The credit card industry pioneered in client loyalty research. So why is it trapped in the 'space' of call centre rote, rate playing games. Maybe it is too much into measuring results.
Here's an interesting paradox. The credit card industry, it seems, led the way in measuring customer loyalty. Yet the industry -- despite all its research into business principals and practices to attract and retain qualified clients -- is trapped in the 'rate game' spiral, as it struggles to attract and retain high quality clients. Why?
Well, Charles Green in his Trusted Advisor blog quotes Fred Reichheld’s book "The Loyalty Effect" from 1991:
We found we could not progress beyond a superficial treatment of customer loyalty without delving into employee loyalty. We found there was a cause and effect relationship between the two; that it was impossible to maintain a loyal customer base without a base of loyal employees; and that the best employees prefer to work for companies that deliver the kind of superior value that builds customer loyalty. We then found that our concern with employee loyalty entangled us in the thorny issue of investor loyalty, because it is very hard to earn the loyalty of employees if the owners of the business are short-sighted and unreliable. Finally, predictably, we found that investor loyalty was heavily dependent on customer and employee loyalty, and we understood that we were dealing not with tactical issues but with a strategic system.Fair enough, these ideals remain valid; the problem is in the measuring, Green suggests.
Very simply, the case of “loyalty” is Exhibit One in a lemming-like rush by business to over-stress three simple concepts:So legitimate and practical ideals are lost in the rush to measure them. And businesses, and their employees, start distorting their behaviours in an effort to achieve short term measurable results -- and then the whole business value proposition gets trapped again in short term thinking.
1. Profit is a measure of business activity effectiveness
2. Measurement is a valuable tool for management
3. Activities can be disaggregated into smaller, measurable activities.
Those reasonable beliefs have metastasized into these distorted versions:
1a. Every business activity has value only insofar as it increases profit
2a. If you can’t measure something, you can’t manage it3a. Anything worth measuring is even better measured in shorter durations and smaller units. This extreme thinking has meant that the management of business these days
is centered on short-term profit manipulation—not on long-term value creation.