Many businesses have a skewed definition of customer loyalty when they consider repeat purchases as a substitute for loyalty.
But customer loyalty goes beyond repeat sales, said Raghu Kalé, CEO of Striking Ideas LLC and author of Loyalty and Sacrifice: Ushering New Horizons for Business Leaders in the Digital Age. In his book, Kalé looks at factors that define customer loyalty and going above and beyond what is necessary in business to build real relationships.
Kalé has worked in various roles within technology companies, consulting, hospitality and advertising. But the common thread has always been communications and helping businesses develop their brands. Now, he has taken the lessons he's learned in his professional career to write a book and start his own company, Striking Ideas LLC, which partners with businesses to develop communication content.
Here, Kalé discusses customer loyalty and building relationships with a brand.
Editor's note: This Q&A has been edited for conciseness and clarity.
What's the secret to creating a loyal customer?
Raghu Kalé: An organization is a cluster of people and processes meaningfully arranged to serve a particular cause, and the bouquet of promises that you take to the customer is what ultimately becomes a brand. So, how do you develop or recognize what your loyal customers are all about? You need to recognize that you have something valuable to offer to the customers. There will always be something that customers are willing to accommodate and adjust with you, even in the hard times. That's where the true loyalty comes in. When you move away from repeat purchases, you start to look at which customers are really connected with you and willing to spend a higher share of their wallet.
How does a company decide what is valuable and what to offer customers?
Kalé: Every company will have their own offering and their own set of priorities. There will be companies and products that are price-sensitive, and they will only look at the value-for-money equation. But, if you look at a higher order -- luxury goods, where there is a sense of relationship building with customers -- then the other things start to come into play, when you are going beyond a purely transactional mindset.
Do you have any examples of real business relationships with customers?
Kalé: In 2008 [during a recession], I had a conversation with a CEO of one of the car manufacturing companies for a documentary I was working on. I said, 'How did you mitigate the losses? How did you make sure that you were ahead of the competition?' He said that the relationships that they have with their customers -- their last suppliers -- go back 70 to 80 years. And, due to the fact that that manufacturer had a great understanding with their customers, the relationship was not being looked at in a transactional way. It went beyond the transactional mindset, and that's where the loyalty, sacrifice and compromise came in.
And, while I was watching the news the other day, I heard a cruise liner is filing for bankruptcy. In a way, they're almost dead because of COVID-19. It was on CNN, and they said that nearly 45% or 55% of the customer base is not canceling the cruise. Instead, customers want to take a rain check and take it in 2021 or 2022. These people are willing to sacrifice and wait until the cruise line comes back. That is a test of loyalty, and that is the concept of the loyalty and sacrifice principles that we are looking at.
If corporations can start viewing customer loyalty factors from this standpoint, I think we will build far better relationships that truly matter, instead of just giving loyalty points because someone made a purchase. Customer loyalty is about much more than just a repeat purchase.
Have you seen a shift in what customers seek and what businesses need to do to maintain loyal customers during the COVID-19 crisis?
Kalé: There will always be customers who are die-hard fans and die-hard loyal to certain brands. But it's unfortunate that only during crisis the true character of people is revealed, whether it is loyalty to their profession or alignment to a brand. COVID-19 has thrown the entire world into upheaval, but I don't think priorities have changed because of it. Priorities have been revealed. Crisis brings the opportunity to shine a light on those who are standing by and those who are withering away.
Loyalty and Sacrifice: Ushering New Horizons for Business Leaders in the Digital Age
Download a PDF copy of Chapter 1.