• April 19, 2004
  • By Paul Greenberg, founder and managing principal, The 56 Group

Loyalty Versus Commitment

There is no such thing as loyalty in a business relationship. Loyalty is something you give to your country, your family, your friends. It is an absolute willingness to do something that could be against your own best interest. In its most intense form, you give your life for your country or to save a member of your family. It is a principle of profound faith. What it isn't is a marketing term denoting a customer's commitment to a business. Loyalty doesn't have a bidirectional requirement, but the relationship between customers and a business demands that two-way street. At its simplest, a customer relationship with business is a value exchange. As the business provides a level of value satisfactory to a customer, so the customer provides value in return to the business. The customer retains that commitment as long as the business continues to provide the expected value. But when you stop meeting the customer's expectations of value, that customer goes elsewhere. Is your business actually loyal to its customers? Then why would you need algorithms for customer lifetime value. Customer profitability shouldn't matter to a company that is loyal to the person, rather than to the long-term revenue potential of that possibly committed customer. Should it? Are your customers loyal to you? The expected churn rate for the telco industry this year is 77 million customers moving on to other telcos. Know how the telcos are going to deal with it? Not find out who have been the most committed customers with weakening ties, but who the most profitable customers with weakening ties are so they can try to manage the churn and keep those profitable customers. But, you say, these things happen in business. Exactly. This is why there is no such thing as customer loyalty. Business practice demands that customers be valued for their profitability and revenue possibilities, not for their emotional commitments to you or vice versa. So, CRM folks and aspiring English majors, get your language straight. Let's not denigrate loyalty with the needs of business. Call it customer commitment if you want, but business value exchanges don't jibe with a deeply held, deeply felt fundamental principle for country, friends, and family. If you think they do, then I'd recommend a prenup. After all, "till death do us part" is a business proposition, right? About the Author Paul Greenberg is president of The 56 Group LLC, an enterprise applications consultancy specializing in CRM, and author of CRM at the Speed of Light: Capturing and Keeping Customers in Internet Real Time
. Contact him at paul-greenberg3@comcast.net
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