Product Impact on Customer Loyalty

Yesterday I noted that relationship was one of the three components of customer loyalty and referred to a survey which showed the impact of customer service in terms of advise and knowledge provided by employees without giving the shopper a bad experience. The statistics, based on the 12,000 shopper survey, was dramatic (95% of the shoppers indicated the sales associates are very/somewhat important). See yesterday's blog for more detail.

I am following this study with results from two other studies. These two studies were performed by JD Power and Ispos, both of whom surveyed the digital camera market and each examined usage and customer satisfaction. The study was completed during the spring of this year (2007). Ispos indicated a sample of more than 1000. JD Power did not indicate the sample size but a fairly large sample would be expected. The findings are noted below:
1. 70% of internet households own a digital camera.
2. 61% own a photo printer.
3. Nearly 24% of the respondents chose Canon as the most frequently named brand according to the Ispos survey. JD Power also indicated that Canon led the list as best manufacturer.
4. A 10-point improvement in overall satisfaction can lead to a 1-percentage point improvement in brand loyalty (particularly within the point and shoot, premium point and shoot and ultra slim segments of the market) according to JD Power.
5. The variables used to score the cameras included picture quality, performance, operation and appearance and styling.
6. JD Power also found that 36% of all camera owners report that positive recommendations from friends and family played a strong role in their purchase decision.

These studies tend to support the notion that loyalty has a strong product component. In this case, I have made a leap-of-faith by assuming brand loyalty and product loyalty in this market are relatively synonymous. With this assumption, the results fall neatly into my previously described 3 parameter model for customer loyalty; namely, product, process, and relationship are the three base ingredients to customer loyalty.

Loyalty of the Wealthy

Cogent Research LLC, a Cambridge, Mass, market research company surveyed 4000 mutual fund investors witha at least $100,000 in investable assets. The managing Director, Chris Brown indicated the the funds that are able to generate sufficient long-term returns build strong investor loyalty. Cogent used a scoring system that appears to be similar to NPS. The results of the survey indicated that the Vanguard Group led all others in investor loyalty. Their score was plus 44. The second company was Dodge & Wilcox with a score of plus 29. It should be noted that the average for the funds surveyed was minus 12.

The second factor that seemed to impact loyalty was the ability to communicate their investment philosophies to their end-users. The most important driver noted in the survey however, was consistency of fund performance.

One point of interest was that the average holding period for a stock mututal fund is about 3 years. A pure bond fund averages about 3.2 years.

Another point made is that while fund companies can attract new custoemrs with strong short-term records, they will lose the customers to more reliable long-term performers.

This market seems to focus on the product aspect of loyalty (recall the four loyalty attributes are product, process, relationship and reward - see previous blogs). The wealthy appear to be loyal to a "product" that performs well for them in the long run. Some would equate this type of loyalty to the loyalty of some auto buyers who continue to buy their car based on long-term performance.