This is a blog version of an original article by Rob Morrison from OgilvyOne.
The Loyalty Paradox is where the more loyal your customer, the less you need to spend on them to keep their business.
This paradox made it easy to offer less to a loyal customer and offer more to a less loyal customer. And because the sales channel was effectively a closed one, neither would know what the other got. That was then.
Now, with social media connecting the world, these tactics can no longer be done discretely. Your loyal customer can now see that a less loyal customer is getting a better deal – and this makes the loyal customer not happy. This also runs the risk of making your loyal customer less loyal.
Loyalty Paradox should instead now be looked as Loyalty Parallel. We now need to spend the same (or more) on those most loyal to us. Think of it as a way of rewarding loyal customers. Keeping them happy will significantly increase their likelihood of promoting your goods and services; and the promoting is done on a global scale (well at least a wider circle that their immediate family and friends).
In this socially connected world an independent loyal customer is truly believable and their recommendations make them super marketing tools.
The old system:
Telcos/Banks/ISP’s/etc would offer new customers enticing deals to join up or use their services. Their existing customers were often over-looked and kept on relatively low value expensive plans.
The new system:
Customers are rewarded for their loyalty – think of pre-event sales, loyalty cards, personalised communications, etc.
Engage with your customer, value their account, chase their business, and listen to their feedback.