You Call This a Loyalty Program?

Try this episode on for size and tell me how it makes you feel about the brand:

I recently logged into one of my hotel loyalty accounts where I had amassed several hundred thousand points. That is, I thought I did. All my points were gone. Apparently this chain has a policy that deletes all your points if you don’t stay at one of their properties for a year. Did they send me a courtesy email reminding me I needed to stay there toward the end of the twelve-month lapse? They did not.

I called customer service and they recited the policy back to me, willing to say farewell to a customer who had paid the freight to accumulate several hundred thousand points in its loyalty program, just not in the past 14 months.

Then I tweeted my complaint about the forfeited points publicly. A few hours later whoever runs the company’s Twitter account tweeted back publicly that the company was very sorry for the situation and dedicated to my satisfaction. The Twit-master asked that I send a private tweet to follow up, which I did. Then we moved the correspondence to email.

I was then told that the company had a one-time exception to the policy where points could be reinstated, but that had already been done for me approximately 13 years ago. Silly how I could have forgotten their grace. However, they said that in an attempt to reinstate my customer satisfaction, they would restore half my forfeited points now and the other half if I agreed to stay at their properties at least three times in the next six months. I wrote back that it sounded a bit ridiculous to be playing Let’s Make a Deal – Loyalty Edition with them, but I would agree because, well, why not?

To their credit, they did return half my points upon receipt of our “written agreement” in that email thread, and I have booked one stay with them. I just wonder, is this what they really set out to accomplish in developing their loyalty program? Is it a loyalty program at all, or just a rewards program that effectively gives me a rebate on what I spend provided I do it on their timetable?

If you give me a reward for my business, then take it away because I didn’t precisely follow your rules, then give it back conditionally with an expectation that somehow I have become pleased by our interaction, how has this helped me as a customer or you as a business? It’s a quid pro quo. I don’t think a quid pro quo has anything to do with loyalty.

When I think about loyalty, I think about preference. When I think about preference, I think about what brand comes first to mind when I need a particular item or service. I choose that brand for a host of reasons, for the totality of my experience with the brand.

I prefer to fly Alaska Airlines because they tend to treat me better as a human being, so I am loyal to them. I am also a member of their loyalty program, but that has very little to do with my loyalty. The way we interact all the time has to do with my loyalty. There is a consistency in my interaction with their airline personnel whether I am flying in coach or upgraded to first class, whether I bought a discount or full-fare ticket. That consistency is what creates loyalty.

I prefer to shop at REI for sporting gear because they are patient with me when I come to their stores not knowing nearly as much about hiking or biking shoes as they do, and when I leave it is with the right pair of shoes. I am also a member of their co-op because that is required to shop in the store, and I get a member rebate every year, but that is not why I am loyal. I am loyal because when I am on a trail or in spin class and my shoes are comfortable, I remember how great they were about helping me get the exact fit and charging me nothing more for their time.

I don’t prefer the hotel chain that gave me back half my points now with a contingent promise for half my points later. We have a transactional relationship based on price and location. I wouldn’t seek them out. I could, but they have given me no reason. Now when I think of them I think of my Let’s Make a Deal experience rather than any experience staying under their roof. That’s sad.

Maybe the problem is terminology. Maybe there is no such thing as a loyalty program. Maybe they are all just rewards programs masquerading as loyalty programs. That’s kind of a punt when you think about it. We could design a loyalty program that involved every point of customer interaction to ensure your satisfaction, but heck, that would be hard, why don’t you just take these points instead and we’ll play like we’re loyal to each other even when we know, wink-wink, we couldn’t care less about each other. It’s a bed and bathroom and points if you follow our rules, so come here at least every twelve months and someday maybe you can cash in those points for a standard room on the house. Maybe, if we have availability, certain restrictions apply.

I recently attended an e-commerce industry conference where at more than one session I heard the phrase, “There is no customer loyalty, consumers only care about price.” If this cynical statement is true, then I wonder why we have marketing departments at all. Don’t believe it. All customers are not automatons who solely focus on what’s cheapest.

Brands are not dead. A brand is a promise. Brands compete on price, quality, and service. If a company wants my loyalty it is there to be won, like Alaska Air and REI. If a company wants to make it about points and rules, that’s something else, and yes, in that scenario why should there be customer loyalty?

You get what you give. Since you’re selling and I’m buying you get to go first. You want my loyalty, show me yours. You want my loyalty, enter into a brand-customer relationship with me. You want to make it about points, if you piss me off I’ll dump you at the next possible off-ramp.

Loyalty is hard to win. It should be, because it’s valuable. That’s why the great brands think in terms of lifetime value rather than rules. If I have to publicly embarrass you with a tweet to get your attention, you don’t care about me a hoot, especially when you just had me on the phone. Think about that the next time a company penalizes you for breaking its loyalty rules. Those are stupid rules. You don’t need the points that badly, and if you don’t prefer the brand, you sure don’t need its crappy rewards program.

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Image: Stefan Hatos – Monty Hall Productions

How Fragile Is a Brand?

Philip W. Schiller, Senior Vice President of worldwide marketing at Apple Inc introduces the new iPads in San FranciscoApple unveiled a bunch of new products last week, including numerous options in shape, size, and price point for a fuller line of iPads.  Many of these products are desirable and will make great holiday gifts, but none comes close to pioneering a new category of experience.  These are known as brand extensions, variations on a theme for already desirable existing successes.  It’s good stuff, and good business, but not much to get excited about — nothing like the first Mac, the first iPod, the first iPhone, and the first iPad, all of which constituted innovations that created category-defining icons.

Steve Jobs used to talk a lot about brand deposits and brand withdrawals.  A brand deposit takes place when a company invests heavily in making an indelible mark with customers, akin to their very first experience with a point-and-click computer, or a sleek digital music player, or an easy-to-use smart phone, or an intuitive tablet.  Brand withdrawals are usually harvesting activities, like brand extensions, where a company takes some money off the table without over-investing to get it.  Extremely short upgrade cycles for modest improvements in a device or high margin accessories like a carrying case are notable examples of brand withdrawals.  Steve would say you have to maintain a balancing act to infuse a brand with life and a company with cash.  I don’t think I ever met anyone better at this balancing act than he was.

That’s why I am starting to feel some heartache for Apple.  I am seeing a lot of withdrawals and not a lot of deposits.  I am also starting to see sloppiness as an acceptable norm, rocky roads that get paved over later without heavily pushing the envelope to warrant the annoyance.

Recently I posed the following question on my Facebook page regarding Apple’s release of the highly touted iOS7:

Is it just me or is iOS7 woefully slow, bloated, and unstable on older devices, particularly on the iPad2? My hour-to-hour experience on my beloved tablet has gone from impossibly perfect to mediocre. Is this the same Apple?

The response was mind-blowing.  Here’s an extract from the thread, names removed to protect the honest:

  • I’m not having any problem with it except for user error with new features. I do see some slowness trying to connect to the internet but I assumed it was my wi-fi.
  • ME: I don’t think so because I am having the problem with wi-fi wherever I log in, it’s just sluggish, and apps that worked fine before crash at least once a day, and gasp, I have to reboot!
  • That’s not good. Wifi is definitely a problem. Apps don’t usually crash unless I stress them by doing things too fast. You have to reboot the device as opposed to relaunching the app?
  • ME: After a few apps crash it freezes, just like MSFT.
  • Ken, I am having the same problem on my iPhone 4S and MacBook. I regularly close apps on my phone, but that just saves battery life. It doesn’t help with speed.
  • Yep apple has confirmed with me that new software doesn’t perform well on old devices. Happen to me when I owned the iPhone 4.
  • It’s also bloated and annoying on newer devices as well.
  • 4S is now super unstable.
  • ME: Yep, no question that the loss of Steve Jobs is hardly being felt in Cupertino. Brand is in hunky-dory hands.
  • My wife hates it… I won’t upgrade….
  • try running it on an iPhone 4. I hate it.
  • Slow and crashes. I’m running it on an iPhone 4S and an IPad 2. Shame. Shame.
  • ME: Wow, I don’t think I’ve seen this much negative love toward Apple other than at a MSFT conference. I wonder if they know. Maybe I should extract these comments into a blog post to help them understand. But would they care? That’s the real question. If they did, they probably already would have done something about it.

Brands are not invincible.  They don’t fly with a safety net.  Customer loyalty has to be won anew at every touchpoint.  No company is safe from creative destruction, not even Apple.  That is why the average life of an enterprise company today is about half as long as a human life, around 40 years.

And you thought your own 40th birthday guiding you into middle age was scary, huh?

In my view, Apple remains a legendary company with three key competitive advantages at the moment:

  1. Brand: One of the most magnificent consumer brands of our time, expertly polished and full of lustre.
  2. People: An almost incomparable assembly of talent in its employment to create, innovate, Think Different, and change the world
  3. Cash: An unfathomable amount of reserves to invest as it deems wise and appropriate.

If they don’t protect the brand, the other two won’t matter in the long run.  While historic odds of longevity are no more on Apple’s side than any other modern corporation, the good news is that Apple has built up tremendous goodwill with customers and shareholders to ignite the future, and I would venture to guess they will protect their brand, but not without a lot of pain in the reinvention.  That’s perhaps the biggest problem of being at the top of the top, and why it is so easy to fall.  When customer expectations are at the level where Apple sets the bar, you have no choice but to outperform yourself time and again.  That’s an outrageous challenge.

Brands seldom shatter all at once.  It’s the little hairline fractures that get you.  Those are waved off as no big deal, normal ebb and flow in business.  Then a hairline fracture becomes a crack, and the crack ripples outward like a spider web, and then the ceramic whole flies apart.  Andy Grove calls it the Strategic Inflection Point, the change in market forces that happens and you miss it, and then it’s too late to course correct.  You can remainder, but you seldom get back to the top of the heap.

That’s because a brand is not a logo, it’s a promise.  And just like when a friend breaks a promise to you, you seldom fully forgive that person or fully trust them again.  Apple has always promised us humanity above technology, so when they even mildly violate that promise we feel it, because we have come to trust them so much. When a promise goes undelivered or long delayed, like a next-generation product leaked to the public zeitgeist, word of mouth can be savage.  Will we give them another chance on a bad release of iTunes or a map app?  On a rough system upgrade?  Of course we will.  Until the promise is broken one time too many, and then we won’t.

Business leadership is managing part for today, part for tomorrow.  It’s a plate spinning combination of the big picture and the small details.  Mostly it’s about listening to customers and loving your brand more than they do, protecting that promise with every resource at your command.  It’s very, very hard to do consistently, which is why the financial rewards are so immense when you get it right.

Curiously, the Facebook thread I extracted above went on a bit longer, and eventually someone pointed me to an online forum where I was directed to adjust a network setting and reboot.  From there things got a little better, but not entirely.  It was then suggested that I do a clean firmware install, which was way beyond my alloted time block for bettering the tool I needed to do my work — remember, these devices aren’t your work, they are the means to do your work.  We migrated to Apple devices precisely because competitors put us through the ropes with reinstalls, adjustments, and tip on settings that experts could swap.  Apple won the last few rounds because you didn’t have to be an expert at anything, you just opened the box and it worked.  That was a wow, and it was always worth the premium price to those who wished to pay it.  There were a lot of us!

Don’t break your promise.  Sweat the small stuff.  Love your brand.  Love your customers.