Loyalty Myths: Hyped Strategies That Will Put You Out of Business and Proven Tactics That Really Work
By Timothy L. Keiningham, Terry G. Vavra, Lerzan Aksoy, Henri Wallard, 2005
Publisher: Wiley
ISBN 0471743151
Does it really cost five times more to acquire a new customer than to retain an old customer? Do loyal customers really promote the businesses they like? Are long-term customers more desirable than short-term customers? Do companies need happy employees to create satisfied customers? According to the authors of Loyalty Myths, the answer to all of these questions is a resounding “no”.
“Virtually everything we have been told about the relationship between customer loyalty and financial outcomes is bunk,” write the authors. “The difficult truth regarding customer loyalty is that how it links to growth and profitability is far more complex than we have been led to believe. An improperly directed program can result in keeping the wrong customers and ironically deflating an organization's profitability. A blind pursuit of customer loyalty is at best a case of misallocated resources. But at worst it is a recipe for financial disaster.”
In their new book, Loyalty Myths: Hyped Strategies That Will Put You Out of Business and Proven Tactics That Really Work, Timothy Keiningham, Terry Vavra and their co-authors examine the most popular maxims of customer retention, revealing why these strategies fail, while showing how they poison management practices and affect the bottom line.
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“Loyalty Myths is an interesting and important book that anyone concerned or involved with loyalty (corporate, customer, or employee) should read.”
“Does it cost five times as much to get new customers as to keep old ones? If you believe so, read Loyalty Myths (Wiley, $24.95) by Timothy L. Keiningham, Terry G. Vavra, Lerzan Aksoy and Henri Wallard. These market researchers thoroughly dismantle that and many other customer-loyalty shibboleths, and offer better ideas.”
“Fans feel loyalty to their teams. Dogs feel loyalty to their owners. But what customers feel toward companies is much less profound, the authors argue in this relentless indictment of loyalty programs. Indeed, many assumptions about loyal customers—that they are profitable or that repeat purchasing indicates some kind of emotional attachment—are simply wrong. These consultants recommend that companies eschew loyalty programs in favor of good, old-fashioned service and unsentimental cost/benefit analysis.”
“Would you believe everything you know about customer loyalty is wrong? Indeed, loyalty is hard to come by and even harder to keep. Loyalty Myths: Hyped Strategies That Will Put You Out of Business – and Proven Tactics That Really Work draws a clearer picture of how businesses can achieve customer loyalty and use that knowledge to thrive in the marketplace. The authors of Loyalty Myths make a compelling case by using facts and research to debunk 53 common beliefs, such as older customers are more loyal and repeat purchase equals customer loyalty, and reveals that the facts behind them are mostly incomplete observations. If you are seeking to build solid customer relationships, this is a good place to start.”
“The gist of this book: Not all customers are created equal; most sales tactics ignore this fact. As a result, companies acquire more “Costly” and “Break-even” customers than “Desirable” ones. Complicating matters is that customers change over time. This is especially true in B2B, where customer needs are affected by business cycles, industry cycles, their strategy, budgets and decision making, etc. – today’s “Desirable” customer can become tomorrow’s “Costly” customer. So what tactics work? Here are the two major ones: Loyalty Truth 1 – “Don’t manage for customer retention before you manage for customer selection.” Do your best to qualify sales targets in terms of profit margin, not absolute profits. Big contracts with low profit margins will surely yield costly customers. They will take time, staff and resources away from developing desirable customers. When it comes to desirable customers, always think “the more the merrier”. Loyalty Truth 2: “Customer loyalty takes more time to grow than most management teams have to give; planning and patience are required.” Retention efforts must have focus to shorten the payoff period. Using the 80/20 rule of thumb, if 20 percent of your customers deliver 80 percent of your profits, then you should devote 80 percent of your retention efforts toward them. This also allows an organization to build a flatter, customer-centric organization.”
