The problem with customer loyalty myths

Virtually every assumption floating around about customer loyalty is just plain wrong, and this faulty thinking is the source of a lot of dysfunctional corporate behaviour, including sinking big bucks in customer relationship management (CRM) systems that fail to deliver any value. That’s the message of Loyalty Myths: Hyped Strategies That Will Put You Out of Business, a book authored by a team of researchers headed by Timothy Keiningham, senior vicepresident of Ipsos Loyalty, a market research firm headquartered in Parsippany, N.J.

The book, published by John Wiley & Sons, systematically demolishes many cherished beliefs about customer loyalty with a relentless but fascinating barrage of facts, figures, and case histories.

“We kept finding that all the promises made about what our clients would get from customer loyalty weren’t materializing,” says Keiningham, explaining the impetus for writing the book.

Companies that want to focus on the so-called 20 per cent of their customers that are profitable without doing proper analysis to sniff them out are asking for trouble. “Focusing on customers who spend the most money is a really bad idea,” says Keiningham. “The problem is that the highest-revenue customers can either be the most or the least profitable.” The undesirable ones are customers that may buy a lot of product but only on deal, or demand so much in service they become unprofitable, he explains.

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Jim Love, Chief Content Officer, IT World Canada

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