Is Loyalty Overrated?

Our dog Scout just had a birthday. She’s a very loyal dog. She and her older sister Cocoa Puff (both chocolate Labs) are loved members of our family, but they have very different personalities and are loyal in different ways. Is loyalty overrated? I can comfortably walk with Scout off leash without the fear of her darting off at the first smell of pizza, so I’d have to say no.

Nature or Nurture?
This got me thinking more…Is loyalty a function of nature or nurture? How important is customer loyalty? Are we taking the best care of the people who give us business? Are we conditioning our customers well or are we the cause of our own trouble? As a company how much of our attention does it deserve? Is it overrated? Is loyalty (to a product or brand) or the propensity to be loyal in general something we’re born with or is it learned? To tell you the truth, I’m not sure about whether it’s learned or hard wired. I can tell you that Scout is a very loyal dog but wasn’t always that way. After a little bit of training and rewards for good behavior she started to get it. She listens to us, stays close on walks off leash and (as you can see in the photo) loves to hang out with everyone. Cocoa Puff (aka: Cokes and Puff Doggy) our other Lab had the same training but is much more independent and loyal to whomever has food. How did this happen? Maybe I need the Dog Whisperer…

On the consumer side, I’ve been watching the explosion of Groupon with deep interest (disclaimer: I’m working on something similar but different for our community too). Groupon has had a tremendous amount of success and is an amazing business case study. If you don’t know their model they basically use the power of (local) collective buying to connect businesses to new customers fast via super low prices. They have a data base of millions of consumers all shopping for the best deals. You discount your product 50%+ and if the set number of consumers all buy your thing, they (all) get the deal. You pay Groupon the rest of your profit margin as a fee. Groupon promises to jump-start your biz and deliver lots of new customers walking in your door fast. Based on the testimonials on their site, it looks like this has worked for a lot of people. But I wonder at what cost and for how long?

From my point of view, if you sign up for Groupon’s service you’re basically mortgaging 100% of your margin or profits today for the hope of business tomorrow-to say nothing of the possible devaluation of your brand. That is, you have to discount your product or service 50%+ (and with competition fierce in some categories it’s higher), then pay the rest to Groupon. This you do with the expectation that first-timers will be so dazzled with you that they will surely be back and you’ll instantly have loyal repeat business. But as the rise of these kinds of services increases (500+ imitators), the deals become even more “insane” margins are ground further to stubble. I’m worried that small businesses are training consumers to be loyal to the best price. Are these the kind of customers we want? With the economy still down, consumers seem to win. But do they? Where does the price-slashing end? Without profits, companies can’t afford to keep their best people and they have to cut corners causing quality to suffer.

I’d like to hear your thoughts on this. Is loyalty nature or nurture? Is it overrated? How do we cultivate loyalty?

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  • Brad Arnold

    I have been thinking about the same thing; Loyalty. It’s a big word. It stems from the word “loyal” which is defined as: “faithful to a person to whom faithfulness is due.” You see in this world (for the most part) I don’t think that loyalty is possible with so many people grappling for work and fighting for the next client or $$$. I find that loyalty is only extended as far as ones ability not to be harmed by it. Meaning, if “I” don’t get hurt by it, if “I” don’t lose money by it, if “I” am not inconvenienced by it… I’ll be loyal to you! That’s why we can get our Dogs not to dart after the smell of a pizza, because the praise of an owner out weighs any prize a dog can have… we can train our dogs to only need us, but our clients and employees will always know there is more out there… and will want more!

    Back to the reason I have been thinking about this. I have been getting the shorter end of the stick… if you will. I have been groomed and have always believed in showing loyalty in business (and in family) even if it means giving the shirt off my back. I will tell you too, I am a huge promoter and teacher that if you take care of your customers, your customers will take care of your bottom line! However, I am seeing that more and more not happening. Not just with me, but I am hearing stories from other clients… that clients are taken advantage of loyalty from vendors and not returning the favor when times are tough. Also, I am hearing the same from clients…that their contractors are taking advantage of them even though they have given them so much work over the years. Huh…

    So is loyalty over rated? No, but I think it has lost its meaning.
    (I hope I stayed on topic)
    Brad A.

  • Bryan

    I think you’ve hit on one of my points…
    This climate is presumably a buyer’s market and consumers might think it’s time to make it count. But it cuts both ways. If companies cut corners or their best workers to cut and compete on shrinking margins, everybody loses.

  • Nancy Ramos

    I believe that loyalty comes from nurture. Although, I do want my customers to return because of the value I offer .

  • Arlo Tully

    Brad - I would have to agree that loyalty has lost its meaning. We use to be a people that had the attitude to take self responsibility and sacrificed for others. This is a attitude of loyalty. But we have turned over many years to have a attitude that says “It is not my fault, and they can defend for themselves”. In both cases I think it is a result of nurturing or lack of. I also think it is something that can be changed through nurturing. It is a up hill battle, but a battle that can be won.

    Bryan - I think Social Media through Social Networking is working so well because it builds a nurtured customer. Where traditional marketing and customer service struggled to nurture because it was not personal. Even when you made it personal for that moment, It started and ended there. I am sure you have heard it said. “No one bought a saw because they wanted a saw but they wanted to cut a piece of wood.” So do not sell saws sell how it cuts. My point is, if Loyalty can come from nurturing then know how to nurture your customer. What is it that will build loyalty? If it is price, Then sell price. But do not sell price through reducing it but selling the benefit to customer buy the price, make it personal and beneficial. Not always easy to do, I know but if you want loyalty, your customer needs to trust you and perceive that you have there best interest in mind.

  • Victoria Procunier

    Side Note: If you’re interested in learning more about how Groupon is working for businesses there’s a recent study by Rice University “Rice University study finds Groupon is more beneficial for consumers than businesses”

  • nazila pace

    Loyalty? first of all I have that tattooed on my side leg…goes to show you how loyal I really am. I think it has been in my nature to be loyal to people. Because I would like for them to do the same to me. Unfortunately in today’s world, even our sports team are not loyal to there team nor fans. In my country, professional athelete will never go from team to team because there is more money, they stay loyal and true to there team, coach and fans. That’s the problem we are having these days…People are being greedy and don’t give a damn about loyalty. But I believe if we stay true to ourselves and others, long term it will benefit us. People who are not loyal, I do not do business with nor like to be friends with. I surround myself with people who are like me or better.
    As for if loyalty is overrated? Absolutely NOT. It’s very much like having respect for your elders, family friends coworkers…or YOURSELF. If you have no respect for yourself, you will not treat others with respect nor will they respect you either. We need loyalty in every relationship, wether its your friends, boyfriend, husband, wives.
    Why do we love our pet so much? Because they are so loyal to us…start treating people with respect and be loyal and see if they too want to hang with you all the time too.
    Hope I didn’t go off track..I guess loyalty is very important to me.
    thank you

  • Jen Olewinski

    In this economy, people are price shopping now more than ever. They will pay a lower price for a service, but at what cost? I am a growing PR firm and offer a great service with amazing results, but I can be outbid by smaller or lower price point firms offering the same service as us. The problem is what is those companies don’t deliver on their promises because the margin of profit is so low that they can justify half-promised service? Where does this end? I say stick on your price if you can deliver, and develop a loyalty and referrals from those that are happy with your service. And offer discounts to those that are loyal, instead of those that are price shopping. Those should be the customers that are your number one focus.

  • BJ

    The coupon deal thing has hammered the Pizza business. No-one buys pizza without a coupon anymore! I’ve used Groupon type of deals and eaten at many restaurants I would never have tried - and never been back to one of them. If you’re going to use that type of marketing as a business, you should be prepared to really blow people away because the point is to gain customers that will keep coming back! Customer retention is what all marketing should be about!

  • Stephen

    Bryan Arnold,

    You hit the nail on the head. Very accurate and I am glad to know I am not the only one who feels that way. Many are both consumers and business owners, and when it is time to be a consumer, most are all about “What have you done for me lately” . They don’t seem to remember the discounts or extra service that was provided a year ago when they were down, now it is just about them. I think that goes to show how society in general is selfish and easily forgets what has been done for them. Sad but true, but regardless we still must treat others as we wish to be treated, that is the only way to keep your morals at the end of the day. Bryan A., I would like to know about your business, contact me at . Have a great day LOC!

  • Tyler Jorgenson

    It is an extremely dangerous tactic to attract new customers through steep discounts. Since the business owner is essentially make no money on each Groupon transaction ALL of the value from the transaction comes from future revenues from each new customer. The challenge is that the new customer is not a retail shopper, they are a bargain shopper. Will they be willing to pay the normal 100% price when their first introduction to you was at a 60% discount? That’s the gamble, and it’s not worth it in my books.

  • Todd Henderson

    I personally think loyalty first earned, then trained, then rewarded (in that order). With so many companies using social networking channels as a stand-in for spamming their audience with the latest press release, product launch, and iPad giveaway, it’s doing the very opposite of the expected outcome of their efforts. I think it’s turning their customers sour to their respective brand. With each set of loyal customer’s eyeballs, great value must be placed…what you say, how you say it, and with what frequency all subtly impact the loyalty you receive. By focusing on what you can offer and not what you might receive, I think many companies would see a drastic increase in customer loyalty. It simply takes a commitment to doing things right.

  • Tim Constant

    I dont think that loyalty is overrated, but I do think it is more complicated that many people initially suspect. There are different reasons people, in this discussion’s case, customers, are loyal to specific product brands or merchants/locations/restaurants. The ability to capitalize on the loyalty of its customer base is, in my opinion, rooted in the business’s ability to identify not only its desired target market, but its substantial revenue producing customer base. These two are not always the same. Customer loyalty, and long term growth and accrued profit will be a result of creating a reason, or hopefully reasons, for those two target groups to continually give you repeat business in the future. Is your customer interested in excellent price points? Quality products? Excellent service? Are they looking for a product that is difficult to find? I think you can create loyalty by catering to your target market and customer base majority and providing them with something that they seemingly cannot or do not desire to get from another business.


    You raise a very interesting question. As a marketer, I think that Groupons can both help and hurt a business — but I waited to see if my opinion changed after actually buying one (have now bought many) - so here’s my new thinking. Groupons are great. I bought an LA Times 1-year subscription for $10.00. I miss the LA Times, but didn’t think I needed yet another something to read. So now the LA Times has expanded its reach, which will inevitably have positive repercussions because I’ll be looking at LA things to do an see which will increase commerce there, which in turn is attractive to LA Times advertisers who also gain the expanded market. I also bought the Duffy Groupon because when my family comes to visit, we always rent one, so I’m already loyal — and now I’m a happier loyal customer. The downside is if the experience is negative, you have the one shot. But if it’s positive, you may gain a loyal customer. Retailers especially gain exposure. I think it will evolve to a “social commerce” platform that ties in a loyalty factor, and customer insight which improves customer relations. Recently, we wrote about the GAP Groupon $11 million dollar case study and other monizations in the social commerce sphere:

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