Saturday, July 6, 2013

Loyalty is not black-and-white

There have been a number of articles written regarding loyalty as if it were a black-and-white topic. The authors have made loyalty appear to be a term something like pregnancy. You're either pregnant or you're not. This kind of writing is not correct and is confusing, at the very least. Companies are looking for loyal customers, as if there is only one kind of loyal customer. We think it is time to address this issue of loyalty.

Can I be loyal to company without giving it all my business? Of course I can. Many companies are loyal to a given set of suppliers.   Just because I go to a specific restaurant, can I still be a loyal patron and frequent other restaurants?  Because I buy a particular brand of shoes, do I have to buy all my shoes with that brand in order to be loyal? 

The obvious answer to the above questions is that customers can be loyal to companies or businesses without giving them all their business. I can be loyal to a company by giving them most of my business. I can be loyal to company by giving them some of my business. Let's look at a few examples of loyalty. In each of the four following ten purchasing sequences I am loyal to company A.

1.     A A A A A A A A A A (all 10 purchases to company A)
2.   A B A C A D A E A F  (5 purchases to company A)
3.     A A B A A C A A D A (7 purchases to company A)
4.    A B C D A E F G A H  (3 purchases to company A)

In each of these preceding sequences, I continue to return to company A. The degree of loyalty can be thought of as a percentage of my pocket (the amount of money I have to spend) relative to my spending at other businesses or companies.

One way to view loyalty is the degree of commitment that one company has to another to purchase or utilize its products or services. While this may not be a pure academic definition of the word loyalty, it is intended to show that there is a degree of variability in the word loyal when dealing with customers and companies. To a certain degree, loyalty is connected to trust, but trust does not guarantee loyalty to the extent shown above in the first sequence.  It is present in all four sequences.

 A more personal way to think of this is that we have friends to whom we are loyal and while at the same time we have friends who are only acquaintances, and to whom we have less loyalty. The degree of loyalty that we give to other people is no different than the degree of loyalty customers will give to different companies with which they do business.

The bottom line is that we must not look at loyalty as a black-and-white parameter. There are degrees of loyalty, which we will give to different companies depending on a number of reasons. The challenge is to find ways of differentiating the different degrees of loyalty. That is a subject to be dealt with in a later blog.


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