Customer LoyaltyCustomer Loyalty

OutlineOutline

• Definition

Customer loyaltyCustomer 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 loyaltyBehavioral brand loyalty

• Measured by proportion of purchase

Undivided loyalty AAAAAAAAAA

Occasional switcher AAABAAACAA

Switched loyalty AAAAAABBBB

Divided loyalty AAABBBAABB

Indifference ABCDADCDBD

Churn rateChurn rate

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

Problems with behavioral approachProblems 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 loyaltyAttitudinal 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 commitmentRelationship commitment

• An enduring desire to maintain a valued relationship

• Loyal customers, high in repeat purchase behavior and strong in attitude

Transaction vs. relational continuumTransaction vs. relational continuumTransaction Relational

Objective Make a sale Create a customer

Characteristic Anonymity interdependence

Criteria of success Volume price, new customer

Value enhancements, repeat exchange

Interaction tone Sale as a conquest, discrete event

Sale as an agreement, continuing process

What affects customer loyaltyWhat affects customer loyalty

Customer satisfactionCustomer 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 satisfactionCustomer satisfaction

Emotional BondingEmotional 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.

TrustTrust

• Willingness of customer to rely on the organization.

• Reduces uncertainty/risk

• Honest, fair, and responsible

Choice reduction and habitChoice 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 companyHistory with the company

• Corporate Image

• Contacts and purchase history

• Service experience

• Intergeneration influence

Multi-faced loyaltyMulti-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 loyaltyGuidelines for enhancing loyalty