When Customer Satisfaction Harms Customer Loyalty

Satisfied customers are loyal.

Says who? Not hoteliers. According to a new study, satisfaction across the hospitality industry is rising, but sales aren’t. That’s because customer loyalty is sliding.

How can satisfaction be up and loyalty down? Because the pickings are too good. Hotels have been promoting low-price deals. Instead of choosing their favorite hotel, consumers know they can always search for something cheaper. So yes, they’re satisfied. At those prices, who can complain? The study’s author calls this “Price-induced satisfaction.”

Hoteliers have found a way to increase satisfaction while deep-sixing loyalty. Nice work, guys.

What’s really going on? Well, customers are getting more value these days. But you can increase value two ways: offer more for the same money, or charge less for the same product.

Charging less for equivalent products creates tangible, monetary value. But creating delightful experiences defines intangible value – and that’s where loyalty lies. The intangibles – a hotel’s reliability, friendliness, efficiency, the extra effort they put in to know you personally – these are what spur loyalty. They give customers a sense of belonging. When people feel they belong to something, you can deepen the relationship. When people feel they’ve made a great bargain, that’s all they get.

In sum: manipulating your tangible value can undermine your intangible value. You’re commoditizing your customer relationship – essentially, you’re buying customers.

Creating intangible value is harder than creating tangible value. You need to understand in what areas your strengths lie, and excel in those. It can be a long, hard road.

But it has rewards. People are not only loyal to products with intangible value; they pay a premium for them.

Phony Assets vs. the Trusted Advisor

As a marketer, the first two items on your to-do list are making people aware and then engaging them. The first task is easy to understand. The second, not so much. And that’s a problem, because engaging your customers is the key to establishing a relationship with them. And relationships are everything.

Customer Experience Crossroads has been exploring the idea of customer relationships lately:

…most relationship marketing strategies are hollow at the core, and are really a pretty label for direct marketing tactics. Which is fine, but don’t call it a relationship.

Exactly. One relationship that’s not hollow, if you can achieve it, is that of trusted advisor. This is not a brokered relationship – exchange is not the point. When you are a trusted advisor, you’re giving your prospects and customers, without any immediate recompense, information that helps them do their job.

If you’re advising via media such as white papers, your content should be of value to your audience. That sounds obvious, but you’d be amazed at how many companies just throw any old stuff that’s lying around onto their site and call it a “resource center.” What your customers want is content conceived from their perspective, that will make them smarter and more capable.

It won’t work if your intention isn’t the welfare of your prospects. After all, you can probably smell a phony a mile away; do you think your prospects can’t? If you promise 5 Ways to Improve your Bottom Line and you give them five product descriptions, you’re a phony. Pure and simple.

If you put out resources that you feel are truly helpful, you’re on your way to building a relationship that will benefit both of you.

Marketing and the Sense of Belonging

I read a fine post on Only Dead Fish the other day. It dealt with the question of how we find community in our fragmented world. Another question occurred to me: what does the fundamental human desire for community have to do with marketing?

Belonging is in our DNA. The instinct to congeal into tribes and villages is powerful. But it’s not unconquerable: post-war American society did a great job quashing it. For generations we were told that happiness equals stuff rather than happiness equals belonging. We moved to suburbs where we could set ourselves apart, with lots of room for our possessions. It didn’t really work out.

Now belonging is back. Open source aligns programmers and users in a shared purpose. The Internet and social media allow disparate people to form communities despite boundaries that would have kept them in different universes a couple of decades ago. People share information, opinions, and ideas. And sharing is the basis of open innovation, and the basis of community.

What’s the implication? How can we build communities in ways that help us build our business?

We need to realize that the old marketing model, by which I try to persuade you to think the way I want you to think, is on the wane. In the new model, we empower and share. We have knowledge, and we want to share it, to make you smarter and more able to do your job.

When we market, we need to be conscious of the community we’re creating. When you share knowledge and empower people, you build trust. And trust is the basis of community – and business success.

The Problem With Lists

A very worthwhile post on Marketing Sherpa about third party lists appeared recently. Adam T. Sutton rightly points out that most business rely heavily on them, and shouldn’t. He also reiterates Brad Bortone’s wise words:

…effective email marketing is based on relationships. These relationships hinge on expectations, promises, and trust.

In truth, third party email lists are a piece of the puzzle, and they’re sometimes appropriate. But the core of marketing is establishing trusted relationships. Which is why, most of the time, you’re better off investing in your own database.

When you do use a third party list, the hardest nut to crack is profiling. A lot of marketers profile based on description (“he’s an engineer, works for a 8 billion dollar company”). Instead, you need to profile their persona – find out the problem they want to solve. Knowing their company’s annual revenue won’t get you closer to a sale.

With the right persona, you can gradually increase the relevance of your communications to the people on the third party lists, until they begin to trust you.

Until then, they’re just another name on a list.

Why Value Propositions are a Bear

Why is it so hard to define value propositions?

It’s your company, after all. You know the product its features. Why is putting it all into a sentence that will make people want to pick up the phone so flippin’ hard?

In our work with B2B companies we delve deeply into our clients’ value propositions. Usually we’re given a list of features and benefits to start with. Over the years we’ve come to understand that features and benefits are not in themselves compelling. In fact, getting to the VP from the features can be an excruciating process – it’s like doing dental work from the back of the head instead of the mouth.

So what do you need? You need a promise.

If you really look at things with your customer’s eyes, the first thing you see is that they’re under pressure. That pressure creates pain, and the pain is tied in with the feeling that they’ve lost control.

Let me repeat: ultimately, pain in business comes from a feeling of being out of control.

Your task, then, is to relieve that feeling of being out of control. It’s not giving them more of this, a better that, or faster something else. It’s removing this horrible, scary feeling of not being in control.

Perhaps they’re losing control of their sales results, their customer satisfaction, their employee morale, their reputation, or a hundred other things. Your job is to promise to give them control.

So what’s the value proposition? It’s your way of articulating how you will relieve their pain.

So don’t start with product features. Start with your audience. What’s pressing on them? Who’s beating them up? Your value proposition beings with, “Would it relieve that pressure if you had a way to [insert what your nifty product does here]?”

Give your customer a reason to think you can help them get back in control, and your phone will ring.

Embrace Your Shipwreck

I read a story recently about a wrecked sailboat that washed ashore five months ago in the swanky California city of Malibu. No one seems sure how it got there. In fact, no one seems to notice it at all.

Perhaps it’s been there so long, it’s become part of the landscape. Or maybe passersby figure it’s someone else’s responsibility to remove it. Whatever the case, the result is the same: a 37 foot eyesore remains on an otherwise pristine beach month after month.

I see this problem when I help companies create a culture of listening. Some people prefer not to listen to customers, because then they’ve got to solve the problems they discover.

That’s the dilemma – listening means responsibility. Sure, listening can be empowering – it’s how companies discover a shared purpose – but it also defines a shared responsibility to do something.

Again and again I encounter executives who really don’t want to know which department is really letting them down, or where the kinks are in their acquisition process. That’s because they’re worried that they’ll be stuck getting the boat off the beach.

So they avoid the shared responsibility. And the boat just sits there.

It’s too bad. Because the reality is, once you’ve defined shared responsibility, you’ve also defined the beginning of a solution: a group of people that can share ideas and make the work of problem solving lighter.

Open Source is for Hardware Too

I watched an excellent TED talk by Marcin Jakubowski on using the open source model for hardware – creating farming, construction and power generation machinery that users can build and maintain.

If we can lower the barriers to farming, building, manufacturing, then we can unleash massive amounts of human potential that’s not only in the developing world.

When you start creating open business models, you increase vastly the potential for addressing problems – including pressing ones like feeding our planet.

The Infinite Loop

Here’s a worthwhile post at Drew’s Marketing Minute about why, after a survey, it’s important to tell your customers what you’ve learned from them.

… it reinforces the message that you care about their opinion, you listen when they offer feedback and you are always trying to get even better.


My thoughts exactly. Drew calls it closing the loop. My only quibble here is that the loop never closes – once you’ve gained insights from your customers, it’s important to keep that channel open. If you let them know that you’re really listening, they’ll be happy to talk more. Which leads to more listening …

The Elusive Social Media ROI

You hear this complaint a lot: trade shows aren’t cost effective, but if we don’t show up, the market will notice.

They even notice if you show up with a smaller booth to save money, so you splash out – with little ROI – to avoid starting a rumor that your company is in trouble.

For some companies, social media is a defensive investment as well. You need to have them “like” your company or product, just because it’s possible for them to do the same with your competitors.

Since social media involves hard costs, it will ultimately drain your organization, as defensive investments do, unless you look at it from a different perspective.

The best way is to contribute to the community – make it smarter. You could use your social media power to point to webinars, white papers, tips – anything relevant that makes people smarter.

Too much self-promotion in your social media, and you lose credibility. As I was writing this, I came upon Danny’s Brown’s distinction: he calls it the difference between engaged and engaging.

The next step is fitting your social media into your lead nurturing strategy. Be present, entice, engage, make them smarter, and nurture them.

More work, but it’ll pay off better than just blowing your own horn.

The Uses of Discomfort

In my last post I talked about how success at a certain business model tends to create an organization that’s invested in that business model. When it’s time to more forward, the organization rebels and sucks you under. Think of GM producing cars for a vast local market that was shrinking as imports went from an exotic choice to a commonsense one. GM was such an attractive edifice, no one was willing to tear it up to make it work in a new market. So the market tore it up instead.

Which raises the question: how and when do you innovate in order to prevent being swallowed in the mire?

It’s probably too late to do disruptive innovation when your business model becomes threatened – the time to do it is before your business model becomes too stable.

Google is a great example – from search to ads, to cloud to mobile, it keeps disrupting itself, and stays footloose.

Another example is Netflix. When they started, they could have been MailFlix – after all, they delivered all their goods by mail. But they knew that they were entering a Net-based world, and tying their fate to the postal system was not the way to go. They chose the unsettled, ever-changing idea of the Net.

Sure it’s uncomfortable working without a firm underpinning of stability. That’s why we need to be comfortable with being uncomfortable.

That’s not as unnatural as it seems. Yes, we all desire comfort and security, but we also have the need to be creative. Discomfort can be very energizing for the creative process. Look at Intel, a huge company that can only survive by innovating at a ruthless pace. Intel is constantly working to make their own technology irrelevant. Their former CEO, Andy Grove, called it constructive paranoia.

And paranoia means never having to say you’re comfortable.