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I think I’m really lucky. I’m able to make a living from things I love doing, I’m continually learning new things, and many of these new things are learnt from the people that are paying me to do the things I love doing. 

This happened the other day. I was with one of my customers and we were discussing the subject of customer loyalty and the way different customers react in different ways to the same circumstances. "It’s a bit like a bank account’ he said, ‘The way a customer reacts to a given situation is partly dependent upon the state of the account at that point in time”. "That’s a brilliant way of explaining it. Do you mind if use and develop the idea to help other people I work with?” I said. He didn’t so that started my mind on a train of thought and triggered me into doing some research that’s led me to a concept of a loyalty account.  Here’s how I think it works.

We can consider a customer’s likely loyalty to our product or service, and reactions to particular circumstances, in the context of an account, very much like a bank account, but containing good will (emotional assets) instead of cash (financial assets). At any point in time the account could be balanced, in debit or in credit. If the account is in credit, a particular circumstance might trigger one reaction. But if the account is in debit the same circumstance could trigger a completely different reaction.

As I’m using banking terminology in calling this as account, I thought it therefore would be a good idea to stick with this and use the exact same references as if it were an actual bank account. So here goes. 

Opening the Account

Just as we may use a particular bank to cash a cheque or buy foreign currency without needing to hold an account with them, we may use some suppliers without ever opening a loyalty account. Whether or not we do depends upon a number of things but I believe the key one is determined by the question – ‘Is this just a transaction or do I (we) wish to create a relationship? If it’s just a transaction, or a one off, then feelings or emotions (other than perhaps politeness and courtesy) don’t have a great importance. But if one or both parties wish to create a relationship, then feelings and emotions must be considered.

So I think a loyalty account is opened when one or both parties decide to create a relationship beyond a single (or perhaps the occasional) transaction. The creation of a relationship requires feelings and emotions to be considered and it is these feelings emotions that result from what happens throughout the relationship that create the deposits to and withdrawals from the account.

Deposits and Withdrawals

Deposits are made and withdrawals are taken through things that touch the emotions of customers. There are obviously degrees of this and the following will indicate some of the steps. 

+1s

These are the little things that people do for customers that go beyond what is expected. They are not things that are given, like pens, diaries, or flowers, but things that are done, with care, consideration and forethought. They create a small deposit in the loyalty account.

WOWs

These are things that are of a similar category to +1s but which cause a much greater emotional reaction. You could say they are exceptional acts of service or customer care. These obviously create a large deposit in the loyalty account.

Oops

These are the little things that go wrong that irritate or annoy customers. They may may not cause the customer to look elsewhere but they do create a small withdrawal from the loyalty account. 

Ouches 

These are the major things that go wrong that really upset customers and can easily cause them to look for an alternative supplier. You could call them the intolerable errors. They obviously create a large withdrawal from the loyalty account.

Recovery

This is where an oops or an ouch is turned into a WOW by adding a +1 experience after correcting the error. It turns what could be a loyalty account withdrawal into a deposit.

How the Account Balance affects Customer Decisions and Actions

The state of the account at any point in time will obviously affect the way a customer reacts to a given circumstance. For example, if something goes wrong at a time when the account is neutral or overdrawn, even a small thing could cause the customer to defect. But if the same thing happened when the account was in credit because of previous positive events, then you are more likely to be forgiven. 

Similarly a positive act could be extremely well received by a customer with an account in credit, but the same thing could be greeted with no more that grudging acceptance if the account was in debit as a result of previous negative events.

- - Case Studies - -

Credit balances - Two examples of businesses that currently seem to have credit balances with most of the UK population are Dyson and Tesco. 

Dyson have a great product and brilliant service when things go wrong and I think there is a general feeling of ‘good will’ towards the company from most people. 

Tesco have been at the forefront of customer service delivery in their sector for some years now and they too created positive loyalty accounts with most customers.

Previous credit balances that have gone into debit – The best current example of this is Marks & Spencer. From a position of strength just a few years ago, with great respect and affection (and therefore credit balances) from customers and investors alike, they now have fallen out of favour with both sectors and are struggling to regain their previous position. I really hope they do, but think it will take a long time and doubt if they ever again will have that special place they once had in the hearts of the British shoppers .

Another is Virgin Rail. When they took over the West Coast line from BR, as a regular user I was really pleased. The Virgin reputation made me assume that things would improve quickly and I would soon be getting the Virgin style of service on trains. But when all that changed was the uniforms and the colour of the trains, and in some instances the service got worse, my good will soon drained and I became a regular complainer. This put them into a negative balance situation, so although things are now much better they still have a lot to do get me back into a credit situation. (I’d still choose another rail carrier if I could on the routes I use.) 

Previous debit balances that have gone into credit – A great example of this is Alpha Romeo. There was a time when very few people in the UK would even consider an Alpha Romeo because of the awful reputation they gave themselves with models in the 1970’s and early 1980’s. But some fantastic new designs, and improved reliability has brought them back to the situation where they now have a highly desirable and much respected range of cars. I guess the same could be said for Skoda. Since they became owned by VW the models have changed dramatically and I don’t think it will be many more years before people will cease to be embarrassed to admit they drive one and comedians will need to find another make to joke about.

Conclusion

So what does all this mean? I think that considering loyalty like a bank account can help people throughout an organisation understand better the way their actions affect customers in the longer term and why it is that customers can react in different ways to the same circumstances. 

I therefore think that this is a subject should investigate, adapt and then teach the people in your organisation. Then you should encourage them to do those things for customers, no matter how small, that create deposits into the loyalty account so that customers stay loyal, staff have less problems when things go wrong and the organisation becomes more successful.

© copyright Chris Daffy