Customer loyalty <> Loyalty cards

Time and again whenever I ask marketing personnel on their customer loyalty programmes, I get the same answer -- "Yes, we have loyalty cards". Somehow, there is this accepted practice that a loyalty programme is all about loyalty cards. There is an understanding that the more points a customer has, the more loyal he is.

Unfortunately, this is not true. Every marketer today has sponsored a loyalty card. Every credit card gives spender points. Every airlines gives mileage point. Every debit card gives cash back. So when everyone gives the same offer, there is no differentiation in your position in the customer mind.

About 15 years back I was considering getting my first credit card. The card provider I selected was the only one giving spender points. And that was the reason I selected this credit card. Today, I carry 4 credit card, and the last credit card I opted for was because it provided me access to the lounge of the airlines I use frequently. The fact that it provides spender points never entered my domain of evaluation.

Now comes the question... so if spender points is not important, can it be taken off. There is a cost to maintain the spender points accumulation and redemption. Companies can save this cost and effort. So back to the same question... can it be taken off?

My answer is "YES, it can be taken off".

The biggest challenge is to move away from the common practice of spender points. This is one ritual that often marketers dread to break away from. And more important, there is no justification statement for continuing with this ritual.

Let us consider the previous case. Do I track the number of points garnered on my credit card? No. My only expectation is to get a private location where I can work undisturbed while waiting at the airport.

So can the loyalty points be taken off? Yes, it can. But it needs to be replaced by something more relevant. To a credit card, it could be access to some facilities -- airport lounge in my case. To an airline, it could be option of booking a preferred seat. To a bank, it could be automatic addition of an appliance to the household insurance.

This will get the customer prefer your service over the competitor because he is getting some additional service that will make life easier for him.

Customer Satisfaction is the Easiest Thing

The recent attack on Taj (Mumbai) has resulted in multitude of articles describing nostalgic incidences of people's experience at the Taj group of hotel. In line with the same, I take this opportunity to relate my personal experience at one of the hotels belonging to the Taj group.

We were travelling to a religious feast last year to another city. There were three families, mine, my brother-in-law's and my in-laws. We had in all 5 adults and two children between us. My daughter and her cousin were two four-year olds with energy appropriately applicable to four-year olds. We were staying at a Taj Residency hotel.

Breakfast was a buffet affair. All of the adults had their plates full and ready to eat the first meal of the day. My daughter insisted that she wanted chocolate cornflakes and nothing else. I predicted a tantrum coming and was desperately trying to contain it. The captain probably heard our interaction. He sent out his team member to purchase a pack of chocolate cornflakes from the shops outside the hotel and got it served to my daughter. Obviously, the captain that day earned a four-year old fan for serving chocolate cornflakes. While Taj earned a loyal customer for life. Even today, my daughter insists on staying only at the Chocos Hotel everytime we travel. That day the decision of the Captain to spend 50 rupees achieved a high level of customer satisfaction from 5 adults and 2 would-be adults.

Customer satisfaction is that simple to achieve. Companies lose this aspect in plethora of powerpoints, business plans, vision documents, architecture designs and process reengineering. All it needs is set the objective in the right priority. (read my earlier article on the bill collection). Quite often companies do everything, that they deem right but do not bother to check on what the customer deems right.

I was attending a presentation by one of the (then) big six consulting house to a large public sector bank on the future of banking. This was about 10 years back and so had the usual stuff of internet banking, ATMs, core banking, and so on. After the presentation was over, the last slide was what hit everyone in the audience. It read:
"Everything that was said in the earlier slides is useless if the teller does not smile when the customer walks up".

It was just that simple. All the bank had to do was make its employees smile a true smile when the customer walked in. It may not have zoomed the bank to the number one status but would have significantly improved its customer loyalty and subsequent business.

Same company .... Same customer .... ????

Yesterday I received a call from a General Insurance company's agent for a health insurance policy. The policy did sound exciting. I told the agent that I like the coverage of the policy and will not purchase a policy over the telephone. I asked him to have someone visit me with the brochures and other documents on the policy so we can close the deal. The agent stated that he would like to close it over the telephone. After a few iterations of this interaction, finally I stated sternly that there is no use continuing the discussion as I am sure of not purchasing the policy over the telephone. The agent said that this was a "telecall offer" and hence he cannot arrange for someone to visit me.

This highligts a sorry state of affair. Probably, the campaign for telecalling was outsourced to the call center agency. Probably, the agent would not have got any commission for any lead generated. Probably, he gets credit only for sales made over the telecall.

We may have heard of product centric companies. In this case, it also seems we have channel-centric processes. Here is a company who managed to throw a line in the vast ocean of the population and were lucky to hit a confirmed prospect. Had they sent a representative to me today, they would have already have sold one policy by now. But the processes did not support this event to happen. In the process, the agents refusal to get someone to visit me have also put me off the company.

Things are so simple. Irrespective of the channel, the general insurance is the same company. Irrespective of the channel, the customer is the same person. So why is there a difference of interaction across channels. Why can't companies have processes that give the same experience irrespective of the channels? Why can't companies have the channels work in collaboration?

Robin Hood Pricing !!!

Whew! Just stepped out of another meeting with a prospect. I was pitching the world of predictive analytics. The same old question pops up -- "But we do not have data". I am now tired of answering this query everytime people talk of analytics. You may not have demog data ... but you definitely have transaction data. And that is enough to generate a good enough predictive model. Agreed we may not be 100% (pssst: in statistics you never are 100%), we may not even be 95% accurate. But we can atleast be 70%. And that is better than 0%. We can get data updated as we go along business of tomorrow. Maybe in some future post I will highlight how some companies are going about slowly but surely increasing the quality and quantity of customer data.

On the flight to this place, I was scanning one of the business newspaper. I came across a lovely term "Robin Hood Pricing". It implies how we charge a relatively higher premium to serve our good customer and subsidize the net return of our bad customer. This advocates differential pricing.

Today, all service industries (or product industries) charge the same "list" price to all customers. They do not track the cost of delivering the service to the customer. There are two costs involved here. The "Cost of Sales" includes the production, logistics and admin costs incurred for making the sale. The other cost of note is the "Cost of Service" that the customer instigates from the company. A bad customer will keep calling the call center, have complaints and demand more than his share of attention and service. Hence, the cost to serve such a customer will be high. On the other hand, a good customer will not disturb the company too much and will often be understanding towards receiving service from the company.

But in today's world, we charge both the types of customers the same "list" price. Thus, we make the good customer pay a premium of our total cost to serve him whereas the bad customer gets a relatively lesser price compared to the total cost to serve him.

That my dear friends is "Robin Hood Pricing".

Mr. Marketer, Please do your homework.

Yesterday I received a call from the local branch of my bank where my account is registered. The lady on the other end of the phone stated that due to my good business :) with the bank they wanted to upgrade me to a Classic customer. She went into various benefits that this upgrade entitled me to.

She wanted to know if I am okay with the upgrade. Now who wants to refuse free stuff. I agreed to the upgrade.

She wanted to verify my contact and details. She read out my address and asked me it is still current and valid. I gave my affirmation. Next, she asked me if the mobile number registered is valid. {now, hello, you called on the number and here I am talking to you... is that not valid number... script writers ... baah}.

She asked me if I was married. Which I said I happily was. She wanted to know how many children I have. I replied I have a 5 year old kid.

Next she asked me the name of my wife and kid. Now, this pissed me off. I am supposed to be upgraded to a premium customer. I have a joint account with my wife at this bank. In the CAF, I have clearly stated that the relation with the joint holder is "wife". I also have a childrens benefit insurance policy in favour of my daughter. The CAF for this obviously have my daughter's name on it. I told the lady that she should have checked my records before calling me. She started justifying that as part of the upgrade she needed more information about me. I repeated that she should have checked my records. I told her to do her homework before calling me.

Quite often marketers just pull out names and phone numbers and generate a standard script for the call center to call. How many times have you been called by your bank or some service provider and asked for information that they should have already have had with them. It is time that marketers do their homework before making that contact to the customer.