Retention and Relationships » marketing http://www.michaelgreenberg.com Musings on customer loyalty and retention marketing Wed, 01 Sep 2010 17:44:16 +0000 en hourly 1 http://wordpress.org/?v=3.0.1 Involuntary Customer Loyalty http://www.michaelgreenberg.com/2009/08/31/involuntary-customer-loyalty/ http://www.michaelgreenberg.com/2009/08/31/involuntary-customer-loyalty/#comments Tue, 01 Sep 2009 00:01:34 +0000 mdgberg http://www.michaelgreenberg.com/?p=110 One point I wanted to add to a recent article was the notion of involuntary loyalty.  Many companies have this and mistake it for one of the other types – rational or emotional.  Involuntary loyalty is attachment to a provider or entity due to reasons beyond the individual’s control.  Think Comcast, Hulu, Walmart in many places, many grocery stores, Medicare, your local mass transit agency, and many others.

When there are no realistic substitutes, people are forced to choose a provider involuntarily.  With analysis, their behavior will even look loyal.  Not understanding that many people would choose to go elsewhere if they can might be fatal to many organizations.

]]> http://www.michaelgreenberg.com/2009/08/31/involuntary-customer-loyalty/feed/ 0 The Wrong Way To Approach Customer Loyalty http://www.michaelgreenberg.com/2009/05/07/the-wrong-way-to-approach-customer-loyalty/ http://www.michaelgreenberg.com/2009/05/07/the-wrong-way-to-approach-customer-loyalty/#comments Thu, 07 May 2009 23:31:38 +0000 mdgberg http://www.michaelgreenberg.com/?p=69 Good piece at Harvard Biz Publishing today, but most of the community commentary misses the point.  Offering price promotions to all customers isn’t loyalty marketing, its price promotion.  Some customers respond only to this message, but many would be just as responsive to a different message (new product intro, local event, cross-sell to a recent purchase), to great service, or to the brand as a whole.

The authors rightly point out that usually only 20% of customers are profitable.  But its not that simple, since what matters is the marginal profitability of the last dollar sold.  You have to cover those fixed costs somehow.

A different interpretation of the tactic they criticize might be:

Resources are limited, so focus on the most profitable customers.  If you have the resources to focus on unprofitable customers too, go for it, since they help cover fixed costs.  But try to allocate your overall resources based on potential for future profitability, not evenly across all customers.  Only when you are totally out of time, creativity, and employee bandwidth should you shift to pure price promotion.

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