Retention vs. Loyalty

You pride yourself on your club’s service and hospitality. You are much better today than you were yesterday but not nearly as good as you want to be tomorrow.  You work very hard to hire right, treat staff right, treat customers right, and to constantly improve. These efforts seem to be rewarded. The questions is can you still do better?

Let’s not kid ourselves about “retention.” You can initially retain members through specific tactics; lock people in to long term contracts and make cancellation painful. But these tactics won’t go unpunished. At some point your “customers” will break free and run like exploited hostages; once exploited, people rebel.  Sometimes it’s mild rebellion and other times it is loud and nasty.

Retention is the lagging indicator of customer loyalty; i.e. a result of the love your customers have for your business.

Stop seeking retention, and start seeking loyalty.

What if you measured attrition based on when customers’ hearts left you? Not bodies and wallets. What if you measured how many current and former members still love your business?  In other words, of the people still paying dues, how many do so but don’t really love your business? Of the people that cancelled, how many did so but still love your business?  If the answer to the former is “zero” and the answer to the latter is “all” you would have the highest loyalty possible.  Retention is thought of as people still paying their dues. When they stop, they move to the attrition side of the ledger.  But if you could measure the investment of their heart instead of money, how many members and former members would be on the “loves us” or the “doesn’t love us” sides of the ledger? Your customer retention/attrition metric and P&L are likely not reporting this.

Assume that long-term value was your only objective. Assume the only metric you were going to use to determine long-term value was customer loyalty. Where would you start? How would you determine the things that were causing violence to your loyalty objective?

Here is a simple filter to determine if your operation is creating even minor feelings of exploitation with your customers. Danny Meyer, in his book “Setting the Table,” makes the statement that “hospitality is what happens for you, not to you.” If your focus is on service and hospitality, look at every process and interaction through this lens. Ask yourself if it happens “to” or “for” your customer.  Start with how you answer the phone, transfer a call, check someone in, sell a membership, sell personal training, set appointments, sell a shirt, allow for a guest, cancel a membership, and handle complaints.  Dig into each of these and see if it is happening “to” or “for” your customers.  During the cancellation process have you turned the customer that loved your business into a former customer that now despises your business?

Let’s suppose you’ve looked at every process and are mortified to discover that almost all of these things, by design, are happening “to” the customer. How do you start to turn this ship around?

I can tell you this, not by commanding your staff to be hospitable!  Not by stating a new direction and mandating that everyone attend customer service training.

You start by looking at how you manage and lead your employees. Are their jobs happening “to” or “for” your staff?  Are you trying to be outwardly hospitable with an inwardly hostile culture?  Hospitality and service work when they are an embedded part of your culture. You can’t ask people that do not feel like they are treated well to treat others well.

If long-term value is the wish of the investor/owner, you have one path to follow: Only the right culture can create happy and loyal employees.  Only happy and loyal employees can create happy and loyal customers.  Only customer loyalty can create long-term value. Only long-term value will create a happy owner/investor.

A little forensic work will reveal that bad culture is generally due to authoritarian leadership. The pursuit of the wrong metrics is a wasting your time, your employee’s time, and your resources.