At the NACCM in November, one of the presenters from Whirlpool said she’s been getting the question recently: “Are we there yet?” In other words, her internal constituents think the customer loyalty initiative has been going on for long enough, thank you, and when will it be complete? This is an interesting perspective worth examining—and debunking!

To understand this better, all we have to do is look at the corporate environment. Most our colleagues have projects or initiatives that start at the beginning of the year and are complete by year’s end. Some projects go on longer, but not most. Then the cycle repeats the following year.

But loyalty is different for a few reasons. First, it’s not an ‘initiative’; it’s a strategy that drives our other corporate strategies. We need to educate our colleagues and help them understand that earning and retaining loyalty is a core business function—it’s as integral to business operations as sales, billing, and collections!

Second, loyalty programs themselves create the need for ongoing work. Each time we surprise our customers with great products or serves we raise the bar. We set the new norm. Therefore, if we want to do it again, we have to move beyond where we just were. It sort-of a continual improvement process aimed at driving loyalty.

My advice? Head off the question entirely by being proactive. Set expectations. If you have a loyalty ‘initiative’ or ‘project,’ rename it to a ‘program.’ Make is sound like any other program that’s here to stay. And make sure you’ve got a budgeted line item for it. After all, if it looks like an ongoing strategic program and quacks like the same, chances are likely people will treat it as they do any other ongoing strategic program—with expectations of longevity—and respect!

Steven Nicks, VP Steven.Nicks@phelongroup.com

Wow! I can’t believe how much hostility surrounds the Net Promoter concept. Who would have ever thought that the let’s-all-work-together customer loyalty crowd could be so at odds?

I recently attended the North American Conference on Customer Management (NACCM) in Orlando and was surprised by the level of conflict. Some attendees referred to the conference as a “Net Promoter lovefest” while others, such as GE Healthcare, espoused claims like “a 10 percent increase in our NPS yielded a $500M increase in directly attributable revenue.” Fred Reichheld spoke to a warm audience, but was confronted by somewhat hostile questioners at the end of his keynote. (Of course, the hostile questioners were from loyalty firms who promote different approaches.) One presenter even dedicated his entire session to debunking Net Promoter, mostly by trying to use Fred Reichheld’s quotes and his own data.

My take? First, we should all thank Fred Reichheld for bringing so much attention to this important topic. Whether or not you’re a Net Promoter fan, you have to admit: Fred has gotten the attention of many top executives and board members. Take advantage of the opportunity to advance your own internal initiative. Second, we should all implement our loyalty programs with a somewhat skeptical eye. We’re never going to get it 100% right so we should always be asking what we can do to improve our initiatives and metrics. As one very wise conference participant put it, “We should view incidents where our metrics fail as opportunities to learn and get better at what we do, not as a failure of the initiative itself.”

Steven Nicks, VP Steven.Nicks@phelongroup.com

Keith McFarland, a two-time CEO and thought leader, recently wrote an article called Decentralizing Your Business. In it, he illustrates how in our fast-paced, information-driven world centralized organizations cannot provide information “the troops on the ground need” as quickly as the troops can gather it for themselves. I find this concept particularly interesting when applied to customer insight programs.

Many corporate ‘voice of the customer’ initiatives centrally gather feedback and analyze it. Or, perhaps more likely, they’re outsourced to a third party. But what happens? Customers self-identify as being unhappy, yet the information goes into a black hole or gets distributed to the field at the aggregate three to six months after it’s relevant and in such a way that no one can act on the specifics.

If you’re designing a customer insight program, I urge you to heed McFarland’s advice. Figure out how to engage the frontline in the process and allow them to lead wherever possible. The frontline knows the customer better than anyone else—and they’re better prepared to take action.

Steven Nicks, VP Steven.Nicks@phelongroup.com

I recently moderated a Women in Technology’s (WITI’s) annual conference panel that generated some questions I thought you’d find interesting. The panel was Conversations: How is the Customer Engagement Changing. I was fortunate to share the stage with a really smart marketer from Adobe, Katie Keating. Together, we correlated the evolution of Web 2.0 and how it is influencing company-consumer, company-customer relationships. Web 2.0, if you don’t already know, is a buzzword coined by O’Reilly Media a few years ago to refer to the “new” Web—the Web as a platform for collaboration, sharing and social networking. In the Web 2.0 world, consumers and customers are in charge; they’re going around your company to find more “real” advice about buying your company’s complex consumer or B2B products and services. This, in turn, has created changes in the marketing stratagem, summed up nicely by a report from the Economist:

Online marketing via the Internet has changed things radically. A survey of 228 senior global marketing executives conducted in February 2006 by the Economist Intelligence Unit, in co-operation with Google, shows that online techniques transform the role of marketing from a monologue to more of a dialogue with the consumer. In this new environment, relevance is more important than repetition, and marketing messages are “pulled” by the consumer rather than “pushed” by the marketer. The ability to create a direct feedback loop between a marketing message and a subsequent action taken by a customer is online marketing’s most important innovation. [The Future of Marketing, from Monologue to Dialogue. February, 2006]

And that, in turn, correlates with The Phelon Group’s Buyer Believer Totem, which emerged several years ago from reams of research data points and other more qualitative analysis we’d done around buyer behavior. The Totem says that:

• First and most, people believe and trust their own experiences.
• Second, they believe and trust the experiences of close colleagues and friends.
• Third, they believe the perspective of objective third parties (analysts, media).
• Last (and least) they believe the stuff that issues forth from vendor companies.

Yes, these are in descending order. And actual experience may shift beliefs even more depending upon your audience. Some buyers, take developers for instance, stay at the first two levels almost exclusively. Developers are very apprehensive about the words of independent third parties, even more so than they are about the words of vendors. Senior-level executives, on the other hand, place lots of trust and mindshare with the analyst and pundit communities. Not surprisingly, we were talking about these very concepts, as well as about customer communities (think Web 2.0), over three years ago. Here’s a snippet from (and link to) one article from mid-2004 that tees-up the whole conversation nicely:

Beyond References: Ten Smart Things Companies Do to Leverage their Customers (Part One)
By Promise Phelon & Steven T. Nicks

From our client experience, we’ve learned that incentive programs are not only difficult to manage but they warp the dynamics of your relationships with sales and existing customers. Instead, we recommend focusing resources on strategies and tools that raise your references on the credibility pyramid. The pyramid depicts the credibility level of varying information sources during IT purchase decision. The higher the source is on the credibility pyramid, the more impact that source has on a purchase decision.Invest in customers who are ecstatic about your solution and your company—do whatever it takes to ensure their continued satisfaction and success so they’ll want to share their stories—and you won’t have to pay them. And don’t forget about analyst relations and industry accolades—both truly under-used tactics. Prospects rely heavily on what analysts say (and don’t say) about vendors and their solutions. They also trust industry assessments, benchmarks and evaluations. Whether you’re up-selling to you install base or prospecting for new customers, invest in elevating your references on the credibility pyramid.

When you have a minute, please read the article. You’ll find it as relevant today as it was then—perhaps even more so. And as for the questions generated at the conference—they’re the keys that pull everything together, and the reason for this article.

1. If Web 2.0 is upon us, how has its emergence changed the way you interact and communicate with customers?
2. How has Web 2.0 impacted your marketing budget? Some of you are probably moving budget from print to online; others are erecting blogs.
3. How much do you REALLY know about whom your customers believe?

I can tell you this: I was looking at marketing spend recently and found that companies are still spending more in low Totem areas, those that really don’t convince buyers and require more resources and time. At the same time, they’re spending less on the top of the Totem, which is all about enabling a great experience and helping the customer qualify and quantify that experience. The second level—where people believe and trust the words of close colleagues and friends—is finally starting to get more notice as a result of our work over the past several years.

Despite opinions to the contrary, Web 2.0 is here and is driving more power to the center of the totem—the experiences of trusted colleagues and reputable third parties. If your marketing organization is like most, you’re probably spending the majority of your budget on the bottom (and most expensive) level of the totem.

Perhaps it’s time for a change.

Promise Phelon promise.phelon@phelongroup.com