Thursday, June 7, 2007

Some definitions of Loyalty

There is a lot written about customer loyalty. Businesses spend thousands, and in some cases millions of dollars to find out how loyal their customers are. The question often asked is whether or not the customer loyalty is higher or lower than this period last year. This may also be asked as "how are we doing on customer loyalty?". This troubles me since I don't think most of those who ask the question have a clear picture of what customer loyalty means.

Let me offer a few definitions to demonstrate that a loyal customer can be defined in many ways.
Definition 1: A loyal customer buys all of the products and services that you provide only from you and no other vendor.
Definition 2: A loyal customer buys most of the products and services you provide from you. However, he does buy some (but not as much) from other vendors. He gives you the lion's share of his pocket.
Definition 3: A loyal customer regularly buys from you but may buy from other in between.
Definition 4: A loyal customer is one who buys from you (but will not confirm how much) and also encourages others to also buy from you.
Definition 5: A loyal customer is one who knows you can be trusted and does not try to "nickle and dime you" on pricing.
Defintion 6: A loyal customer is one who will allow you to make a mistake and still give you his business.

The first bottom line on loyalty is that you should decide on a definition of loyalty before you can measure it.

More on this topic later.

1 comment:

Becky Carroll said...

Dr. B, I love these definitions. Most companies don't really think through them, so they end up chasing after something that is too hard to measure. They also end up counting customers as "loyal" if they keep buying from them over time, unaware that these customers haven't really developed a relationship with the business. These types of customer have no barrier to exit and will often leave for a better offer (price, service, etc).

Great blog - I will be back!

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