Loyalty Myths: Hyped Strategies That Will Put You Out of Business and Proven Tactics That Really Work »

TIMOTHY L. KEININGHAM is Senior Vice President and Head of Consulting for Ipsos Loyalty. He is the author of several books and articles on customer satisfaction and loyalty, and has won best paper awards from the Journal of Marketing and the Journal of Service Research.

TERRY G. VAVRA is Chairman Emeritus of Ipsos Loyalty. He is a customer satisfaction and loyalty consultant, a public speaker on these subjects, and the author of four books (including one of the first books on CRM) and numerous articles in these fields. He is also a former educator who taught at the graduate level.

LERZAN AKSOY is Assistant Professor of Marketing at Koç University in Istanbul, Turkey. Her research interests include customer satisfaction, loyalty, and relationship management. She has provided executive training on customer relationship management to executives from numerous multinational companies.

HENRI WALLARD is CEO of Ipsos in charge of Ipsos Loyalty.

In Loyalty Myths, the authors have assembled 53 of the most common beliefs about customer loyalty – all of them wrong or misconceived! Each of the beliefs in this book is debunked with real-world examples. While other books speak in platitudes; this book is the only one to validate each proposition with real data.

Granted unprecedented access to customer records from a variety of multi-national corporations. Through these records, Ipsos Loyalty was able to precisely track the impact of this customer-centric construct on actual purchasing behavior. The authors’ findings and conclusions will stun business leaders around the world. The lessons learned from these provide a true guide for the proper use of customer loyalty.

Soundview Summary - Soundview Executive Book Summaries

Many CEOs worldwide cite customer loyalty as their most important strategic objective, spending billions of dollars to hold onto their current customers. Thousands of books and even more articles have been written about customer loyalty and everyone agrees it is vital. But are they right? In Loyalty Myths, renowned authors from one of the world's premier business research firms reveal the ugly truth about customer loyalty almost everything you've been told about it is wrong!

To set things straight, the authors critique 53 of the most common beliefs about customer loyalty and debunk them fully with hard science and even harder data.

The subject of Loyalty Myths is the evolution of thinking about customer loyalty. The serious reader will have to set aside many of the platitudes he or she has previously learned they simply don't work in today's marketplace! The authors offer a truer picture of how businesses can leverage customer loyalty to help them survive and succeed.

The pursuit of customer loyalty can be a highly profitable strategy, but not by clinging to the myths that have developed surrounding the idea. Following the conventional wisdom that has been propagated about customer loyalty will almost surely cause firms large and small to suffer, the authors warn, which ultimately means that customers will suffer as well. If loyalty doesn't pay, then firms will have to pursue another strategy or they won't remain competitive. Loyalty Myths seeks to expose the myths for what they are so that in the end everyone wins by being good to one another.

A Recipe for Financial Disaster'
Customer loyalty as a business strategy is incredibly seductive. It fits perfectly with a sense of justice and fair play. Company leaders want to believe that good behavior leads to good outcomes simply put, it is good business to be good. And a loyalty metric would seem an objective and perfect fit for such a noble business truism. However, the authors assert, many of the propositions used to create and support today's loyalty strategies just aren't correct. Most are patently false, they add, making their prescriptions financially dangerous.

The difficult truth regarding customer loyalty is that how it links to growth and profitability is far more complex than most managers have been led to believe, the authors write. A blind pursuit of customer loyalty is at best a case of misallocated resources. But at worst it is a recipe for financial disaster.

By disposing of the myths surrounding loyalty, the authors explain, a proper focus on customer loyalty can be stimulated. Treating customers and employees with decency and respect can pay substantial dividends.

The Right Way to Manage for Customer Loyalty
Without question, it is possible to make money, at least in the short term, by focusing on cost reduction and ignoring customer loyalty. And, unfortunately, there is no guarantee that focusing on strengthening customer loyalty is a long-term strategy. Even if an executive is sold on customer loyalty as a long-term strategy, he or she may still lose money if a strategy is based on a naive reliance on one or more of the loyalty myths. But when a customer loyalty strategy is based on sound foundations, building customer loyalty can be a very profitable business strategy.

The authors point out that the science associated with customer loyalty as a business strategy is relatively new and rapidly evolving. Our current knowledge has advanced to the point of finding flaws in the conventional positions the myths. We can use the evolving science to demonstrate and prove the "loyalty truths" that are associated with profitable customer loyalty strategies. The authors write that to dismiss loyalty as a viable strategy because of the fallacious myths associated with it is to throw the baby out with the bath water.

According to the authors, these are the seven truths of customer loyalty:

1. Don't manage for customer retention before you manage for customer selection.
2. Customer loyalty takes more time to grow than most management teams have to give; planning and patience are required.
3. Focus on customers' share-of-wallet. Don't disregard those customers with current low shares; customer polygamy is the rule these days. But don't accept your current share. Learn how to improve your share of your customers' loyalty.
4. Loyalty requires mutually beneficial interactions; most loyalty programs are tilted in the company's favor.
5. The chain of events from loyalty to profits is twisted and complex. Learn the specific response patterns of your customers and your industry.
6. Satisfied and loyal employees can make a difference, but customer satisfaction and loyalty can and often do happen in the absence of employee satisfaction and loyalty.
7. Customer loyalty and brand imagery are far from independent; you must manage them hand-in-hand.

Introduction: The Myths of Loyalty: Did the Gods Mislead Us?

Chapter 1. Loyalty Myths that Subvert Company Goals.

Chapter 2. Loyalty Myths Contaminating Company Management Practices.

Chapter 3. Myths about Customers: Their Needs, Behaviors and Referrals.

Chapter 4. Myths Concerning Loyalty Programs.

Chapter 5. Myths About Loyalty, Share of Business, and Profitability.

Chapter 6. Loyalty Myths Regarding Employees.

Chapter 7. The Foundations of Customer Loyalty.

Chapter 8. The Right Way to Manage for Customer Loyalty.

Acknowledgements.