What is Loyalty? And is it Dead?

Let me start by answering the second part of the question: loyalty is not dead. But the assumption that any company can earn the unwavering commitment of their customers is simply naive.

If you think that loyalty is the blind devotion of customers to purchase your goods and services, then it’s not only dead, it’s crazy. Many marriage vows include the phrase “until death does us part,” but there are still a lot of divorces. If people can’t stay loyal to their spouses for life, why would we think that they can remain loyal to a company?

So what is loyalty? That’s the key question. I’d like to throw out this simple definition:

The willingness to consider, trust, and forgive

A loyal customer is willing to consider new products and services you have to offer. A loyal customer is willing to consider you in their short list of suppliers for new purchases. A loyal customer is willing to trust your descriptions of new products. A loyal customer is willing to forgive you if you make a mistake (as long as it’s not repeated or egregious).

What more can you really ask for?!?

And if you need more convincing about the existence of loyalty, take a look at the range of loyalty levels for companies across multiple industries (data from 2012 Temkin Loyalty Ratings, 2012 Temkin Trust Ratings and 2012 Temkin Forgiveness Ratings).. There are some significant differences between loyalty leaders and laggards.

LoyaltyRangesByIndustry

A loyal customer, however, can not be expected to purchase a product that is overly expensive, or select a service that is substandard, or put up with a consistent set of mistakes.

USAA tops the 2012 Temkin Loyalty Ratings for banking, insurance, and credit cards. Do you think it would be in that position in 2014 if the company doubled its fees and rates, cut way back on its call center training, made it difficult to file a claim, and stopped investing in mobile, which is becoming its members’ most-used channel? I don’t think so.

Loyalty is not dead, but it’s also not permanent. Companies need to constantly focus on how to keep customers loyal and not fall into the trap of relying on that loyalty.

Loyal customers are willing to consider, trust and forgive you….for now. Nothing more, nothing less. Embrace it.

The bottom line: If you want a customer’s loyalty, then you need to keep earning it

About Bruce Temkin
I am a customer experience transformist, helping large organizations improve business results by changing how they deal with customers. As part of this focus, I examine strategy, marketing, interaction design, customer service, and leadership practices. I am also a fanatical student of business, so this blog provides an outlet for sharing insights from my ongoing educational journey. Simply put, I am passionate about spotting emerging best practices and helping companies master them. And, as many people know, I love to speak about these topics in almost any forum. My “title” is Managing Partner of the Temkin Group, a customer experience research and consulting firm that helps organizations become more customer-centric. Our goal is simple: accelerate the path to delighting customers. I am also the co-founder and chair of the Customer Experience Professionals Association (CXPA.org), a non-profit organization dedicated to the success of CX professionals.

5 Responses to What is Loyalty? And is it Dead?

  1. Sam Klaidman says:

    With respect to your last paragraph before the “Bottom Line”. I am reminded of an article I read about 10 years ago called “Customer Loyalty—Not for Sale, for Rent” by David Sims in CustomerThink, 31.May.2001. Unfortunately the article is not archived on-line. I would be very happy if one of the readers can send me a copy of the article or a link.

    Thank you

  2. Reblogged this on Thriving Business Tips and commented:
    What a great post on customer loyalty. There must be dedication to our clients and shaping their accurate view of our company.

  3. Brian Lunde says:

    I always appreciate discussions about what customer loyalty really is! However I have a concern with this definition. A person could be willing to “consider, trust and forgive” a company without ever actually buying anything from them. The idea of a “loyal non-customer” seems like an oxymoron to me.

    The “classic” definition of customer loyalty, found in Richard Oliver’s 1999 Journal of Marketing article called “Whence Consumer Loyalty,” is: “A deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, *despite* situational influences and marketing efforts having the potential to cause switching behavior.” There is a lot packed in those words. I think the phrase “deeply held commitment” easily absorbs the notions of consideration, trust and forgiveness.

    To this we must add that customer loyalty is not binary, “on” or “off.” Our firm argues that customer loyalty, in the typical situation where customers allocate their spending in a category across multiple brands/firms (i.e. they don’t sole-source), is best reflected by share of wallet. This captures Oliver’s point that true loyalty resists competing influences; the higher the share of wallet a customer gives a firm, the more s/he is resisting the “pull” of other brands and the more loyal s/he is.

    • Bruce Temkin says:

      Brian: Thank you for sharing your thoughts and for pushing the discussion along! Hopefully you will see in my blog that I don’t necessarily buy into historical definitions and beliefs. The entire management literature needs to be updated in lots and lots of places. I very purposely did not fall back on Oliver’s (or anyone else’s) definition. To begin with, depending on how you count hyphenations, Oliver’s definition uses almost 40 words while mine is seven words. While I’m somewhat joking about this, the clarity and power of simplicity is important and an often missing element in management education. If people can remember a simple definition for loyalty, then they are more likely to use it and to share it with other people — creating a common vocabulary.

      Let’s move off of the simplicity discussion and talk about the content. I believe that a purchase happens based on the combination of a customer’s loyalty AND the specific offering put in front of him/her. Let’s say I want to buy a TV from Best Buy, even go into their store planning to purchase one, but the store doesn’t have what I’m looking for and I purchase it from Amazon.com. In my definition, I am loyal to Best Buy, I had a preference and actively considered the company… but they blew it. I may do this several times, as a loyal Best Buy customer, but eventually give up and lose my loyalty — not even looking at Best Buy in the future.

      I think it is incumbent on companies to not only build loyalty but also to give reasons for customers to repurchase. Success, then is a combination of building loyalty and providing appropriate offerings. If Best Buy had what I wanted, then I would have purchased it from them. That purchase is not what made me loyal, it’s just one of several outcomes that are possible given my loyalty.

      WHy is this important? I think you need about the creation of loyalty and the capitalizing on loyalty separately. A business will not not improve if you do well at only one of these areas, you need to focus on both of them. If we do the things that get our target customers to be willing to consider, trust, and forgive us, then we have a shot at the second part, getting their business. Best Buy had my loyalty (in this hypothetical case), but they didn’t take advantage of it. They needed to give me a reason to repurchase from them to capitalize on my loyalty — not waited until I repurchased to label me as loyal.

      I think this new view on loyalty opens up a number of new ways to think about driving business success. And it puts loyalty into the context of what it is, a temporary advantage that companies can either take advantage of or squander.

      I’d love to hear more thoughts from you Brian, or from any other readers. The one thing that I ask is that no one argues that we should use old definitions and viewpoints because they’ve been around for a long time. Management thinking needs to be updated, so let’s only hold on to old thinking when it still makes sense. That way we can collectively drive the next generation of management thinking.

      • Brian Lunde says:

        Hi Bruce, your proposed definition of loyalty surely beats Oliver’s for brevity! And I completely agree with you about not holding on to “old definitions and viewpoints [just] because they’ve been around a long time.” By the same logic, however, new is not automatically better just by virtue of its newness, right? Hopefully we can agree that the goals of our thinking should be relevance and utility in the face of modern business challenges, regardless of age of the ideas. I still see some benefit to Oliver’s thinking even though his definition is admittedly wordy and academic.

        Perhaps we can agree to disagree about whether or not actual repurchase behavior is merely an outcome of loyalty, or is itself part of what it means to be loyal. The debate about “attitudinal loyalty” vs. “behavioral loyalty” predates us!

        I was surprised however by your assertion that “…you need to think about the creation of loyalty and the capitalizing on loyalty separately.” Perhaps I misunderstand what you mean by “capitalizing on loyalty”…because I think you would agree that the way I capitalize on loyalty may be precisely the most important factor in building it in the first place. The in-store experience–where the capitalizing often takes place–may be crucial to a customer’s future willingness to consider, trust and forgive.

        Maybe all I’m saying is that it is dangerous to separate building loyalty from capitalizing on it, at least to the degree that we include the purchase experience as part of the latter. I see things like product selection and availability as part of the purchase experience, and as in your Best Buy example, these issues may end up being fundamental to building (or destroying) loyalty. By separating them we may miss important links that flow from the offering itself back to loyalty.

        Thank you for this forum and for all the great work you are doing to advance the cause of customer experience!

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