Although it is difficult to determine the method to retain a customer, and even, it is unlikely to measure one's own loyalty, in the field of marketing generating loyalty is still an inescapable mission.
by Glenn Withiam*
One of the goals of marketing is to create a loyal customer base. It sounds simple enough, but the fact that fidelity is difficult to measure complicates the achievement of this goal.
In addition, even if there were a consistent measurement, it would seem that customer loyalty changes with the wind. The hotel industry's efforts to maintain customer loyalty through various programs for frequent buyers have had spotty results, to say the least.
Perhaps one problem with loyalty programs is that it is very difficult to determine which guests are loyal and which are sporadic. Beyond that, even if a guest is not faithful in heart, but comes back again and again, should we care whether or not he is really faithful? After all, your money is just as valuable.
Some types of clients
The most common approach to ranking guests based on their loyalty is to measure their purchase frequency and spending levels and then use those factors to divide customers into four groups:
- Those who come frequently and spend generously are considered truly faithful.
- Frequent customers who don't spend much have "latent" loyalty.
- Of the infrequent customers, those who spend a lot of money when they come are said to have a "fake" loyalty.
- And finally, there are those who neither come frequently, nor spend much, these are not considered faithful.
In an article, soon to be published in the Cornell Hospitality Quarterly, this approach is used to analyze the type of customers of a low-end casino in Las Vegas. Researchers Sarah Tanford and Seyhmus Baloglu provided several useful observations, but I would like to point out only a couple of them.
One of the ideas put forward by these two experts was to find ways to persuade the group of customers with latent loyalty, who spend little, to spend more money.
They may simply not have more money to spend, but if your business has a group like this, it's important for you to find out why they spend so little, even if they go to your business frequently.
About groups that spent large sums of money, Tanford and Baloglu concluded that the "false loyalty" group was the one most influenced by the casino's loyalty program.
These types of customers did not feel identified with the casino, but they liked the prize program. In contrast, those with "true fidelity" would possibly come to the casino anyway, because they felt appreciated and recognized.
This is perhaps the most significant finding of the study and opens a very important door. Apparently, the path to loyalty is built by making sure your business provides the benefits that customers truly value, i.e. a benefits package that perfectly matches what your guests are looking for.
With these loyal customers you are, in some ways, providing an adequate level of recognition, whatever criteria the customer is applying.
In conclusion, there is no doubt that their formal loyalty program attracts customers and that some of them are good consumers. But it may be that your informal loyalty program—your basic business model—should become the real goal of customer loyalty.
* Director of Publications for the Cornell Center for Hospitality Research