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