Customer Loyalty

Outline Definition

Customer loyalty Customer’s commitment or attachment to a brand, store, manufacturer, service provider, or other entity. A behavior toward the product An attitude to behave

Behavioral brand loyalty Measured by proportion of purchase Undivided loyalty AAAAAAAAAA Occasional switcher AAABAAACAA Switched loyalty AAAAAABBBB Divided loyalty AAABBBAABB Indifference ABCDADCDBD

Churn rate The rate at which new customers try a product or service and then stop using it.

Problems with behavioral approach A customer may be making a repeat purchase not because of any true loyalty or commitment, But because of convenience, price, availability, or inertia due to habit. Inertia suggests a low sensitivity to the brand since purchases are made without a real motive for the choice.

Attitudinal brand loyalty Include favorable attitude that reflects a preference or commitment expressed over time. Emotional attachment, evaluation No loyalty Inertial loyalty or spurious loyalty Latent loyalty

Relationship commitment An enduring desire to maintain a valued relationship Loyal customers, high in repeat purchase behavior and strong in attitude

Transaction vs. relational continuum TransactionRelational ObjectiveMake a saleCreate a customer CharacteristicAnonymityinterdependence Criteria of successVolume price, new customer Value enhancements, repeat exchange Interaction toneSale as a conquest, discrete event Sale as an agreement, continuing process

What affects customer loyalty

Customer satisfaction

A post-purchase or post-choice evaluation that results from a comparison between those pre-purchase expectation and actual performance Satisfied customers may not be loyal customers. Xerox’s finding: satisfaction rating 4 is six times more likely to switch to others than rating 5. Customer satisfaction

Emotional Bonding Brand affect, brand equity Company attachment Establish feelings of closeness, affection, trust, and respect. IT may limit emotional bonds. Personal contacts, non-verbal signals, friendships, and personal interactions are critical elemets.

Trust Willingness of customer to rely on the organization. Reduces uncertainty/risk Honest, fair, and responsible

Choice reduction and habit People have tendency to reduce choice. There can be a switch cost associated with change to the unfamiliar, untried, or the new. There may be cost in time, money, and risk

History with the company Corporate Image Contacts and purchase history Service experience Intergeneration influence

Multi-faced loyalty Customer loyalty to: Brand: promotion Product: production Company: public relations Customers: meeting, chats, reunion Price: discounts, coupons Places: sounds, excitement Variety: new options, variations,

Guidelines for enhancing loyalty