Manipulations lead to transactions not loyalty

It’s simple – explains a television commercial – simply put your gold jewellery in the prepaid insured envelope and we will send you the cheque for the value of gold – in just 48 hours– with no questions asked – screams Muthoot Gold and many others – claiming to be the leaders in their said space – serving as a broker for the gold, that would eventually be sent to a refinery, melted down, and re-introduced again into the commodity market- for you to buy.

The promoters of these said companies simply wanted to be the best in their space and sought to transform an industry with the reputation of a back alley pawn shop and give it a bit of Tiffany sheen. They invested money in making the experience perfect. They worked to make the customer service experience ideal. They were successful entrepreneurs in their earlier spaces, who knew exactly the steps in building a brand, while providing a strong customer experience. They had spent mammoth money trying to get the balance right, and they made sure to explain their difference in direct response advertising on various local, national cable stations.

Better than the similar offers, they always say. And they were right, yet the investments did not pay off as expected. And a few months later, they made an astonishing recovery. A significant one: almost all of their customers did business with them only once. They had a transactional business, yet they were trying to make it so much more than that. Hence they stopped trying to make service better than the similar offers and instead settled with good. Given that most people are seldom going to be repeat customers, they weren’t going to any head –to – head comparisons with other services.

All they needed to do was to drive a purchase decision and offer a pleasant enough experience that people would recommend them to their friends. And more was unnecessary. Once the owners of these enterprises realized they didn’t need to invest in the things that build loyalty. All they wanted to do was drive transactions, by making their business vastly more efficient and more profitable.

For transactions that occur on an average of once, carrots and sticks are the best way to elicit behaviour. When the police offer a reward they aren’t looking to nurture a relationship, with the witness or tipster, it simply is just a single transaction. When you lose a pet dog, and offer reward to get it back, you don’t need to have a lasting relationship with the person returning it; you just want your pet dog back.

Manipulations are a perfectly valid strategy for driving a transaction. Or for any behaviour that is only required once, or on rare occasions. The reward the police use are designed to incentivise witness to come forward, provide tips, evidence that may lead to an arrest. And, like any promotion, the manipulation will work, if the incentive feels high enough to mitigate the risk.

In any circumstance in which the person, organization wants more than a single transaction, however, if there is a hope for a loyal, lasting relationship, manipulations help seldom.

• Does a politician want your vote, for example, or does he want a life time of support, loyalty from you? Judging by how elections are run these days, it seems that they only want to win this election.
• Ads discrediting the opponents focus on single issues, and an uncomfortable reliance on fear or aspirational desires are all indicators. Those tactics win elections, but they do not seed loyalties amongst the voters.

Automobile industry across world learned the hard way of the high cost of relying on manipulations, to build a business when loyalty was what they really needed to nurture. While manipulations may be a viable strategy when times are good and money flush, a change in market conditions makes it too expensive. 

When the oil crisis of 2008 hit, auto industry’s promotions, incentives simply became untenable – same thing was repeated in 1970’s too. In this case, how long could the manipulations could produce short-term gains was defined by the length of the time the economy could sustain the strategy. This is a fundamentally weak platform upon which to build a business, an assumption of never ending boom. Though loyal customers are less tempted by offers, inventive, in good times, the free flow of business makes it hard to recognize their value. It’s in tough times, those loyal customers matters most.

Manipulations work, but they entail huge cost – in money terms – lots of money. When money isn’t available to fund these tactics, not having loyal following hurts- really hurts – badly hurts.

 

Manipulations work, but they entail huge cost – in money terms – lots of money. When money isn’t available to fund these tactics, not having loyal following hurts- really hurts – badly hurts. After September 11, in USA, customers sent cheques to South West Airlines to show their support.  One note that accompanied a cheque for $1000 read – you have been so good to me over the years, in these hard times, I simply wanted to say thank you by helping you out.

These cheques that South West received were not enough to tide over their damages, and plug the bleeding bottom line, yet they were symbolic of the feelings that the customer’s had for the brand – a sense of partnership. The loyal behaviour of those who did not send money is almost impossible to measure, but its impact has been invaluable over the long term, helping South West to maintain its position as the most profitable airline in the history, till date.

Knowing you have a loyal customer, employees, supplier’s base not only reduces costs, it provides massive peace of mind. Like loyal friends, you are certain, aware, know that your customers, employees will be there for you, when you need them most.

It’s the feeling of we are in this together – that’s shared  between customers, company, suppliers, stake holders, voter, candidate, boss, subordinate, that defines  great leaders.

In contrast, relying on manipulations creates massive stress for buyer, seller alike. For the buyer, it becomes increasingly difficult to know which product, service, brand, company is the best.  I joke about the proliferation of tooth paste varieties and the difficulty in choosing the right one.

Relying on manipulations creates massive stress for buyer, seller alike. For the buyer, it becomes increasingly difficult to know which product, service, brand, company is the best

But toothpaste is just a metaphor. Nearly every decision we are asked to make every single day is like choosing toothpaste. Deciding what law firm to hire, college to attend, car to buy, company to work for, candidate to elect- there are just too many options, choices, each claiming a distinct uniqueness over the other.

All the advertising, promotions and pressure techniques are employed – to tempt us, confuse us, seduce us, titillate us in one way or another, each attempting to push harder the other to court us for our money, our support, ultimately yielding one consistent result: stress.

For enterprises too, whose obligation is to help us decide, their ability to do so has gotten more difficult, complex. Every day, the competition is doing something new, better, unique- churning out new promotional campaigns, new guerrilla marketing tactics, adding on new features, benefits, – and to keep pace in this is extremely hard work. Combined with the long term effects of years of short term decisions, that have eroded profit margins, this raises stress – levels inside organizations as well. When manipulation is the norm, no one wins, all loose.

It’s not an accident that doing business today and being in the work force today, is more stressful than it used to be. Many of the ills that we suffer from today have very little to do with the bad food we are eating or the partially hydrogenated oils in our diet. Rather, it’s the way that Corporate has developed that has increased our stress to levels so high that we are literally making ourselves sick cause of it.

Across spectrum we are suffering from Hypertension, Cholesterol, Diabetes, Depression, Ulcers, Anxiety, Cancer, and Cardiac at record levels. All those promises of more, more, more are actually overloading the reward circuits of our brain. The short term gains that drive business across today are actually destroying our health.

Your call now, folks!