Tuesday, January 19, 2016

Yea, But Will They Keep You as a Customer?

Image courtesy of Critical Todd
The old acquisition vs. retention challenge is alive and well!

The perils of focusing on customer acquisition and sales over the customer experience and retention can be summed up nicely with this: "As fast as you're bringing customers in the front door, they're running out the back door." Some refer to it as the leaky bucket syndrome.

If only companies knew what they truly needed to do to keep us coming back, to keep us feeling loyal. If only they would shift the ratio of acquisition : retention focus to be more about how to keep the customers they already have than on how to acquire new/more customers. Imagine how many more customers they could acquire - thanks to word of mouth from their current customers.

Today's post was inspired by a story shared on LinkedIn recently by one of my connections:
I'm always looking for great customer experience to emulate. This morning I went to a coffee shop for the first time. I think the server sensed she'd never seen me before, so when I accepted a loyalty card, she smiled and clipped off 4 coffee's worth "to get me started". I thought about this on the way to the office - would a loyalty card with 1 clip motivate me to return to a coffee shop I'd used as my regular was closed for the holidays? No. But a half full card will, so they lost nothing, and gained a new customer.
Congratulations to the coffee shop! It worked! Put another notch in your belt (or loyalty card) for acquiring yet another customer. (Or did they?)

My immediate reaction after reading that last sentence of the story was: "Yea, but will they keep you as a customer?" That, my friends, is the $64,000 question.

Interesting on the customer's part is that he wouldn't go out of his way to go to this coffee shop for just one clip on his card. It doesn't seem like this coffee shop truly is a viable alternative for him. So, did they really acquire a customer? Well, in the marketing sense of the word, they did. They got another one. The problem is, maybe he'll go back; maybe he won't. And therein lies the problem. If they'd truly made an impact on him, if they'd executed on a great experience for him, he'd go back. For just one clip.

It's quite the game we play.

This is the difference between loyalty programs and customer loyalty/retention.

Loyalty programs are a marketing tactic to acquire new customers and hope they keep them coming back as a result of all the perks. Loyalty cards, discounts, coupons, points, miles, cash back, etc. are all examples of those perks. This is what companies think they need to do to keep customers coming back. What happens when companies take all that away? Do people keep coming back? Ha! Ask Ron Johnson how well that worked for him at J.C. Penney.

True customer loyalty, and thus retention, is earned. Companies have to work for it. Companies need to spend time, effort, and resources to design and deliver a great customer experience. Then, and only then, will they have acquired a real customer, one that will keep coming back, tell his friends, spend more, become less price sensitive, provide feedback, and want to see the brand succeed and grow.

In the story above, it doesn't sound like there was anything special about the coffee shop -  there were no ravings about a "better than Starbucks" experience. Nope, just four clips on a loyalty card. And he'll go back some day because of the four clips, but he wouldn't go out of his way for one. Starbucks, for example, only gives one star at a time. And we know people go out of their way to find a Starbucks. One star or none.

So, you decide. Where's the real ROI? Acquisition or retention? Marketing programs or customer experience strategy? And which one brings you real customers?

Seems like a no-brainer to me.

Do what you do so well that they will want to see it again and bring their friends. -Walt Disney


  1. I suspect I would have gone back, not for the 4 stamps, but because the girl on the counter had the sense to hand out for stamps. I wonder what she would do the next time.


    1. I'm sure there are others who would do the same, only to be disappointed that she only gives one stamp (or forgets to give a stamp, which happens, too).

  2. Annette,
    The story in your post reminded me of a story that Phil Barden told me (http://www.adrianswinscoe.com/customer-service-and-customer-loyalty-can-be-improved-by-using-decision-science-interview-with-phil-barden/) where another coffee shop experimented with using a customer loyalty card that had more spaces than its regular card but had some pre-stamped the first two i.e.. regular cards had 8 spaces and the new cards had 10 spaces with 2 pre-stamped.

    They ran both sets of cards together and the pre-stamped card created 70% more business than the other card.

    What’s even more fascinating is that the people that went on to complete the pre-stamped cards rated the business as better and had higher satisfaction than the the people that went on to complete the unstamped cards.

    The reason that seems to work is due to a psychological effect called ‘The Endowed Progress Effect’.


    1. Thanks for sharing that experiment, Adrian. Interesting outcomes, for sure. They rated satisfaction higher, but satisfaction with what? I wonder how that question was asked.

  3. It is so great to read your story. It brings me so great emotion. Thanks.