Is there a link between Employee Loyalty and Customer Loyalty?

Well, employee and customer loyalty are different things, right? There are different programs, processes and owners that drive merchant or channel loyalty, customer loyalty and employee loyalty in many big companies. In other companies, all of these may not exist but what does exist, say customer loyalty programs, don't ever concern themselves with employees or partners. 

What if there was a link?

One end of the spectrum would be a great company, doing well, and selling a great product. Customers are happy, which is why the product sells a lot. Employees would be happier here than in a slumping company with sad products to push, no matter what the HR policies are. Employees of a successful company tend to gain more resume-value (e.g. doubled sales from X to 2X), have more promotion and increment chances since such companies tend to earn money and expand, and in general even if they're riding a wave, feel proud about their numbers. But while this logic may hold, there's a much better, simpler way to see the relationship between the two loyalties. 

A company is its products, its customers and its employees. 

Imagine a restaurant that you want to be loyal to, but that loses its doorman every week, chef every other week, barman now and then. Now what will bring you back? It can't be the food since the new chef will cook it a bit different, and it can't be the service. Most of all, you'd suspect the restaurant does something wrong by its stakeholders. Just the brand or the interiors can't create loyalty. And more than anything else, especially in the service industry, the product is a function of who delivers it. The trainer is the training, the salesman is the shop and the call-center employee is the company. Once these front-facing people leave, patrons think the place 'isn't what is used to be'. And it applies to product companies as well since IP finally resides in people. It's just that all of them aren't leaving together - else we'd know that KM systems can only do so much to preserve knowhow. 

Allow me to also claim, for a bit, that since a company is a set of employees, employee-loyalty is loyalty to other employees. Once a company loses some employees, it'll lose more since the act of employees leaving spoils the employer-brand ones and of-course, those that leave can poach. So if you think the doorman is okay to let go but not the chef, you may be right... but only till the doorman tells the chef about his great new workplace that also needs a chef. 

iDEA - Link Employee Feedback to Customer Benefits

Space-a-spade, most customer-benefits that are at the discretion of store staff do to placate a kind of customer that, honestly, one could do without. But tell me something, have you been to hotels where you have been nice to the staff and the staff to you? Then when you visit them again, they remember you and sometimes 'pull a few strings' for that upgrade or meal voucher? You probably don't know if the reverse has happened - when you shouted at the waiter and had your soup spat in. 

So what I'll propose here isn't completely new, but it still is, somewhat. 

What about recording the views of your staff against the customer's loyalty record so that you can reward the better people, not just the blackmailers, the churn-risks and the highest spenders (well, rewarding the highest spender happens rarely - loyalty programs  are frequently to reward the worst customers - but more on that some other time). The implicit, anecdotal, ad-hoc, hyper-local version of this anyway works, as described in the beginning of the article, but one could make it organized so that the information, like other loyalty information, is available across the points of service. This may not just reward the good guys, but help identify the serial offenders - those that slip in the strand of hair to get their meals free, those that stain the bed-sheet to get the champagne, those who think waitresses enjoy being flirted with and so on. 

Today these guys walk free of their past, actions remembered only for a short while by the particular people who encountered them till those particular people are in the same establishment and so on. This simple change in the customer record could take away their invisibility. The next time the customer walks into your bank, hotel, restaurant or shop - the screen will flash on the reception. And who knows, maybe in the long run, when you take away anonymity,    

I'm not sure if I've thought of all dimensions. Maybe there's more. Maybe there's potential for misuse, but that's like asking if you would trust your employees to give fair reviews. Maybe this system is against sometimes-nasty-but-overall-nice people or now-reformed people who are, like all of us others, noticed and remembered more for the bad than the good - but that's just a calibration issue. I don't know - sometimes it seems like an idea that should already exist, sometimes as something that needs more thought. 

What do you think?

ps: of-course at the base of it all is still the question around whom does your loyalty program reward - the bad customer (which is usually the case) or the good kind that you want more of. If you haven't answered that yet, read this post once you have.

Loyalty - so much more than RFM

What does RFM mean? Someone's shopped recently - does it mean the person is more loyal? Frequency is again a function of category - one should look at share-of-occasion and not frequency unless one is working within a closely defined category - which is rare. Monetary value similarly means less. These three factors perhaps are telling you which customers are contributing disproportionately to your company's value - but but not as much about how loyal they are and why. 

 

Talking of loyalty, the first distinction to be made is obviously between purchased vs. natural loyalty. Purchased loyalty - buying occasions induced by throwing money at the customer is more in the league of buying turnover and hence not really part of a loyalty discussion. The use of insights and analytics to this field will at best yield a better efficiency for interventions such as subsidy and coupons, but loyalty by definition is not this, right? Now that brings us to the rudimentary but complex topic of defining loyalty and more importantly, remembering the definition as we go about undertaking various activities under the garb of loyalty. For this discussion, therefore, paid loyalty is out of syllabus. 

The second most important distinction to be made is between attitudinal vs. behavioral loyalties. Both are important and in syllabus, but it is still important to put the right label when we speak - because both are fairly different animals. While behavioral is observable, measurable and clear, it cannot easily answer 'why' questions. One could have high exhibited loyalty just due to the lack of  alternatives, or better alternatives. It is a practical kind of loyalty to measure though, and a focus here ensures one is not wasting time running faster than the tiger. At the same time, it is important to remember that buyers can be loyal and potentially open to switching at the same time - not single but ready to mingle nonetheless. 

The attitudinal kind of loyalty is the holy grail of the 'why'. 

Storks mate for life. Wild dogs, ants and bees exhibit loyalty to the pack. Dogs may not show loyalty to their mates, but they're loyal to their human masters. Cats are said to be loyal to the house and the lioness to the 'position' of the most powerful lion. The logic of loyalty is certainly complex and non-trivial - and we haven't even started talking about humans.

We haven't spoken about how some people may be more 'predisposed' to being and staying loyal. This is something you could possibly measure - such people have clear favorites that don't change that often. in most cases - music, food, colors and so on. On the other extreme are 'variety seeking' people - who like to try different things and not get tied into a pattern. The first person, if ordering five dishes in a restaurant, will order four familiar ones if not five, while the second person will order only one familiar dish if at all, and others he hasn't even heard of - the more exotic the better. Of-course the perplexing question here would be are the predisposed people already taken? Or they still have 'open' slots for newer brands to latch on?

A close topic is the cultural context to relationships - in India, disloyalties to a girlfriend are commonly / socially forgiven, but not to a wife. Disloyalty to an employer is again, forgiven - but in Japan that too, is a matter of loyalty. Within various age-groups in India, the elder generation is probably still loyal to a brands like Bata and Tata, the younger prides itself on discovering new, cool brands every day.  

We haven't spoken about some categories being more prone to loyalty - more 'emotional' and less 'commodity'. Now who's loyal to a brand of memory-cards? But we are, to mobile phone brands, right? What about inherently infrequent purchases like double-beds? How many will you buy even if you're loyal to a retailer?

So clearly, we aren't having the debates we should be having - we're merely talking about which customers already bought more from us. We're talking about cross and up-selling, driving repeat and many things I completely respect - but loyalty is the wrong label for these conversations. 

After we separate the discussion around transaction incentives (don't you hate the term 'paid-loyalty?'), after we speak of customers predisposed to loyalty towards categories they care about, after we put the filter of financial and emotional viability on it - in other words creating loyalty drives meaning for the customer and the company, after we separate behaviors from underlying attitudes, then and only then would we begin to understand this noble emotion.  

ps: thoughts welcome - I think it's happening to a lot of other big words (e.g. Trust - familiar?) too. More on that later. 

Loyalty Programs versus Loyalty

What comes to your mind when you think of loyalty? My guess is, one of two very different things. You’ll think either of a loyalty-program (which is really a way of either incentivising repeat purchases or re-activating potential lapsers) or of Harley Davidson. Both, now that you see, are very different from each other. 

The loyalty I’d get through a points program is ‘purchased’ loyalty. You stop giving me points, I stop buying. This ‘loyalty’ is a reward for threatening to be disloyal, for being a bad customer. The Thums-Up or Laphroaig loyalty is not only unlike this but I suspect opposite. I mean if you do start incentivising / paying a Thums-Up guy to drink Thums-Up, he’d hate it. He wants to be seen as the guy who loves his soft-drink and doesn’t compromise. He’d rather drink nothing than drink Coke or Pepsi. He’d hate to be seen as the guy who drinks Thums-Up since he gets a discount. 

The other big(-ger) issue is on withdrawing benefits. Benefits in perpetuity stop making a difference, and temporary benefits leave the consumer with withdrawal symptoms. We’ve all read about the day-care that started monies for parents who picked up their kids late. The percentage of parents coming late increased, and what was worse was when they got rid of the monetary penalty, the percentage increased further. So translating a monetary value back into an emotional value is impossible. 

Moral of the story - it’s tougher, but much much better to start creating emotional loyalty. Get that experience, that taste, that message right. Re-consider what your ‘loyalty’ consultant is telling you. Re-think before you go down that one-way street. I’m not saying points are bad, I’m just saying that it might not solve the loyalty problem. What’s common to Islam, Pink Floyd, Classic Milds, Manchester United, Old Monk and Royal Enfield is that they don’t offer points. And the day they do, they’re no longer on this list.

Post-script, maybe can be split up into another post, is a note on B2B. This is different, please do not confuse that with this. That’s a different ball-game altogether. Employees of a certain company will fly the most expensive airline as long as the company pays their bills, and never for personal trips unless they’re redeeming miles. Some other company will stick with sub-optimal bill plans of some telecom operator as long as one admin / facilities person is really happy with the operator for some reasons. Interesting topic, that one too, clearly not the ‘loyalty’ we’re talking about here, so maybe some other time on that....