied into the network, i.e. community. A place like eBay does both at the same time (my reputation increases the more I do business there, and the network of other buyers and sellers is enormous.)

  7. I actually think loyalty is more alive than ever . . . if it is earned. I find myself booking flights with Continental even at times when another airline may have better options. Why? Because they respect (and reward) my relationship, remember my preferences, and treat me as a valued customer. The same can be said about the dry cleaner, car wash, grocer and even the bank that I use. I don’t want to change these providers, but I will if they stop treating me the way I have grown accustomed to being treated. Unfortunately, th bar is still not set very high when it comes to being better than the masses in any of these categories.

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  9. @Jeff Larche: The internet hasn’t lessened customer loyalty. It’s just helped to expose what we previously (and erroneously) GUESSED was loyalty. Like Jim said, people will stick with you for value; that’s as true now as it was before Google. What the internet did was make it much easier for relatively ambivalent customers to discover WHY they should leave you. Now customers can price-search and gather reviews much easier than they ever could before, which makes them more likely to leave than in the (cough, cough) old days, when it was much harder to find a reason to leave, beyond basic price shopping.

    Customers who leave because of internet searches were probably never loyal in the first place, they were just lazy.

  10. Ron, Very nice post. I have an interesting point of view to support your post:

    I had client, B.S. Nagesh of Shoppers’ Stop, a leading retailer in India. telling me once( I used to run their very successful loyalty program – First Citizen) – “We need to be loyal to our customers, more than they being loyal to us!” . That’s the truth about loyalty. Companies need to create enough value, stay true to building relationships which is a two-way street, build enough reasons for customers to “feel cared”, then customers show their loyalty to companies!

    Loyalty is not dead. Loyalty has to be earned by companies in this era of information availability & easy switching possibilities! That’s making a huge difference.

  11. Loyalty is most definitely not dead, but there are degrees of loyalty. Firms should try to understand loyalty beyond the number of years they’ve had a customer. Sometimes companies assume that if a customer hangs around they are loyal. In our firm we balance time on books with profitability and try to predict where they may go based on where they’ve been, etc. This expands our thinking about loyalty, which is very useful as we decide how to market and who to market to. We also do a lot of listening.

    Some customers are just lazy and don’t take time to step back and re-evaluate a relationship. I was loyal to a car insurance company for over 15 years. My parents had a policy with them and once I was out on my own, I followed suit. I always threw away those direct mail solicitations from other insurance companies because I had subconsciously struck an arrangement with my insurance company. I paid them on time and they would provide me with their service at a reasonable price. I didn’t feel I was particularly loyal to them. I actually didn’t even think about it much.

    Then along came the internet and one day I fired up my browser. In a few simple clicks I discovered that I was overpaying by more than $400 per year. I switched that afternoon. My past actions of shredding all the incoming competing offers were in a sense a powerful demonstration of loyalty. When I left I didn’t feel that I was now suddenly disloyal. What I felt was stupid and maybe even a little taken advantage of. Perhaps they weren’t being loyal to me.

    Completely agree with you that most people won’t switch quickly, especially in the financial services area. What I do think the buzz is about is that when companies show customers they understand them and are making things easier for them and more relevant (one to one is impossible, too expensive and not necessary) they are demonstrating loyalty to them. The favor will be returned.

    No, you’re correct. The internet hasn’t changed everything. But it sure makes it easier than ever to change almost anything.

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