Thursday, June 04, 2009

Firms of Endearment: What makes you emotionally loyal to a company or organization?

I recently came across the concept of "firms of endearment," which comes from the book Firms of Endearment: How World-Class Companies Profit from Passion and Purpose. Firms of endearment are companies that endear themselves to stakeholders (employees, customers, vendors, shareholders, etc.) "These companies meet the tangible and intangible needs of their stakeholders in ways that delight them and engender affection for and loyalty to the company."

The book reports that not only are these companies more beloved by customers, they are also significantly more profitable than comparable companies on the S&P 500 and even the benchmark companies chronicled in Good to Great by Jim Collins. In case you're curious, here's the list of the top FoEs:
Best Buy
Commerce Bank
Container Store
Johnson & Johnson
Jordan's Furniture
L.L. Bean
New Balance
Progressive Insurance
Trader Joe's
Whole Foods
(There are other companies that are FoEs, like Target, that didn't make this top list.) The authors argue that people feel customer loyalty and attraction ("endearment") to these companies in ways that they do not to other companies. This rings true to me; I love Honda and Target but ignore Buick and recoil at Wal-Mart. I've always bought Reeboks and never Nikes. An excerpt from the book:
Of course, millions of customers do shop routinely at many other companies with which they feel no emotional attachment. Customers can be loyal in behavior to a company without being loyal in attitude. Attitudinal loyalty comes from emotional attachment, a force that causes a customer to drive past a Sam’s Club near her home to shop at a distant Costco instead, for example.

The logical “left brain” says you should shop at Wal-Mart so that your shopping trip ends up saving a few bucks. However, the emotional right brain may not welcome the experience. Integrating the two sides is one of the secrets to Target’s success. “Tar-zhay’s” customers get low prices, as well as a pleasant experience and more stylish products than they would find at Wal-Mart. Now consider the impact of these experiential differences from an investor’s perspective: Wal-Mart’s stock has been stagnant for the past five years while Target’s has risen nearly 150 percent.

Seems like this concept holds true not only for businesses but also for nonprofits, churches and parachurch organizations. What makes you love some organizations and not others? Why do I love listening to NPR and feel emotionally attached to them in a way that is not true of other media? What endears you to a particular ministry, church or community? And is there anything we can do to endear our own organizations to others? I'm curious what companies or organizations you find yourself fiercely loyal to, and why.

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