Customer Loyalty

I’ve been reading Michael Treacy’s Double-Digit Growth and recommend it for anyone running a business or having P&L responsibilities. In this book, Treacy outlines what he calls his “5 Disciplines of Growth”:

1. Keep the Growth You Have Already Earned
2. Take Business from Your Competitors
3. Show Up Where Growth Is Going to Happen
4. Invade Adjacent Markets
5. Invest in New Lines of Business

I’ve read through the first three and found #1 and #3 the most interesting so far. The first point about keeping the growth that you’ve already earned has really sparked my interest. Treacy talks primarily about customer loyalty and programs to support it…which got me thinking…

How many publishers are really doing a good job building customer loyalty? Quality is “Job One” as Ford used to say (in their pre-Firestone/Explorer days). That phrase certainly applies to all industries though and is generally assumed to be a given. If you don’t offer quality products, how do you expect to build customer loyalty? With cheap prices? Maybe, but is that a long-term solution?

Part of the challenge is that most publishers don’t have a direct relationship with their customers. Most customer loyalty programs have to be conducted through a retailer. Should publishers be more aggressive in establishing a direct relationship with their customers? If so, what sorts of programs make the most sense? How about these:

• Frequent flyer program – After you buy a certain minimum number of products, you get one free.
• Premium content program – Access to a premium content site is offered for free or at a discounted price.
• Bookclub program – Customers who promise to buy a certain minimum number of books over 12 months get a special discount on all of them.

Some publishers already do a good job of tracking and following-up with their existing customers. O’Reilly is a good example. Every O’Reilly book you buy generally has a blown-in registration card. I’ve received catalogs and e-mail blasts from O’Reilly in the past, most likely from a prior reg card submission.

Amazon is clearly a leader in building customer loyalty. They not only experiment with various programs, but they study the data and leverage the results. It’s one thing to launch something like the 3 programs I’ve listed above, but it requires a much larger effort to regularly analyze the data, use it to make improvements to the programs, etc.

I’m looking forward to reading Treacy’s next chapter on how to invade adjacent markets. I’ve always felt there are loads of opportunities with that strategy, especially in the computer book-publishing segment. In the mean time, what are your thoughts on customer loyalty and how publishers can do a better job building it up?

Comments

[Todd Main]

These are really great ideas, but I think a much more simple one to implement is for the publisher to provide a newsgroup forum for each book they publish. We buy books to learn, but we rarely have an opportunity to discuss these books with others. If the author and editor frequent the forum and provide responses sometimes or further insight, it makes owning the book all that much more meaningful. For example, one book I'd love to discuss is "From Good to Great" - but I have no one to discuss it with.

Of course there is a bit of a risk in opening up a forum, like unsavory posts, competitor slanders, non-readers (those that didn't buy the book) throwing out opinions that are not based on the discussion of the book - but that is manageable so long as everyone knows that it is an audited forum. One of the reasons Amazon is so successful is that readers feel that they can give something back to the community on the books they've read.

You can go so many places with this newsgroup idea. Commenters receive "points" for number of posts (for all book forums from one publisher they have joined) - they can buy something with those points, like a new book or a subscription. Or the most prolific commenter may be offered an opportunity to write an article for the publisher’s website. The ideas are endless.

This all creates community and that may be the one thing the publishing industry lacks. Personally, I'd like to have the opportunity to thank authors for their books that have really helped and also be able to lodge a complaint about a book or a section that wasn't researched well. Just put the forum link at the end of the book and invite readers to contribute their thoughts.

My 2 cents.

[Blaine Moore]

I like Todd's idea. I would definately subscribe to a board or newsgroup of that sort.

[Scott Walker]

These comments are spot-on, but the trouble for publishers is that (with exceptions like O'Reilly) the customer's relationship is with the author of the book, and perhaps with other readers of the book, and not with the publisher.

Still, the publisher can provide good customer experience with good design and a pleasant reading experience, and -- to the extent the author is willing -- tools for discussion and contact.

[Brad Hill]

Joe, your three suggestions all force the reader to spend more money! That's an enforcement of loyalty, not a cultivation of it. Besides, if we're talking about computer books, your "premium content site" would probably be a failure from the start. Forgive me, but that sort of brainstorming is what leads some people to conclude that publishers just don't get the Internet.

Listen, put your readers in a relationship with your authors. That is all. Don't breathe a word about how they should spend their money. Community is the stickiest commodity in the online realm. This is the big missed boat in publishing. And it's getting more missed with every day, week, month, and year that goes by.

Sorry to be grumpy once again on this topic.

[Sol Nasisi]

Not a publishing expert but seems like it makes sense to keep the customer relationship with the author. Publishers should want to strengthen this relationship because it should lead to more future sales. Sort of like pumping the latest movie star, etc.

[Joe Wikert]

Many of these comments touch on message boards for individual titles. Believe it or not, O'Reilly doesn't have a monopoly on this idea. WROX has done it for years (see p2p.wrox.com). I totally agree that it's a great way to build loyalty and community; so do the 400K+ unique visitors who utilize the site every month.

Brad, I'm not so sure all 3 of my suggestions cause the customer to spend more money. Let's use the frequent flyer program as a good example. Customers don't have to participate, but once they exceed a minimum number of books purchased, they get one free. I don't know about you, but I've certainly bought several titles from the same publisher over the years, sometimes even within the same year. Would I like to get rewarded with a free book once I bought 5 others, for example? You bet! Would I look at it as the publisher is just forcing me to spend more money? No, just like I don't look at the free flights I've earned on United and USAir as the airlines having forced me to spend more money. It's the opposite: They're simply acknowledging me as a frequent customer/buyer and rewarding me with a free trip.

The bookclub program is similar. Again, the idea would be to focus on those customers most likely to be frequent readers/buyers of your product. If someone typically only buys one of your books every year or so, they're not a good candidate and shouldn't sign up. But why not reward your best customers?

This reminds me of how I am always skeptical of magazine subscription renewals I get each year. I'd say at least 50% of the time I find that my "preferred renewal rate" isn't as good a deal as a totally new subscriber can get. I always call the publisher on this and am always offered the better deal. Most people don't do that, I'm sure. It irks me that as a preferred customer I'm not getting as good a deal as a new subscriber. I realize the cost of acquiring a new customer is high, but most studies seem to indicate it should be as important, if not more so, to retain your existing customers. That's all I'm trying to do with these suggestions...

[kathy Sierra]

Interesting... I agree that strengthening the relationship between reader and author is important, but that also means that some publishers may want to work harder at *author* retention/loyalty or the publisher ends up building a brand for an author that immediately switches to another publisher. But that's a tricky one...

Readers might have a stronger relationship with a given publisher if there were more of a relationship *between* the books on a given topic (or even across topics). I want to know that the publisher cares about me as, say, a software developer, and that they can show me how their various books form a cohesive learning program for me, rather than simply a collection of titles on a particular topic. Often when publishers recommend another book from their stable, it doesn't feel like it's in my (the reader) best interest, but simply the book they happen to have.

The different books--even when from the same *series*--usually don't feel like they are a part of some overarching thing. One book has virtually zero relationship to another book, and it's obvious that the various authors are not related in any way. Most publishers don't do training for their authors either, although I know O'Reilly does orientation and training for Missing Manuals and Head First, but I don't know about the other books. I think the Pragmatic guys are doing an excellent job at having it feel like all the books are coming from the same *team*, despite being written by different authors, and even when the author's voice still comes through loud and clear.

I don't think there will be a strong relationship between readers and the publisher until the publisher is perceived to be a provider of "growth" products. But I do think it's possible, and of course you know I'm going to point out how the O'Reilly website does a great job of making me feel like it's the place where my learning continues. That doesn't mean there's a seamless link between their different books, but the O'Reilly network makes me *perceive* that there's something more there than just a collection of books.

[Joe Wikert]

Thanks Kathy. I think your last paragraph says it best. The two things that jumped out at me were "...until the publisher is perceived to be a provider of growth products" and "...makes me perceive that there's something more than just a collection of books." The publisher who can deliver on both those promises will indeed have a leg up over those that don't.

[Brad Hill]

Joe -- frequent flyer programs and book clubs are textbook examples of coerced loyalty. Your regard for them as reward programs, and my perception of them as coercian programs illustrates the different viewpoints of your content ownership and my consumer advocacy. I believe our disagreement also underlines the difference between offline thinking and online thinking. You propose dragging offline models into the online space. Other types of publishers, such as music companies, also hope for chimerical migrations of analog business practices.

But on the Internet, if nowhere else, free means FREE. Your ideas DO require more spending, just as airlines require FF participants to stick with that airline. I'm sure we all know of people who have bought unfavorable tickets just to get the miles. That is coercian. Book club members buy required minimum purchases to get discounts. That is coercian. Neither of these schemes cultivates loyalty in the sense that I think you meant in your original entry. Coercian schemes often lead to resentment and bailing out when the added value diminishes or expires.

I think, also, that part of our disagreement lies in perception of brand clout. You speak as if book buyers are already loyal to the publisher, so mechanisms of rewarding that ongoing loyalty should be built. (If readers are already loyal I don't understand what you mean by "building customer loyalty," but let's forget that for now.) Many publishers in many fields overvalue their brand clout. Most consumers have no idea which company made the film they loved, the CD that lives in their Walkman, or the book they take to the beach. Most customers do not anticipate buying the next Warner Music album, the next ticket to an Orion film, or the next Random House book. A few book series have brand clout: Dummies, Hacks, Idiots, and some others. I do think that perhaps frequent flyer and book club schemes could stand a chance with those lines.

But if I may say so, when you brainstorm on the blog, you tend to reach for offline models and attempt to transplant them in the online landscape. That does not modernize our relationship with our old-media customers who live and work online. The culture in here is unique. Values are different, and content values are generally lower. Mechanisms that are easily accepted offline are scorned online. And, above all, COMMUNITY RULES. Look at the ventures that "get" the online culture best, and it's easy to see that they are about connecting people. Amazon is sticky as hell because it's full of people telling other people what to buy. eBay--no explanation necessary. Yahoo!? The greatest community domain on earth. Google was just a tech company until it started connecting people through shared keywords; then it became a media company. Even unauthorized file-sharing, which might seem like a content venture, is essentially a communal activity.

I have a feeling that when I hit Post this is going to seem like a horribly offensive lecture, and I apologize in advance. To wrap up: If you want to build loyalty, and create a new relationship with customers, and cultivate brand recognition, don't try to squeeze customers into some added-value revenue scheme. Just welcome them into the family; build a stimulating home and haven for them; make them feel hip and special; give them updated information; and do not under any circumstances mention money or offer discounts. Building new relationships means revising one's self-definition. I, and others like me, are willing to redefine what it means to be an author. Are you and your company willing to redefine what it means to be a publisher?

[Todd Main]

I have to agree with Brad here on almost all points. He has succinctly defined the issue at hand.

One of the fundamental issues here is that even as large as they are, publishers lack brand definition and recognition as being different from other publishers. Readers buy books for 1) Content and 2) Author. I have personally never bought a book because of 3) Publisher.

Some might say that the Dummies series is bought because of 3) Publisher, but I would argue that 99.9% of Dummies readers have no idea who the publisher even is. Secondly, even if they do know who the publisher is, would they consider buying from the same publisher just because of the Dummies series? Probably not.

If I wanted a reward program, I'd generally get it from my local mega bookstore. They won't limit me to a certain publisher. They will also likely manage the program better than a publisher could hope to do.

What bookstores don't do well is community building. That's where publishers can play a great role, build their own recognition and set debate and conversation into play between readers.

Look at Microsoft. It had years of challenges due to the simple fact that it did not support or help cultivate communities. It's really only in the last 2 years that Microsoft has put it's support engineers and developers on the frontline in newsgroups (both MS and non-MS newsgroups) to answer questions, listen to complaints and provide clarification. All of this is done for free. And this is from a company that already has brand recognition.

If publishers can build a community, I will certainly take part. But Brad has hit the nail on the head - it's not about the money the publisher can make now through value-add. It's about the loyalty they can build so that maybe one day I will buy because of 3) Publisher. But "3) Publisher" is not just an editor and a print shop - it is a trusted advisor, a community builder, a cultivator of thought leadership. Now THAT will bring any publisher all the money in the world.

[Joe Wikert]

I’m quickly finding that a blog is one of those interesting forums where you can be told you’re both too short and too tall as well as too light and too heavy, all for the same point of view. As you may have seen in earlier posts, I’ve been told that I’m trying to create an electronic product model that is too far removed from the existing print one, which works just fine. On the other hand, in this post, I’m told that I tend to reach for offline models and attempt to transplant them in the online landscape. In the end, I suppose I’m guilty of a little bit of both.

“Coerced loyalty” is a great expression. Brad, I think you’re right that frequent flyer programs are a good example of coerced loyalty. I tend to think just about every purchase involves some level of coerced loyalty though. Nevertheless, all those people out there who complain that frequent flyer programs are unfair because they “force” you to use only one airline or go via an indirect route are probably the exact same people who would complain the loudest if the programs ever went away. Maybe these customers are being pressed into using these programs, but they certainly are quite popular. Also, I’ve been doing a great deal of flying lately and I can tell you that most airfares are within $25 to $50 for the routes I’m taking. There are exceptions of course, but I don’t take those routes. Given such a tight range of pricing with so many options, why wouldn’t I want to build all my miles on one airline and reap the benefit of free tickets down the road? If that’s coercion, so be it – I’ll take the free tickets!

I do agree with you that welcoming customers into the family, building a stimulating home, etc., are all key ingredients here. I don’t think there’s any reason to avoid discounts or financial perks though. There are far too many examples of how these can be part of a successful overall solution/offering.

[Juno888]

..If the author and editor frequent the
forum and provide responses sometimes or
further insight, it makes owning the book
all that much more meaningful.