Customer Loyalty in Today’s Crowded Market Place

A couple of weeks ago at one of our business conferences, we had a panel discussion on customer loyalty. My friend, Sivaram Kuppaci thought customer loyalty does not exist in today’s ‘easy to switch’ digital era. We, as consumers, are spoiled for choice with business models where ecommerce giants are living off venture money giving away freebies and even selling products below cost, price more than loyalty seems to be winning the game.

Defining Loyalty

How do you define loyalty? If you ask your spouse, she would say “it’s me and ONLY me.”

Reminds me of the Cola wars, there are teenagers who don’t switch brands even when the other is not available.

Esteban Kolsky’s model talks about emotional and Intellectual, “emotional is when the customer is doing business with you for emotional reasons, there’s an emotional bond, he’s in love with you and your products, and cannot even think about anyone else.” Reminds me of Apple, and of course Coca Cola.

Intellectual, on the other hand, “is a relationship where the customer has to justify doing business with you. Are you still the best at fulfilling his needs? Is there someone else in the market who can do the job better?”

Kolsky further goes on to state in his blog post that fewer than 3% of companies invest in emotional loyalty, the rest of them focus on intellectual loyalty by retaining the customer for the lowest cost as long as they can.

Don Peppers defines loyalty as attitudinal and preferential. “Attitudinal means customers are willing to buy your product over others irrespective of price, even though both products are almost equivalent.” Peppers goes on to state that the focus here is on “willingness” not necessarily an actual purchase. Behavior on the other hand “is the actual conduct of the customer where he re-purchases regardless of any preferences.”

Bruce Temkin’s definition is “customer’s willingness to consider, trust, and forgive.”

How do brands build loyalty?

Talking from my personal experiences, I’ve become loyal to brands for the following reasons:

  1. They were my clients, my success depended on theirs so it was just natural;
  2. Sometimes I’d meet the CEO at an event and liked her humility and charm, so decided to try her products.
  3. Other times, there were things like I just loved the product, in clothes, Louis Philip fits me just right and I love their service personnel whichever store I go, their pricing is also just about right. Almost every time I walk into that store, I find something that I really like;
  4. The Brand Personality sometimes just attracts me. Red Bull, although I am not loyal to them, I like the way it tastes and the personality they represent – adventure and the spirit of winning, I also like their F1 team; Virgin for their service and the fact that they always strive to be the best.

Along with personality, I’d say the values of the organization also does attract me.

Customer loyalty is such an important topic because it’s far less expensive to retain a customer than acquire a new one. Therein lies my fascination for this topic.

Our 2 biggest challenges are,

  1. Defining Customer Loyalty
  2. Retaining Customers and Driving Loyalty

Check out below what some of our readers have said,

Questions we’ve been discussing:

Q. What is your definition of customer loyalty?

A. David Leonhardt (President, THGM Writers)

My definition of customer loyalty is pretty simple – that I look for that brand when I am ready to buy. It doesn’t mean that the brand owns me, just that they are my go-to source.  For instance, I like nature’s Path cereals.  I like their taste, I like their ingredients, and I like their approach.  So they are the first cereals I go to.  But They are not the only ones I buy.  I might also buy another brand because someone in my family likes it.  I might pick up a different cereal because it is on sale.  Or I might just want variety (Ooh, long time, no Shreddies!).  But I still look first for Nature’s Path.

A. Deborah (I/O Psychology Strategist)

Customer loyalty can be demonstrated in different ways.  When it comes to the web, it is often easy to measure by the number of times someone visits a brand web site, Facebook page, Twitter feed, Pinterest board, etc.  If the customer actually engages with the content, that is all the more indicative of loyalty.

A. Dr Elaine Nicholls (Teacher, tutor, study skills coach)

If a customer returns to a brand despite there being a choice(s) in the market. You are the primary, go-to provider of goods or services for the customer in your company’s vertical market. The customer does not consider using another provider even if they are not one hundred percent satisfied.

Q. Why are you loyal to one brand over others?

A. David Leonhardt (President, THGM Writers)

It is first and foremost about the product itself.  If the product satisfies me, I will keep buying it.  If the price spread between the product and competing products starts making it too expensive, of course I will reconsider.  If a new product comes out that is even better, well, loyalty can be fickle.  If customer service really upsets me, well, that probably won’t push me away from the product, but it might make me do some nasty doodling about the brand.  And look for a cheaper, better alternative.

A. Deborah (I/O Psychology Strategist)

I am loyal when it appears that the brand actually cares about their customers.  This can be done in different ways, but it has to start with a staff that actually cares and is able to translate that caring into engagement and programs that demonstrate that caring.

It is understandable if “caring” is not everybody’s thing, but if it can be spearheaded by the right people, the brand has a chance.

A. Dr Elaine Nicholls (Teacher, tutor, study skills coach)

I consider many factors such as value for money, longevity and quality. I am also influenced by customer service and ethical issues surrounding the brand such as environmental impact of processes, delivery and packaging. Conversely, I will immediately seek an alternative if I feel that a brand has misrepresented themselves in these things by implying they are ‘green’, ‘healthy’ or anything else. I hate this type of cynical marketing with nothing backing it up. As a scientist I am very wary of statements such as ‘98% of people agreed, of 32 asked’.

Let us know your definition of customer loyalty, and what you are doing to retain customers in the comments below.


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