Understanding Customer Loyalty

The Goal of Every Business

Understandably most businesses everywhere are constantly looking to increase and consolidate the level of customer loyalty they have with both individual  customers and the group as a whole and when you consider that numerous research reports have consistently reported that it is many times more difficult to win a new customer over rather than keep and existing customer, you can fully appreciate why. But two important questions that arise from this underlying premise are:
1. Does every customer have the same potential for being loyal  and
2. Of those customers that are loyal, are there different groupings of loyalty?

Does Every Customer Have The Potential For Loyalty

Simply stated, the answer to this first question is no and rather than take this as an admission that the business is unable to provide quality service or the customer is unable to respond in kind with loyalty, the issue is often one of pure practicality where it is unreasonable to be loyal.

For example let's assume you are taking some time away from work and taking an extended road trip where you have chosen to drive around the country and experience first hand the many wonders your nation has to offer.  When you are on the opposite side of the country you pull into a petrol station to fill up on fuel before starting the long trek back. At this station you receive an excellent level of customer service, an excellent meal, the opportunity to withdraw cash from an ATM, and so on. Kudos to the management and staff but are you now loyal to this business. Clearly not, because no matter how well your needs were met her you probably wont be back any time soon and realistically the best the business could hope for is a favorable review on a review site such as Urban Spoon or Trip Adviser.  So no not all customers have the potential for loyalty, but for those that are what types of loyalty exist?

Loyalty by Default and Loyalty by Design

There are two key types of loyalty, namely Loyalty by Default and Loyalty by Design.
So what is the difference?  As the name suggests customers through repetition may be loyal to you by default where it is for the most part out of habit that they continue the association but  in truth see no great advantage in dealing with you and feel no great degree of connection with the brand or business.

Customers who are loyal by design on the other hand have made a conscious choice to do business with you and are overtly aware of and appreciative of the value that you provide for them and will therefore be much less likely to look elsewhere for a replacement provider or service regardless of what other alternatives may present themselves, whereas the customer that is loyal be default will much more easily be swayed to try and potentially adopt another alternative provider with only marginal improvements to what you are offering.

In a recent training session to CEO's I asked the group to write down on a piece of paper what percentage of customers they felt where loyal by design versus those that were loyal by default.
Suffice to say you could have heard a pin drop as the people in the room started to ponder their situation and realise that for most people, the answer lay squarely in the default category where the potential to lose significant amounts of business was only as  far away as a rival business uncovering some part of the need that was still undelivered and provide it to a higher level than them.

If you're reading this and thinking this dynamic also applies to you, you have plenty of company. The good news however is that the business can proactively do something about this situation and gradually position itself squarely in the other camp. On our next blog post we will fully explore the strategic change needed to drive this change in approach to further enhance and maintain your customer loyalty.

And until then, good luck and good marketing.
Regards,
Daniele