When Customer Loyalty Is A Bad Thing

Interesting premise from HBR. How customer loyalty programs, which many marketers think is a good thing straight off, could, if not analysed right could turn out to be costly for some companies. Authors Timothy Keiningham and Lerzan Aksoy writing on Conversation Starter blog on HBR asks companies to look at the right kind of customers to build their programs around. Instead of asking whether there are enough loyal customers in the customer base, companies need to focus on three more complex questions: 1) which loyal customers are good for their business, 2) how do you hang onto them, and 3) how cam companies get more customers like them. The place to begin any loyalty strategy, according to the authors, is to determine which loyal customers are profitable and which are not. A closer examination of these two types of customers always reveals very different reasons for their loyalty. Unprofitable loyal customers tend to be loyal for one of two reasons: 1) they are driven by unprofitable pricing or exchange policies, or 2) they demand an excessive amount of service that they are not willing to pay fairly to receive. More here