According to the “Pareto principle”, 80% of the effects come from 20% of the causes. This can also be the case for ecommerce, where business leaders often find out that 80% of their profits come from 20% of their customers. In order to assure their profitability, these merchants just have to ensure that 20% continue to buy from their shop. In this guest article, Internet psychologist Graham Jones presents advice on how to keep loyal customers.
Apple is a great example for customer loyalty. It has a tiny market share of the computing sector, a share which has hardly changed in 30 years. However, the people who buy MacBooks, for example, always buy them. Apple consumers are highly loyal. Other laptop users are not so fickle. One year they have an Asus, the next year it is HP and the year after that it could be Acer or Lenovo. It doesn’t matter much to them; a laptop is a laptop. Apple, though, is the world’s most valuable company, amongst the most profitable and one of the most cash-rich, with hundreds of billions of dollars squirrelled away in offshore accounts. Apple demonstrates that you do not need to have most customers to be a significant business – you just need intensely loyal ones.
New research shows that Apple has improved its loyalty ranking over the past year, from 4th position to 3rd. It is only in the smartphone sector that its loyalty position has fallen; but so too has Samsung its nearest rival, well below it in the chart.
The question worth asking is why do these major brands attract such high levels of customer loyalty. What are they doing that makes people come back time and time again? It’s not price. After all, Google is free to use; Apple is highly expensive, and you can buy things more cheaply online than from Amazon.
Neither is it being established. Facebook has only been publicly available for a decade. Netflix has been offering video on demand for less than that. Many other well-known brands have been around for more than 100 years that don’t feature too well. Ford Motors is 16th in the list, next to Uber. You would have thought that an established brand would be able to beat a newcomer for loyalty. After all, Ford has 115 years of experience to build upon compared with Uber’s mere handful.
So it is not price, nor the length of operation that is influencing loyalty, it must be something else.
Some other recent research published by Forbes suggests that loyalty has much more to do with the way a business operates and the way it thinks.
According to this study, there are several barriers to customer loyalty, and they mainly focus on the lack of consistency.
Only recently I was working with a major UK brand, which has 25% market share in its sector, earning itself a handsome £700m a year from several million customers. However, one of the things I pointed out was the lack of consistency on its website. Some parts of the site have the option to share the content via social media, whereas other pieces of content cannot be shared. When I asked why, I was told that this is because the parts of the website are “properties” that are “owned” by different divisions with the company. In one of those branches, the leader is a fan of social media, in the other, the leader thinks social media is the spawn of the devil. The result of this divergent thinking is that the customers are confused. They are not getting a consistent experience on the website – and it is no surprise to find that the bounce rates are higher than what the company wants and that loyalty is too low, leading to the ever-present need to find new customers. That’s just plain daft. And they are a top brand…!
If you read articles about brand loyalty, you will often find that customer retention is about fine details, such as excellent aftercare service, or technical issues such as website operations. Such features are worthwhile, but they are less important than other factors.
To consider Google, one of the top brands for loyalty, one key factor in their success is that whatever Google element you use you get a consistent experience, no matter where in the world, or which device you are using. Similarly, with Apple, the experience you get in a store is much the same as that which you receive on the website. In brands where there is a high degree of loyalty, it is hard to “see the cracks” between different parts of the business.
This has nothing to do with the way the website works, or how quickly you answer the phone, or whether your customer service team scores highly in star ratings. Rather it is all about company culture, the way everyone thinks within the business and the degree to which you empower staff to do the right thing within that thinking. Firms that get a high ranking for loyalty tend to be newer brands, where business structures are flattened, where staff are more empowered and where everyone within the business “buys in” to the brand.
If your business wants more loyal customers, to enable you to guarantee profits from that “holy grail” of 20% of your consumers, then rather than focus on technical details or minor things you can change, paying attention to company culture is the most important thing you can do. It will result in a consistent experience for customers. Lack of such consistency is why businesses fail to gain loyalty.
And if you don’t believe me, ask a veterinary surgeon. Ask them why dogs are loyal, and they will tell you it is all about the behaviour of the owners.