Short-Term Cash Versus Long-Term Loyalty

“S hort-term cash versus long-term loyalty is very much the MO currently at American” is what Edward Pizzarello of Pizza in Motion wrote in this article pertaining to American Airlines offering Platinum Pro — its new elite level status — for sale.

Let us think about that statement for a moment.

Short-Term Cash Versus Long-Term Loyalty

There was a time when loyalty was considered very important while supposedly cost effective. Building and maintaining relationships was the mantra of business: “The customer is always right” — right?!?

“There is no definitive answer to this question, but most sources say the answer is that it costs between 4 and 10 times more to acquire a new customer than it does to keep an existing one”, according to this article pertaining to the cost of customer acquisition versus customer retention written by Ian Kingwill, who posted it at LinkedIn. “Some sources say cost of acquiring a new customer is over 30 times that of keeping an existing one.”

Distance

Keeping relationships local was important years ago. Members of families lived closer together; and companies supported the local community in the form of being an integral part of the neighborhood. There was comfort in knowing that support was available nearby for the long term — which typically resulted in fostering a strong sense of loyalty — but that is only good if you were happy with the status quo. People and companies eventually wanted more.

These days, relationships — if you want to call them that — tend to be more long distance. Many companies are now nationwide, global or multinational. Family members live great distances apart. That sense of “local community” seems to be more of an elusive pipe dream than a reality; and that has been a contributing factor to the weakening of the sense of loyalty.

Greed is Good?

Chief executive officers of companies are more interested in short-term goals primarily because they benefit and profit from them — and companies use lucrative incentives to lure what they believe are the most talented and experienced candidates to fill executive positions. Many of them eschew long-term loyalty because — well — they will likely not be around when that eventually pays off. Please pardon the grammar; but short-term profits are literally where the money is.

Short-term thinking is not confined to the board room. Many consumers also share the blame, generally wanting to purchase a product or service as inexpensively as possible without thinking about the long-term ramifications — and technology only fuels that way of thinking, as anyone can readily find what they want by instantly comparing what companies have to offer using their computers or portable electronic devices.

As especially evidenced in recent months, politicians are not concerned about the welfare of their constituents. Their legacies seem to be their top priorities — but then again, there are constituents who will vote for a lamp if it represented the political party in which they believe. Loyalty is only as good as the next vote — which is not a particularly long-term point of view.

What a mess…

Disruptive Technology

…but that is not only the product or result of the human condition; and calling that imperfect is an understatement. Advances in disruptive technology have created an environment which is starting to emulate a dystopian future. Do you have an issue using the products or services related to the largest technology companies? Good luck trying to speak to an actual human being to help you resolve that issue. Rather, count on spending vast amounts of your time engaging in a runaround all over the Internet to research countless articles and forums where no one has a definitive answer. If you need help, review the frequently asked questions, as they purportedly have all the answers.

How can you be loyal to a company where you cannot talk to an employee or where customer service seems to be non-existent? Simple: offer a superior product or service at a cost too low to resist — or free of charge altogether.

Unfortunately, a lack of human interaction or real customer service is the byproduct of procuring products and services at a low cost or free of charge. With salaries and benefits, employees are too costly for companies. Automation keeps those costs down — especially when the customer base of some of these companies is in the billions of people. Fewer employees mean more profits…

…and if a new entity emerges which offers a product or service that is superior to an older competing entity, customers will flock to it — especially if the price is right.

Summary

I have launched and operated businesses over the years; and while profit is certainly king, I always did everything I could to assist customers and clients — even at no additional cost. Perhaps this is a poor way of thinking; but to me, the relationship with the customer is what mattered to me in the long term.

Alas, one inherent problem with that way of thinking is that not all customers think long-term. They want what they want at that moment — and for as little cost as possible.

We live in an impatient world. We want satisfaction now. We basically do not know how to work together towards a common goal or solution — or, at least, want to invest the time, money and effort. We are all responsible for the disintegration of the concept of loyalty.

The sustainability of a company — or of our planet, for that matter — is not of concern to most people who will not be affected by the benefits in the long term. Hey, our ancestors did not think about that for us — so why should we think about that for our descendants?

In my opinion, the issue is that people seem to avoid living in the world as a community where we help each other benefit and profit — regardless of whether that community is local or worldwide. This is by no means a call for socialism, as I believe that a person should rightfully benefit from the time, effort and money which he or she invests…

…but there needs to be more open-minded thinking pertaining to long-term loyalty and relationships; and it has to start somewhere. Should it begin with American Airlines and how it offers its new Platinum Pro elite level status to members of its AAdvantage frequent flier loyalty program? Should it start with you and me?

More importantly — and I will be the first to admit that I have not covered or exhausted all of the factors; so this may be an ongoing discussion — is long-term loyalty possible as long as lucrative short-term cash exists?

5 thoughts on “Short-Term Cash Versus Long-Term Loyalty”

  1. Sam says:

    Excellent article. Written very thoughtfully

    1. Brian Cohen says:

      Thank you, Sam. I appreciate it.

  2. Jason says:

    Very good article Brian.

    I agree 100% with what you wrote. It is why I try my best to avoid buying anything on Amazon if at all possible. It does not mean that I am not very price conscious, but I want the smaller businesses to survive by buying direct from them. Market domination by one company in any industry is not good for the consumer because over and over it leads to higher cost, less selection, and less customer service. The focus on short term profits is why I believe that the customer experience provided by AA for example, has dropped drastically.

    For people who are poor, they are forced to make decisions strictly based on pricing. But for most people, there is some leeway in who they choose to do business with. Of course if a person only cares strictly for themselves with no regard for others then of course they couldn’t care less who they do business with. It is only when people care about their community that people will be willing to consider who they give their business to.

    1. Brian Cohen says:

      What bothers me, Jason, is that while a lifestyle can be partially influenced by choice, I generally am dismayed by people who are more financially fortunate than others and yet sneer down on less fortunate people as if they truly believe that they are better than them. I have seen that attitude in various forums and Comments sections of weblogs.

      There are absolutely people who are forced to decide strictly based on pricing if they are to have any semblance of a reasonable lifestyle — some of whom would like the luxury of purchasing something based on what they truly want and not primarily because of economic reasons.

      Again, I am not promoting socialism; but if someone who is in a less fortunate situation financially is willing to put in a honest day’s work for an honest day’s pay and is not even afforded that opportunity, then something is truly wrong, in my opinion. This is where the community aspect should come in: there should be an effort to ensure that the economic system works for as many people as possible who are willing and able to work — and therefore be able to afford to purchase products, services and opportunities. That, in turn, theoretically helps to create a stronger economy overall.

  3. Marsh says:

    I deal with this at my job everyday. The CEOs of the brands we manage want to push and squeeze every dollar out then worry about the long term strategy of the brand. They will only be there short term and want to maximize profits not maximize long term value.

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