What is customer loyalty worth in today’s business environment, and does it always pay to remain loyal to a business?
Solve this popular consumer myth for us, and you’ll also enter our competition offering five $100 vouchers. Let us know your reasoning and experiences to help shed some light on this situation.
When I was in business I would do everything that I possibly could to keep good customers, I never advertised, my customers did it for me. By good I mean those who were honest, paid their account promptly and treated me fairly. You will find a minority who want to take advantage, you can do without them. If you accommodate them they will want more and more. I would give one warning in case their misdeed was a genuine error but after that it was goodbye. I once had a colleague ask me how I could afford to pass up any custom. I replied that sometimes it meant less cash flow for a week or two but it meant sleeping well the whole year.
Treating me well was good business from their point of view as well. Given two emergency calls, which one gets serviced first, the one who deals fairly or the one who only pays at the last minute? I firmly believe this is the correct way to behave because it is good for profits, good for the community and yourself. Life is too short to spend it wrangling with people who want to nail you to the wall on every deal.
I try to be a good customer and to remain loyal where I can. As mentioned it is often in my interest to do so. Do I sometimes pay a little more than the absolute minimum - yes. In the long run do I get better value for money - yes. I will be forgiving of minor transgressions for the sake of keeping the relationship going but if it becomes clear that they are no longer trying hard enough I will leave. Threatening to take your business elsewhere will not be heard, the sound of your footsteps as you go will.
Yes and No… with many small businesses I think it is worth staying loyal, as they look after you with good service, and sometimes prices too.
For large companies, and I’m thinking insurance in particular, staying loyal is likely to mean you’ll be paying a lazy tax!
Until recently we had all our insurance with NRMA, where we supposedly were getting various discounts for being loyal long time customers, but last time a car insurance was due we thought the premium was a bit too high, so looked around - over the fence so to speak, and the grass was indeed greener! We saved well over $100. The other car is due soon, so we’ll be looking around again.
It depends on the business whether loyalty is worth anything.
There is an old business axiom “that it is easier (and cheaper) to retain a customer than get a new one”
But many business don’t seem to pay that axiom much attention anymore, including in my experience ‘Choice’ the consumer society.
I’ll give an example:
I had been a longterm customer of ‘Choice’ magazine for over 25 years and in the mid 2000’s I gave up my membership as I was disillusioned with the direction the organisation was taking at that time.
Then over the next five years I never heard a word from ‘Choice’ no effort was made to re-engage me. Then belatedly after this long period ‘Choice’ did contact me again as a former subscriber and offered me the opportunity to trial the current magazine again which I did and as I was now comfortable that ‘Choice’ had returned to its core activities I resubscribed.
I put these lost years down to the direction of the senior management of Choice at the time was pursuing and this happens to all ventures new brooms come in and decide to do something different with no regard for their existing loyal customers and this sometime ‘hacks-off’ these existing customers who vote with their feet.
So the moral of my story is loyalty is a two way street.
One thing that I have noticed over the years and it doesn’t apply to all businesses either big or small is complacency . Once they seem to think you are a " regular " and are going to use their product or service the enthusiasm that was first shown when you became a customer falls away , often very sharply ./
I experienced this a number of times over the years . Loyalty also has to be redefined in this age of online shopping . An acquaintance of mine who owns and runs a fishing tackle store was aware of the threat of online shopping very early on and countered it by consistently improving his customer service and always striving to do better . He never became complacent in as far as he thought his customers would always purchase from him . He worked to achieve loyalty to us the consumer and for the most part that loyalty was returned .
I have no need to buy anymore fishing reels or rods as I’m well kitted out in that department . I often drop into the shop to purchase a few sinkers and some swivels . Maybe $8-10 purchase .He treats me like I’m spending a million dollars there . Asks how and where I’ve been fishing and takes a genuine interest in me as the customer . Hence I’m loyal to that business because it fits the criteria I have established regarding a standard of service that lives up to customer expectations .In the end we can’t go looking for a consumer Utopia that does not exist . We merely have to set a standard that we see as acceptable to both supplier and consumer . If this is achieved loyalty should usually follow.
I never realised that I really am a “loyal customer”. I generally do my research and if I find something I like, I stick with it. It’s a two way street…they usually have less hassles with me and I pay my bills on time. This is highlighted by another post I’ve just made re Virgin mobile…I’ve been a customer of their’s ever since they started in Australia and with their bad coverage, I’m agonising over my last resort of changing carriers.
Why the agony? I’m one of those loyal customers. I know how they work and operate. I know how they deal with me when I contact them. I don’t want to research new companies and make a decision, which may/may not be the correct decision.
For companies…it pays for them to keep the loyal customers, as it’s easy money for them and we will speak highly of their product. For individuals, anything for a simpler life, but I guess we all have our limits…and that limit can be stretched either by costs or customer service. For me, customer service is becoming more important.
"[quote=“BrendanMays, post:1, topic:15347”]
does it always pay to remain loyal to a business?
Some good observations … Certainly agree with the lazy tax @gordon mentioned … loyal doesn’t mean blind, but it’s easy to assume one good deal leads to another …
Our range of experiences are similar - it depends?
I would hope to be able to suggest there are some rules or criteria to take the uncertainty out of the answer. I Can’t.
The only certainty is that everything is constantly changing. And trying to keep up is even more challenging.
Is loyalty fickle? Are we loyal to price, service, quality, convenience or fake discounts and rewards?
Is loyalty also a two way street? If both parties are willing to communicate and share the rewards?
The continued aggregation of business makes loyalty a vague outcome. We have big companies taking over small to gain market share (IE customers) without any notion of loyalty (EG Westnet became iiNet and now merged into TPG. There’s not a enough word space to relate that outcome). It’s also evident in the banking industry where banks are now insurance brokers, financial service providers and super/managed investment providers. Great - but with all those extra services why has my local branch closed and why do I pay the same or more than a new customer on an introductory rate? As the current banking sector inquiry and other public criticisms suggest there is not true competition. Loyalty is worth nought until you leave. Even less if you are a self funded retiree trying to renegotiate a loan.
I can’t see any one individual being able to influence the majority of our purchasing outcomes. Loyalty will need to be collectively bargained.
How do you know you have the best outcome, assurances and deal?
For an organisation such as Choice the future is much broader than just testing products. Hopefully it continues to stretch the vision.
I am loyal to the local Stihl dealer but only because it’s too far to drive to the next one. The only other dealership in town sells Honda and Hasqvarna. Is brand loyalty relevant in the same way or am I just lazy? The staff at both are personable and helpful, although the smiles at one are broader. I use both depending on product but prefer one over the other. It’s not that simple if you don’t live in a big city.
There are some in-depth replies here, some of which I haven’t read so I hope my comment isn’t irrelevant to the discussion!
My anecdote is for car insurance. The savings for being a long-term customer of your car insurance company simply does not outweigh the “lazy tax” you pay for not shopping around every year - for my situation. I won’t re-crunch the numbers for everyone here, but last year alone, I saved just under a hundred dollars for ending my previous insurance contract and opening a new one with the same company.
I always advise people to crunch the long-term numbers themselves for their situations, and come to an informed decision.
EDIT: I was too lazy and didn’t proof-read my mispelling of ‘lazy tax’!
There is blind loyalty and there is informed loyalty. If you are loyal to a product or business and are doing so without any questioning of why you are it is probably a bad idea and the outcomes are likely poor (whether you in the end realise it or you don’t).
If you look at the reasons and/or values of why you are loyal and weigh them up and decide to stick with it, this means that you have an informed reasoning as to why you remain loyal. In this case the “value” is worth your loyalty and the outcome will almost invariably meet you expectations. These reasons/values could be a single factor or a combination of factors eg price, social, speed of claim/response, inclusions, exclusions, performance and so on.
So no loyalty does not always pay but you can always assess it to determine if it does.
I believe in reciprocity, so I will support a business with my $ while I too derive some benefit, whether it be:
- an good experience such as a pleasant environment, a chat, or an offer of a cup of coffee.
- a financial benefit, where it is at least no more expensive than other places, but preferably cheaper,
- superior service, such as faster processing, or paying out or refunding without hassles, OR
- a better product, or product range, for what I require.
If any of those becomes a negative, then I look for alternatives. If two of those are negative, I’m gone.
Our dentist is a good example of loyalty. He knows that my family is currently under severe financial constraints, to the point where I discussed the probability that we would have to move to a ‘health-fund-approved’ dentist.
The last two times I have visited, he has done the work and then said “that’s no charge for today”. (The second time around I insisted on paying at least a moderate amount.)
He knows I have teeth falling apart and that need a lot of dental care. He knows I am currently unemployed, but has decided that I am a good customer and he will try to fit me into his budget.
Loyalty absolutely pays… when it comes to small businesses.
-> when it comes to some businesses. It works all ways, business dependent.
A simplistic overview so please do not try to read anything into or out of events re the following.
I became a regular customer at a local family run small shop. My purchases were modest but consistent. After a while they started giving me a small discount. As a result I stopped shopping around because I got good service and was made to feel ‘special’ although as a family run small shop the prices could never be as sharp as a larger operation. The personal familiarity had value.
After a few years the discount suddenly stopped and I was ‘just a customer’ with personal familiarity, paying RRP. The next time I went in I hinted at the previous discounts and was rebuffed. I have not been back since.
Some very good observations here. My immediate answer was “It all depends” and I stick by that. I always open to small and/or local businesses making an effort to nurture our relationship even if it is for non-financial gain – this is where good customer service plays a huge part. For the larger organisations this is not always easy to recognise and I now always investigate whether I am paying a lazy tax or being taken for granted in the relationship – here Choice has played no small part in raising consumer awareness of poor institutionalised behaviours.
Being in customer service consulting for many years, it always pained me to see organisations abandoning simple principles of customer service in chase for an increased profit. However, it is not always financial gain that encourages customer loyalty. On several occasions I worked with organisations implementing customer knowledge sharing systems which encouraged customer feedback and contributions on their service or products and also gave recognition to their knowledge contributors.
This sounds like the IT industry. Microsoft gives titles to non-employees (but no money) if they help debug their software and advise others how to make it work. It works surprisingly well and saves huge amounts on testing and documentation.
It depends on the business and whether they value you as a customer, and wish to retain you as a customer.
I would say as a general statement, that businesses which offer more personal interaction (such as local butcher you use regularly or the GP one has built a relationship with over many years) are more likely to reward loyality, either through better service or through point of sale offers/discounts/rewards.
Those companies which you are effectively another number. …or customer…may not care if you are their curtomer as there is another potential customer around the corner. Such companies may appear to offer benefits to loyal customers, but may be window dressing to something already available to all.
Thanks for the detailed thoughts on this subject all. It’s not as easy notion to pin down, and I think collectively we’ve helped put this to the test. Please keep sharing your experiences around loyalty so that we can continue informing the topic.
Same here with my experience with NRMA. Received the renewal notice for my NRMA contents insurance and the premium increase was way over CPI increases, interest rates, etc and there was an arbitrary increase in the amount sum insured.
Last time I went through a process of negotiating with NRMA to reduce the premium to something reasonable and I said that I would not do this negotiation again and would go to another insurer. That’s what I did and got a better deal with a company that rates higher in the Choice reviews of insurers.
I had been with NRMA for many years and the reduction in premium easily covered the loss of the so-called loyalty bonus.