Loyalty Myths: Hyped Strategies That Will Put You Out of Business and Proven Tactics That Really Work

Citation

Gemmel, P. (2006), "Loyalty Myths: Hyped Strategies That Will Put You Out of Business and Proven Tactics That Really Work", International Journal of Service Industry Management, Vol. 17 No. 4, pp. 401-403. https://doi.org/10.1108/09564230610680686

Are you ready to read a book which undermines many of your common beliefs of how to do business? Then Loyalty Myths is the right investment of your time.

Very early in the book, the authors set the stage by stating that a firm needs to “know the value of each customer and then focus loyalty efforts on those customers who are the most valuable”. This is the core message throughout the whole book, but in order to understand what it means in practice, the authors lead us through six chapters with 53 loyalty myths. The fact that there are so many loyalty myths indicates that many (but not all) of the 40,000 books and articles that have been written on loyalty management teach us as a reader nothing more than platitudes which simply do not work in the marketplace. “Platitudes” is a strong word, but it just indicates that the many articles and books oversimplify the issue of loyalty management and how it relates to growth and profitability.

The 53 loyalty myths are structured throughout six chapters in the following way:

1. 1.

   Myths that subvert company goals. Customer loyalty seems to be a very important (sometimes number one goal) of firms. But is it really important to keep “all” customers loyal. This chapter introduces the issue that any loyalty initiative needs to begin with an understanding of the profitability of individual customers. The 11 loyalty myths introduced in this chapter really undermines some of the popular wisdom such as “it costs five times more to acquire a customer than to retain a customer”.

2. 2.

   Myths contaminating company management practices. The customer‐focused organisation is a theme coming back in many publications. Are these organisations really customer‐focused? Do companies tend to know their customers? And are customer databases adequate for building loyalty? These are some example questions dealt within the loyalty myths chapter. One major lesson is that customer loyalty takes time to grow and that many firms are not ready to effectively implement loyalty strategies.

3. 3.

   Myths about customers. Do customers really want a monogamous relationship with the firms with which they do business? Using the example of Ryanair, the authors introduce the idea that monogamous relationships are not of this (business) world anymore. This does not mean that the share of wallet of the current customer base cannot be increased.

4. 4.

   Myths concerning loyalty programs. Most of us are members of multiple loyalty programs. The question is whether these loyalty programs really make the customer loyal or are a bad investment? Do frequent shoppers decide to sign up for the program because they are awarded for doing something they would do anyway? Does loyalty programs hostage the customer instead of nurturing loyalty? In this chapter, the authors develop some key characteristics for programs to successfully create loyalty.

5. 5.

   Myths about loyalty, share of business and profitability. In this chapter, the relationships between satisfaction, loyalty and profitability are investigated. The main point is that this (services profit) chain is much more complex than has been told. To understand this chain, every firm has to know their customer very well. Customers are not the same in different industries, within one industry and within one firm.

6. 6.

   Myths regarding employees. Who does not know the satisfaction mirror? Happy employees will create happy customers and the other way around. Does this mirror really work in all circumstances? It is without any question that dissatisfied employees can harm the company, but employee satisfaction or employee loyalty are two of a myriad of factors that ultimate affect the loyalty of customers.

After reading through so many loyalty myths, undermining our common belief in how we do business and how we teach management theories and principles, the reader becomes anxious about knowing what customer loyalty really is and how it can be obtained. Although there is no one clear definition of loyalty, the authors introduce in the last two chapters some new insights into what components can have an effect on loyalty. One of the major points is that we have to bring together two marketing theories and practices: brand‐centric marketing and customer‐centric marketing. These are sometimes two worlds in marketing; while they must go hand‐in‐hand to develop customer loyalty. After reading many critical notes on the fact that researchers in the past looked at loyalty in a far too simple way, the authors here come with (on a first sight) simple solution: combine the effects of branding and service experience and you will create an exponential effect on loyalty. This is then the seventh loyalty “truth” which must be added to six other truths (one for each of the six “myth” chapters).

The last chapter of the book teaches that the building and implementation of a reasonable approach to constructing a customer loyalty program is not that simple. The approach consists of five steps: observation, scoring, selection, prioritisation and leveraging. The core element in this process is the recognition that there are three segments of customers (desired customers, break‐even customers and costly customers). The construction and implementation of a loyalty program must then be differentiated using a matrix based on the segment of customers and their share of spending. In this way the authors very clearly explains what they mean with “knowing the value of each customer and then focusing loyalty efforts on those customers who are the most valuable”.

A little bit more surprising in this final chapter is the introduction of the four tools which can be used to leverage aspects of the customer and brand experience to grow the selected customers as we would wish them to grow. A reader with no (marketing) background in some of these tools, will have difficulty to understand how these tools can leverage.

A nice feature of this book are the many different real‐life (internationally selected) business examples used to introduce and illustrate some of the loyalty myths, such as Scott, Ryanair, France Telecom and Tansas (a Turkish grocery retailer).

After reading a whole book with nice examples of how firms were misled by the myths of loyalty, the reader expects at the end to find at least one example of a best practice, illustrating the seven loyalty truths and the process of building and implementing a loyalty program (as described in the last chapter). The book gives the reader the feeling of proposing a theoretical framework of how to construct and implement a loyalty program, where this framework still has to be empirically proven. Or do we still have to find this one firm which fully understands the “what and how” of loyalty programs?

The reader of this book, whether it is business manager or an academic, certainly will be shocked by one or more of the statements in the book, only because the statement undermines a common belief. By doing this, the book is a real added value for everyone who is involved in understanding customer needs and makes a profit out of it. The desire of the authors was to make Loyalty myths “as fun as possible”. The way in which the book is written and the many cartoons really help to achieve that goal. Moreover, the book encourages researchers to further develop the “complex” science of loyalty management which is just beginning to grow. But do not forget: The public will rather believe a simple lie rather than a complex truth.