Gaining customer loyalty is a neat marketing trick. It ensures that you have found your niche and a base of customers that you can always rely on as a revenue stream. Even better, these same customers are eager to refer their friends and other acquaintances to your products and services.
Most businesses nowadays even create entire marketing campaigns solely dedicated to enhancing the role of the loyal customer (from empowering them to become brand ambassadors to promos that award their purchases with discounts and perks).
Yet as innovative (and effective) as it all sounds, are you certain that customer loyalty can help you during times of competitive disruption?
If you truly understand that there are limits to loyalty from employees and from business partners, then it shouldn’t be all that different with the loyalty of your customers. In fact, it stands to reason that your best customers would actually be in the worst position to help you in the face of competitors disrupting the playing field with an objectively superior market offering. The following is just a short list of reasons why:
1. They can sustain a business but can’t always grow it.
Yes, finding a niche means you have enough paying customers to cover your costs. But if your intention is to grow and expand your business, sticking with your target market isn’t necessarily going to fund that growth.
Profitable Growth is generally delivered when you have more new customers joining your loyal customers and/or your loyal customers spending more each time. This means reinventing not just your marketing strategy and your supply chain strategy but also your portfolio allocation of products and how you will focus these products by market segment.
Imagine you are a local retailer who wants to expand while there’s already the looming shadow of Amazon on the horizon. Your local community of buyers, however, eschew online shopping because they find you more convenient and familiar. Do you see the disconnect already?
In fact, it only shows how they are only one piece in the large puzzle of balancing portfolio management, with sustainability and innovation. So you can see then that if a disruptive competitor is already launching an innovation broadside on your business, then even your prospect of sustainability is looking rather dim.
2. They are more emotionally invested and have strong bias.
Normally, this would be great if you were trying to maintain your base of customers and affirm your unique position on the market. However, don’t you think there were a lot of people who were also emotionally invested in the horse and buggy? That didn’t stop it from being phased out by automobiles.
Even today, a small minority of consumers pine for the years of rustic simplicity where the family farm was the center of existence and the most advanced technology being sold was the wind-up clock. That doesn’t make them an ideal source of revenue for most modern firms.
Dealing with disruption requires a different, objective perspective that isn’t colored by fondness for your brand. You are better off hearing a blunt truth about your market position than a sweet lie fostered by brand loyalty.
3. They are not supply chain experts.
Make no mistake, consumers today are still very well-informed compared to the past. Your own customers may very well be well-educated on how you deliver your products/services. On the other hand, this still doesn’t fully qualify them to understand why a competitor will have a distinct advantage over you.
To put it simply, they are used to the way your business does things but aren’t aware of other practices or technologies that put your company at a disadvantage. Because if they did, they would be opting for that advantage too (or bar themselves from it out of their emotional investment in your brand).
This is hardly the recipe for a solid audit on your supply chain, let alone your entire business model. Their feedback is only as useful as how you can improve your product to their preferences. If its new markets you are looking to foray into, you will need more qualified expertise to guide you through those sometimes murky waters.
This isn’t to say loyal customers have zero value. It is just that they don’t have much utility outside of business sustainability (and somewhat short-term sustainability as far as impending disruption is concerned). They can indeed be blind to an incoming innovation that changes the market landscape and you are better off spending more time innovating and perhaps less on investing in blind loyalty.
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