E-Loan Founded on Loyalty

Discussion
Oct 10, 2005
Avatar

By John Hennessy


Since its founding in 1997, E-Loan has tried to distinguish itself from other firms in the online-financial-services sector. In every public proclamation, the company notes its refusal to add lender’s fees, its non-rate-based commissions, its posting of competitors’ rates, and other product and service-related policies. These policies evidence an important philosophy regarding the company’s willingness to sacrifice short-term revenue for increased long-term customer value. E-Loan knows that it is better to increase the value of a customer relationship than to take all the money it can from the customer in the current quarter.


Some examples of E-Loan’s efforts on behalf of its customers include:


  • Providing customers with access to their credit scores in 2000 (which led to credit score provider Fair Isaac and others allowing consumers to access their credit scores), and;

  • Sponsoring financial privacy legislation.

E-Loan’s chief marketing officer Catherine Muriel likens the company’s tactics to a “quiet revolution.” But when asked whether E-Loan sacrificed short-term results for longer-term gain, she chafes. “‘Sacrifice’ seems a little bit strong to me,” she explains. “Without a doubt, there are things I don’t do in marketing that I could get better results with — more modeling, getting triggers on mortgages or whatever else from the bureaus, including more personal data in direct-mail pieces. But overall it’s not worth it. What we’re doing is comparable to the Apple and Nordstrom mentality: if you do the right thing by your customers, they’ll do the right thing by you.”


“You don’t want to come across as too sanctimonious,” she notes. “When you tout rates, you see an immediate difference. Convincing customers that you’re really on their side is a much trickier sell.” 


Moderator’s Comment: What companies in retailing and consumer products manufacturing are profiting by running their business based on long term customer
value rather than short term financial gains? Should more companies adopting a long term, customer oriented approach to their business?


Knowingly sacrificing short-term gains with the belief that you are creating long-term value for your business and your customers can only be accomplished
if it comes from the top and is supported from the top. That kind of leadership and clarity of purpose is uncommon, which helps the companies who follow this philosophy stand
out even more.

John Hennessy – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

9 Comments on "E-Loan Founded on Loyalty"


Sort by:   newest | oldest | most voted
Mark Lilien
Guest
15 years 4 months ago

For retailers, return policies and price-promotion policies are key litmus tests of how they value long-term customers. For example, I’ve noticed that JC Penney has a very liberal return policy, particularly for the mail order and Internet businesses. Pathmark and many other supermarkets have very liberal return policies. On the negative side, retailers whose prices on the Internet differ from the stores create continuous friction and mistrust. From an October 5 Macy’s ad, page A9, The NY Times, “Store offers do not apply on macys.com, and macys.com offers do not apply in store.”

John Rand
Guest
John Rand
15 years 4 months ago

I recently did some research in the grocery channel around the regional retailers that have the best overall performance. Most of them are growing at several times the average of the channel – and almost every one is privately owned or employee owned. They all take a long term view of business in general, including customer care – and boy, does it show in the numbers!

Tom Zatina
Guest
Tom Zatina
15 years 4 months ago

For years, L.L.Bean proudly replaced almost any item that wore out or broke. There certainly was a cost to maintain this practice but the long term benefit was also clear. I know a lot of people who cited this policy as a great reason to shop L.L.Bean…even though they had never taken advantage of it.

Sid Raisch
Guest
Sid Raisch
15 years 4 months ago

Costco is an example of a company that is sticking to providing its customers what it promised to provide, rather than bowing to calls from the market to increase prices and profits. Let’s see if they can do it for the long run, but so far-so good. I switched to Costco from Sam’s this year to give them a try because their customers seem more loyal to them than I was to Sam’s. I was also tired of feeding the growth of the Wal-Mart empire with my dollars. At Costco more of those dollars are going to their employees.

Ryan Mathews
Guest
15 years 4 months ago

Tom’s right. I think L.L.Bean is the gold standard here, but let’s not forget what may be the urban legend of Nordstrom’s accepting a tire back even though they obviously don’t sell them.

James Tenser
Guest
15 years 4 months ago

Worth remembering in this context is how very few corporate leaders have the courage to ask their shareholders to be patient this quarter because long-term profits are sure to follow. Most firms that do take this longer view tend to be privately controlled.

That’s not to say that all companies must ignore strategies that may enhance their longer term success with customers. Fair-minded, consistently-implemented practices – like those of Lands’ End and L.L.Bean – trade-off short term costs for greater repeat patronage. Even Wal-Mart gets high marks from shoppers for its liberal return policy. Both Geico and Progressive automobile insurers each seem to understand that keeping a continuing customer is more profitable than acquiring a new one. They express this loyalty-to-customer through transparent, efficient and predictable service practices.

Smart firms know loyalty returned is loyalty earned.

Camille P. Schuster, PhD.
Guest
15 years 4 months ago

Many retailers wonder why customers leave or try to figure out what they can do to increase loyalty among the consumers who “cherry pick” their sale items. Customers need a reason to be loyal and the lowest price isn’t it. Developing loyalty, like creating trust, takes time. However, the companies that invest the effort find they can offer “fair” prices or “competitive” prices without having to offer the lowest price and still retain customers.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 4 months ago

Lands’ End and The Men’s Wearhouse have the most reasonable return and support services I’ve encountered. Lands’ End has honored returns from me that are over a year old, and The Men’s Wearhouse will “expand” suit pants for free as their customers also “expand.”

However, some companies just can’t afford a long term, customer oriented approach. They’re in commodity businesses that are strictly price-driven and subject to market whims. When, for instance, is the last time you saw an oil company aggressively advertise their proprietary gasoline additives which are meant to prolong engine life? And when is the last time you saw a truck rental company tout their customer service as they used to?

Ian Percy
Guest
15 years 4 months ago

“He who would accomplish little must sacrifice little; he who would achieve much must sacrifice much; he who would attain highly must sacrifice greatly.” These thoughts from James Allen’s “As a Man Thinketh.”

Investing in sustainable customer loyalty and enduring profitability requires sacrifice in the short term – there’s no doubt about that. And the tendency is to look enviously at those who reap quick Quarterly returns with short-sighted thinking. But if, like the E-Loans people, you stick with the long-term strategy there will be many more looking enviously at you.

wpDiscuz

Take Our Instant Poll

Do companies with a long term view of customer relationships perform better than those concerned with meeting the current month’s, quarters, etc. numbers?

View Results

Loading ... Loading ...