“Stay!”: How to Create Loyalty — or at Least Laziness

by Freddy J. Nager, Founder & Fusion Director, Atomic Tango LLC

Hunger-inducing visual courtesy of PhotoXpress.com

Maybe it’s the bacon.

Every week, I shoot pool in the same joint. Is it the cheapest pool hall in town? Nah. It’s actually pricey. Is it the service? Not really. The people are friendly, but service isn’t a big factor when renting a pool table. Is it the ambience? I do love pure pool halls like this — not some bar with a coin-op table, but a dedicated pool hall with 8-foot Brunswicks and a jukebox playing Soundgarden. What about the location? The House of Billiards is one of the few remaining pure pool halls on L.A.’s west side, and although L.A. is a car culture, we Los Angelenos generally hate to drive, so it wins there. And then there are the BLT’s…

You wouldn’t think a pool hall would be the go-to place for a bacon-lettuce-tomato sandwich, but the BLT’s at the House of Billiards are everything a BLT should be. I generally don’t feast on swine, but I make an exception with these BLT’s. The combination of textures and temperatures and flavors makes me drop everything just to chow down, even though I’m paying by the hour.

So, yes, perhaps it is the bacon that made a loyal customer out of me.

The conclusion: loyalty is a complex, multi-layered issue. Kind of like a good sandwich. More fundamentally, loyalty isn’t rational — it’s emotional. And emotions can’t be represented on a spreadsheet or a 2×2 matrix.

And that’s what drives many business geeks crazy, particularly in dotcom land.

Online services, such as search engines and even social networks, are built largely on rational criteria: efficiency, low-to-no prices, and a hassle-free/bug-free experience. That’s why I compare them to utilities: they exist simply to provide a basic service. Most consumers don’t have loyalty to a utility — we couldn’t care less who provides our natural gas as long as it’s dependable and cheap. Rather, we provide loyalty to brands that stir our emotions and serve a more visceral need: sports teams, religions, political parties, even some fashion and automotive brands.

Web services? Not so much.

Consider how Friendster gave way to MySpace which gave way to Facebook which could give way to the next hot social site that comes along. Consider how America Online was the dominant Internet player of the late-90’s — AOL addresses were as common as Twitter accounts are now — peaking at 30 million cash-paying members in 2002, then rapidly deflating into a cautionary tale of mergers gone wild and wrong (“You’ve got fail”).

Another consideration: in the physical world, consumers will put up with less-than-optimal combinations of product and price if the place is convenient. But on the Web, distance is not a factor: consumers can check out the competition by simply clicking a few keys. Indeed, there are entire websites that enable you to compare various ecommerce sites in one glance: Shopping.com, Shopzilla, Bizrate, ePinions, Pricegrabber, Shop.com, mySimon, and Google’s Froogle (which wins the prize for best name), to name a few. Loyalty shmoyalty — you’re presented a list of options, with price being the key criterion.

Ready for some irony?

One of my pool buddies works for one of those shopping-comparison sites, and he tells me that they just embarked upon a loyalty-building program. That’s right: a company that undermines consumer loyalty by emphasizing price is now trying to figure out how to keep its own users from straying. Apparently, his company is spooked by the cashback offer from Microsoft’s Bing shopping service, so they’re making some special offers of their own.

The problem: practices such as giving cash back and other discounts are not distinctive or copy-proof. That’s not competitive strategy — that’s just putting out. And putting out only engenders loyalty until the competition puts out even more.

So how can a company inspire loyalty in a fickle realm, where allegiance can be switched at the click of a mouse?

Loyalty, laziness, or hoping to become a bedroom slipper?

1. Cross-pollinate with a worthy cause. As I mentioned in my article on collaborating, companies should seek out exclusive partners with whom they can share customers and costs. Ideally, that partner should boost their brand at the same time. So cold, emotionless Web services should seek out warm-and-fuzzy non-profit groups that have large, loyal followings.

Imagine a shopping service that gives a meaningful percentage of all its transactions to the Humane Society. Now their customer isn’t just shopping — they’re giving a homeless dog or cat a chance at life. I say “meaningful” because the Yahoo-powered search site GoodSearch does give money to non-profits, but only a whoppin’ $0.01 per search. Not exactly inspiring there.

(Update 6/14/9: What do you know: Microsoft has decided to go this route by partnering with Feeding America to promote IE8 — though Microsoft is being mocked for being absurdly penurious about it. So if you’re going to collaborate with a charity, don’t be stingy. You might be saving money up front, but you can’t afford the PR damage.)

2. Appeal to laziness. What some companies think is customer loyalty is actually customer laziness. We consumers often patronize the same stores and services again and again even though we’re not entirely satisfied, simply because it’s too much hassle switching to something else. (Note my comment on Los Angelenos not really liking to drive.) So while I despise my Internet service provider (Verizon DSL), I haven’t switched because it would be a hassle, and from everything I’ve heard, all ISP’s are equally despicable.

In terms of computers, some people refuse to switch from PC to Mac, even if they can afford to, simply because they’re comfortable with Windows. Who needs the hassle of learning another system?

Amazon tapped into customer laziness by combining an unparalleled selection with lots of shortcuts. Their prices are not always the lowest, but they’re low enough to make lazy shoppers (like myself) forgo the price check at Barnes & Noble. I know that, by going to Amazon, I can find a book and purchase it in less time than it took me to type this paragraph, and the deal will be “good enough.”

On the search-engine front, there’s a new battle afoot: Microsoft’s Bing vs Google. Of course, Google is built into most browsers and many websites, so it currently has the upper hand in convenience, but Microsoft just made Bing the default browser in its IE6 browser, and it’s hard to imagine that the Beast of Redmond will stop there.

(Update 6/7/9: According to the latest stats, Microsoft needs to really step it up, as Bing’s market share is already in decline just weeks after its launch. According to TechCrunch’s MG Siegler, “Microsoft needs to keep pushing those TV and web ads to keep its name in people’s minds. Otherwise, Bing runs the risk of having already peaked.” Although I love to endorse advertising, the issue here is the laziness factor. Google works well enough for most people, so why surf over to Bing when the Google search window is sitting right at the top of their browser?)

3. Create switching costs. This is related somewhat to laziness, but there’s also a financial incentive: it simply costs too much to change brands. I cited a few of these switching costs in my article “How to Win a Price War” .

Harvard Business Review Editor Karen Dillon notes that, when it comes to picking an airline, frequent flier miles are more important to her than great customer service. Such rewards-based loyalty programs do bind people to a company in a way that is more rational than emotional. The only catch: you need to sign up customers before the competition does.

Apple used its early dominance of the digital-music market to lock in a serious switching cost: all those songs on our computers that can only be played on iPods. Sure, we could convert them to more compatible formats or purchase them anew, but who needs the effort or expense? So when our current iPods get lost or wear out, we simply purchase another iPod. When you combine that fact with Apple’s powerful brand, it’s hard to see any other MP3 player ever taking that market.

4. Make it personal. It’s easier to be loyal to a person than to a faceless institution. That’s why smart brands often position their people — or even a fictional representative — up front and center. That may be a CEO, a spokesmodel, a star player, a spiritual leader, or even a talking gecko. If consumers like that person (or reptile), that helps bond them to the company.

And it’s not just for the ads. All company-to-consumer communications, from newsletters to even bills, should come from a person. I’m not suggesting that an individual sign every letter; it’s enough to have a full name and virtual signature printed somewhere on the document.

One final note: just as loyalty can be won, it can also be lost.

Even the strongest cult brand — whether it’s a sports team, religion or political party — can lose its followers if it betrays them. Churn out a crappy product or get involved in a scandal, and all that hard-won loyalty will dissipate like so much spilled Dom Perignon.

Detroit experienced that painfully as we Americans decided that Ford, GM and Chrysler would have to do a lot more than simply appeal to our patriotism. So the first and most important rule of commanding loyalty is to give some in return. Being loyal to your customers doesn’t mean listening to their every wish and whim — which could be a mistake — but providing a consistently high quality product would be a great start.

Throw in some bacon and you’ve got me sold.

Update 6/25/9: No real surprise here. According to TechCrunch, “Study Suggests People Prefer Bing’s Design To Google’s, But Still Won’t Switch… Brand loyalty is a powerful thing, especially when it comes to technology.” I believe that, until Bing offers a “killer app” that compels people to switch, basic consumer habit and laziness will prevail.

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