Saturday, November 21, 2009

Is Loyalty Just a Habit

William McEwen of Gallup wrote an interesting article titled "Is Loyalty Dead?" He starts by referring to a study by Catalina Marketing that has reported that more than half of the average brand's highly loyal customers became significantly less loyal in 2008 than they were the year before. His question is whether this is just a reflection of the economic climate or is there a sea change in the customer's mindset of what loyalty is.

The definition of loyalty has been considered sacrosanct for many years even though we have gone through several generations of new consumers (generation Xers and then generation Yers). It may be time to stop and reconsider our basic definitions of loyalty. Can we expect these new generations to act identically as their parents did?

When we look back at what we thought were loyal customers we might want to think of them as loyal or, as an alternative, maybe they were merely buying out of habit. if they were buying out of habit, then there is no "glue" to hold them to a particular company. Mr. McEwen points out that habits reflect past behavior and may not represent future behavior. While past behavior might suggest some form of loyalty, companies need to be concerned about the future behavior of their customers.

Mr. McEwen also notes that Gallup research has shown that customers' intentions are only weakly related to behavior outcomes such as continuing to buy. If, however, the intention is complemented by strong feelings of emotional attachment to what they are purchasing, then the customer's indication of an intention to buy is valid. I believe the Gallup research would also show that customers who say they definitely will continue to buy a brand but have no emotional bond with that brand will wind up acting the same as those who say they're uncommitted or they might not continue to buy the brand.

The key point made in the article is that loyalty entails more than an intention and habit. Loyalty results from a strong bond of emotional engagement. AS I have noted in past blogs, loyalty is not a passive state. Loyalty occurs when a positive emotional bond is built between the company and the consumer. Loyalty measures the strength of the relationship. A customer who continues to purchase from a company but has no emotional bond is no more loyal than his habit of selecting the company out of habit.

In the larger picture companies buy businesses for the value of their customers. But customer loyalty is not always associated with the brand. It is possible to buy a brand but that may not include the relationships. The customer relationship must ALWAYS be earned. If customers don't feel the relationship, it should not surprise anyone that their buying habits might change.

The bottom line is that loyalty will always be defined by trust-based relationships. Thus a company must engage in actions that will lead to enduring, trust-based relationship. Remember customers do not have relationships with a company or a brand, they have relationships with people

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