Why Don’t More Retailers Understand Loyalty Is a Two-Way Street?

It’s been often stated in one way or another on this site that loyalty is not a card. Demonstrating loyalty — to go all Merriam-Webster here — is "having or showing complete and constant support for someone or something." I shop at many stores and websites, but have feelings of loyalty for very few. Those that have my loyalty have earned it.

Among the bigger guys, Trader Joe’s and L.L. Bean stand out. High quality products, good value for the money, friendly people and return policies that make me feel as though this buyer never has to beware when doing business with either.

Locally, in this little patch of New Jersey, there are a number of independents that have earned my loyalty. They’ve done so by demonstrating that loyalty is a street that runs both ways.

A case in point is the Vanilla Bean Creamery in Cranford. It goes without saying that the product is very good. This shop makes its own ice cream on premises and creates unique flavors. A couple of years back, Vanilla Bean’s Bananas Foster was voted best ice cream in the state. One reviewer on Yelp wrote that she has relatives who come from New York City to buy the Bananas Foster. The other reviews on the site couldn’t have been more glowing had the shop’s owner paid for them.

vanilla bean creamery

While the ice cream is excellent, that’s not the reason Vanilla Bean receives an almost weekly visit from members of the Anderson clan during the summer months. Instead, I’ll give you two examples.

Several years ago I stopped by the shop with kids in tow during the course of running errands around town. Taking our ice cream in cones to go, we left the store and, not more than a minute out, someone’s ice cream hit the pavement. After assuring one distraught child that she would get replacement ice cream, I went about finishing the errands. About an hour and a half had passed and back to Vanilla Bean we went. The teenager behind the counter saw us come into the store and said something to the effect of, "You must really like our ice cream." I said yes we did, but then explained the reason for the return visit. Guess who didn’t have to pay for a replacement cone?

More recently, I got to see the Vanilla Bean’s loyalty in action again. Like others, the business offers a punch card. Buy 10 ice creams and get one free. It also participates in a local shopping card program with a 10 percent discount off of all purchases to support the high school’s football teams.

Going to the shop with child in tow, we proceeded to purchase two ice creams. One was a kiddie cup and another that may have exceeded a single day’s recommended calories for an adult after all the toppings requested. Going into my wallet, I saw I was due for a free ice cream and assumed they’d take it out of the kiddie cup — wrong! The monster ice cream was free. The kiddie cup had 10 percent taken off and a new card got punched. I asked the woman behind the counter if she had made a mistake. I didn’t want her getting in trouble for giving me the more expensive item for free. "No," she assured me. This was the way they did it. The owner always wants the customers to know how much their business is valued. They do.

BrainTrust

Discussion Questions

Why do you think so many retailers struggle with figuring out what it takes to create a bond of loyalty with their customers? Do you have a personal loyalty story with a retailer that you can share?

Poll

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Debbie Hauss
Debbie Hauss
10 years ago

Since we’re all consumers, I don’t think the problem is that specific retail executives don’t “understand” the elements of loyalty; it’s the execution that baffles them sometimes, particularly for very large companies. It’s difficult to consistently provide that personal relationship when you’re a 2,000-store company with transient employees.

Certain retailers consistently do it well—such as Whole Foods and Nordstrom, but it’s the smaller, local retailers that have the ability to make that personal connection more easily. The ice cream shop is a perfect example.

My example is my local running store in Montclair, NJ. John, the owner of Fleet Feet, helped me choose my running shoes for my first marathon. He allowed me to wear the shoes outside for a practice run, and he followed along to watch my stride and assess the fit. Now that is excellent service—and since then (13 years later), I have been extremely loyal to that store.

Ian Percy
Ian Percy
10 years ago

Oh how I wish airlines would be more like Vanilla Bean. I guess it’s debatable as to whether airlines qualify as “retail” or not but I’ve often mused on this very ‘loyalty’ issue of late. For some time I was in US Airways’ “Chairman” category of frequent flyers, member of the Club, etc. Only the Nobel Peace Prize and Sainthood is treasured more.

In making a change to how I’m spending my time (40 yrs of that kind of travel is enough) I understandably ‘lost’ that classification. Now they might as well have sent an email to me saying “To us you are dead.” I now almost always explore other airlines because this “loyalty” deal is off.

What would it have cost US Airways to 1) have noticed that a “Chairman” member had suddenly stopped flying so much; and 2) to have offered an ongoing “Silver” status (the lowest available) to someone who’s given them a awful lot of business for so many years? On a relative basis, Vanilla Bean replacing a child’s cone was a much bigger deal.

Southwest here I come!

Max Goldberg
Max Goldberg
10 years ago

Most retailers don’t take the time to put themselves in the shoes of their customers and look at loyalty programs from the customers’ perspective. They don’t make customer service a passion from the CEO to the lowest level employee. They talk the talk, but don’t walk the walk. Until they do, loyalty is going to remain an illusion that is falsely soothed by use of cards that gather information, but don’t engender a relationship.

Ryan Mathews
Ryan Mathews
10 years ago

Debbie is spot on—it’s all about execution.

As George correctly points out, loyalty—like trust—is something that has to be conferred by the customer onto the retailer. There’s no other way to get it. Too many retail companies confuse “loyalty” with “rewards”—the former the result of experience and the latter a function of the terms of purchase.

Here’s an example. I regularly shop at a Spartan-supplied independent where I pay a significant upcharge for the privilege. It’s an arrangement that often leaves me questioning my own sanity.

The store has a “bring your own” bag program which in theory earns you a modest per bag credit for supplying your own bags. Invariably the cashier forgets to deduct the credit (which, on average, ranges from 10 to 50 cents per trip) from the bill (which, on average runs from $200 – $300 per trip).

Frustrated that the cashiers were undermining the program I asked one why he hadn’t given me the discount. “Oh yeah, sorry but I’ve closed out that order,” he said. I got home—fuming—and decided not to let it go. So, I called the store and asked for the manager. He got on the phone and—without asking who I was—listened to the story. “That’s just awful. I know you don’t care about the money but jeez we set these programs up and then this happens. I’ll talk to somebody about this. Thanks for calling and thanks for shopping with us,” he said, and then hung up.

So … to all of my good friends at Holiday Market in Royal Oak, MI, here’s a big shout out for all the help on that bag issue—which by the way continues to be a problem—from your unwillingly anonymous customer.

Loyalty is something that you have to earn the hard way—every customer, every transaction and interaction, every day. Otherwise, you’re just running a discount program.

Gene Hoffman
Gene Hoffman
10 years ago

Bonds of loyalty are formed for different reasons, one of which is giving replacement ice cream cones to your kids. Another is having low prices. Another, on the other side of price is offering a status environment. And the lists expands from there.

Personally, I’m most loyal to quality retailers who can project that they like me. From there, everything else is rationalized in their favor in my loyalty story.

Ralph Jacobson
Ralph Jacobson
10 years ago

Although I often cite airlines and hospitality as model of true loyalty programs, it’s interesting how many bad experiences the consumer is willing to tolerate in those industries before they drop their miles or points programs. That compelling loyalty needs to better transfer to retail. I believe it is very possible to do this.

Whatever format the retailer is (e.g., grocery, apparel), the retailer needs to employ the human touch to the shopping experience, both online and offline. The human touch is the final differentiator.

Bryan Pearson
Bryan Pearson
10 years ago

Behavioral loyalty reflects purchasing behavior and is often motivated by rewards. Customers who maintain shopping frequency and purchasing patterns are deemed loyal based on average spending behaviors. The customers are content with the service, but if a better option comes along they’ll make the switch without a second thought to the company they’re leaving behind. Behavioral loyalty can be a strong indication of convenience, price advantage or lack of competition, but it can be fragile and fleeting.

Emotional loyalty, in contrast, exists within a sustained customer relationship; when the customer sticks with one brand, even when a competitive alternative is available. It relies on the company’s capacity to recognize customers’ contributions directly. Research by the Gallup Organization shows that a customer who is more emotionally loyal to a business is more valuable than one whose loyalty is only behavioral, or due to satisfaction. In fact, emotionally satisfied customers increased their spending by 67 percent over a 12-month period compared with a mere 8 percent among those who were rationally satisfied.

Shep Hyken
Shep Hyken
10 years ago

First, retailers (or any business for that matter) must understand what loyalty is about. It’s not a program! It’s an emotion! A loyalty program can support a loyalty initiative.

A loyalty program that gives perks, a discount, a free “whatever” after ten purchases, is an incentive to do business. If the perks go away, does the customer go away? That’s the test.

Retailers should have reasons, other than some form of a discount, that compels loyalty.

I love going to a particular restaurant and always getting the same server, because he knows how to deliver a great experience. As long as I keep getting that experience, the restaurant has my loyalty. A free dessert or beverage would be a bonus. That’ it.

More companies should learn how to separate the incentive from the value of the experience to create a higher level of customer loyalty.

Anne Howe
Anne Howe
10 years ago

Mr. Pearson makes the ultimate point of this discussion. Convenience or rational loyalty is what I have with Delta Airlines. The emotion I feel during my transactions with Delta is frustration and dismay, and sometimes thankful when they actually give me a glass of water on a short flight.

Until we can consistently measure the difference between rational and consistent loyalty in terms of “meaning to the shopper” we really can’t make comments on what retailers could do differently to cultivate or maintain it.

Meantime, I dropped my ice cream….

Gordon Arnold
Gordon Arnold
10 years ago

When listening to retail mavens discuss loyalty programs there is generally a subjective insistence statement that acknowledges the existence of a premium program in place that rewards the “many” in membership like no other. Membership numbers are often shouted with glee, but there is no evidence of sales growth or profit taking revealed in any conversation.

The sad truth of the matter is that loyalty programs are merchandised and not marketed. Every single retailer is pushing the program(s) like it was a bag of cookies and cream equal to and better than those of brand ‘x’. Successful information gathering to provide a list of active ingredients for customer loyalty is collected at a few cash registers all over the world by owners and marketing managers trained and willing to listen to the public. Failure happens when a retailer expects a consumer to respond to a self checkout inquiry that provides limited opportunity to handle objections and even less perceived incentive to participate in any expanse of the customer-supplier relationships.

The simple truth is the customer is already predisposed as a customer, cashier, and bagger. With all that going on there is not a lot of time in the line for speculative chit-chat with the machine. The consumer in “xx” or less items line with a live cashier may be in a hurry and unreceptive to invitational conversation. Customers with large dollar and/or product orders are generally highly focused on the transaction for completion purposes and tuned out to qualitative information services. A trained marketing manager might provide not only a highly desirable loyalty package, but also have the savvy to identify opportunities in and out of the store to make the plan customer inquiry driven through the process of “establishing a need.”

In order to drive marketing incentives there is a strategic necessity to understand the differences between product and plan—as in tangible and intangible items and their relative values to the customer of any “specific” company. When executives understand this difference, it is easy to see a need for separation of marketing and sales from operations and merchandising for true market share expansion. Dollars, authority, willingness and “need” are the ingredients for making a prospect a customer for everything and anything. Differentiation is the ingredient that makes that customer mine.

Gene Detroyer
Gene Detroyer
10 years ago

It is a basic retailer mindset. Everything the big retailers do is geared to driving sales to the customer. It is not about engaging the customer to become a real customer. There is tremendous hubris in retail marketing and until that changes, loyalty will never be a two way street.

Imagine the board room discussion about a loyalty program. The first question will be “how can it help us?” The question of “how can it help our customers?” may never come up.

There are very few retailers that come to mind where I feel it is about me rather than them; Amazon, Staples, Home Depot and nobody else.

Lee Peterson
Lee Peterson
10 years ago

Here’s the thing, which is alluded to quite a bit in the write up but not stressed: it’s a lot easier to build loyalty when your product is off the charts (like the brands mentioned). And if it’s not, then its a lot harder to build any kind of loyalty with just ‘deals’. It’s about the value of those deals.

Starbucks is a great case in point. They shoot you a free cup of coffee every now and then. But that’s not so special. The apparel retailers send out amazing deals like 70% off all the time. The difference is that to most people, a free drink at Starbucks is worth a lot more that the price because of its quality. Apparel, not so much.

Product, as we used to say, is the #1 P. Everything pivots from there. Especially loyalty.

Ed Dennis
Ed Dennis
10 years ago

Biggest problem is ownership. The difference between an owner running a business and a manager running a business is the manager may be on a journey, but the owner is already home. The owner has his life on the line, the manager only his job.

I was once in a car dealership owned by a friend. He got a call from an irate customer who felt he had been short changed. He took some information and asked the customer if he could have a number and get back to him in 5 or 10 minutes. He then contacted his employee who had been interfacing with the customer. The employee explained that the customer was unreasonable and had refused the customer’s request because he would have been irresponsible to give in to the customers demand. My friend then called the customer and asked that he bring his vehicle in at his convenience for the modification he had been denied. My friend also explained to him that it was industry practice to sell the item he felt entitled to as an optional item, but said to him that he would give him this item at no cost because his people took it for granted that the buyer/customer would be familiar with industry practice. The customer was there in about 15 minutes and the owner went out to talk to him and explained why his employees had denied his request. The customer left very satisfied.

Later that day I was in a Waffle House and the same guy came in to eat. Someone commented about his new truck and he went on for 15 minutes about the car dealer and how he would never shop anywhere else. My friend lost a few bucks on an accessory, but bought a million dollars worth of good publicity. That’s the difference between ownership and management.

Ed Rosenbaum
Ed Rosenbaum
10 years ago

There is nothing much to add after looking at the limited survey question results. It is a sad commentary; but customer loyalty programs for the most part remain a one way street.
Trader Joe’s is certainly to be spoitlighted for their customer loyalty. Add to that Southwest Airlines and The Container Store.

Mark Burr
Mark Burr
10 years ago

Loyalty is, has been, and always will be owned by the customer. It happens when the continuously choose a retailer over and over again when they have other choices. It is the result of how they solve the value equation (Each customer has their own) and their experience.

There is no card, a program, a bonus, or a reward that will create loyalty on its own. The retailer that has the best chance of creating bonds with their customers are those that understand that every customer is their best customer—period.

The lists of “wow” experiences are long from a few of my favorites, but the ones that are on the top of the list are generally Zappos, Costco, Texas Roadhouse, L.L.Bean, Amazon, Brooks Brothers, Jos. A. Bank, Crate & Barrel, and my two favorite mechanics.

The reason? They consistently execute well every time in every way.