David Evans Speaks To The Economic Times
Extracts from an article appearing in the February 10 issue of The Economic Times, Brand Equity.
Customer service, says David Evans, is a bit like yoga, a never ending journey and something that is practised every day. The 62 year-old chairman of the Grass Roots group is a brand performance guru and is an unexpected contrarian of the subject of customer loyalty management. He doesn’t believe investing millions in (customer relationship management) CRM technology, doesn’t care for loyalty cards and says price-driven loyalty is often the lowest form of loyalty. Instead, Evans tells his clients that the best way of retaining customers is to enhance the overall value of their product or service.
The Grass Roots group was founded by Evans in 1980 in the UK and has worked with blue chip companies like Barclays, British Telecom and Lexus. Evans, who was awarded an MBE by the Queen in 2008, believes the message that Grass Roots gives any client is simple: a consistently well delivered product or service at good value goes much further than programs that focus on retaining customers with ‘bribery’. Yet, he says, firms are constantly chasing the perfect mathematically proven customer loyalty formula where there is none. ‘There are 1.8 billion people in the USA databased on various loyalty programs. The population is 320 million. If you cut out the lowest band of socio-economic classes, the average American is on fourteen loyalty programs. That’s absurd’ he says.
In India, Evans says, there is even more of a scramble for the perfect customer loyalty program. ‘Once you become free to choose, loyalty becomes interesting. Indian consumers are enjoying the joys of freedom and brands are struggling.’ So is the quest for loyal customers in India a largely wasted effort? ‘Not if you understand that loyalty is ultimately about the way people feel about the organisation and the way the organisation responds. ‘He gives the example of Lexus. Grass Roots designed the loyalty program for Lexus 16 years ago. The first thing they did when Lexus opened their dealership in the UK was set up a system for every Lexus owner to be telephoned three times a year; what they had to say was fed back into the system. ‘There’s no incentive to stay loyal to Lexus except engineering perfection and total reliability,’ says Evans, who drives a Lexus Hybrid himself.
Part of getting your value proposition right, is creating a culture, like Lexus, of constantly eliciting feedback and integrating it into your production service and using it to coach your employees………
The story goes on………And CRM, he says, is not the way. ‘My bank spent a fortune on CRM that let them know exactly what I was doing when and where. They still haven’t got it right. On the other hand my personal banker who has known me for 20 odd years asks after my children whenever I go into the bank and she’ll say, ‘you know we’ve just improved our interest rates there, shall we shift your money there for you?’ That’s what I want.
Most often, according to Evans, loyalty programs are simply a way for companies to get hold of a database. ‘They want an excuse to communicate with you,’ he says. There are brands that get it right. Evans gives the example of the Tesco Clubcard program that has demonstrated that loyalty programs can be an important differentiator in the competitive supermarket sector. Tesco uses the program to communicate directly with customers and then makes those communications relevant to them by learning about how consumers shop and what they want from their retailer. Tesco then lets that consumer behaviour drive its decision model, so which programs work and why they work for different groups of customers.
The first lesson to learn from the example of Tesco, says Evans, is that firms should focus on whether the benefits offered are valued by the targeted segment. He recalls the time when Grass Roots ran a complex loyalty scheme for British Telecom and had this discussion with the managing director who insisted that one of the rewards of the points system should be air miles. Evan’s didn’t agree. ‘We took on a wager: I said less than 12% of members would redeem the points for air miles, he said 30% would. We were wrong, both wrong. Only 9% did. What’s the point of giving you a reward that you don’t value?’
Ultimately, says Evans, you can have the most glamorous loyalty program but it cannot be expected to camouflage the product or service’s shortcomings. ‘It is people and service that make a brand. Otherwise, an airline is an airline is an airline and a hotel is a hotel is a hotel,’ he says with a shrug. He points to slide from a presentation he made recently. It’s a quote from Mahatma Ghandi: ‘Take care of the means and the end will take care of itself’.