Top

Generation Gaps and Myths in Customer Loyalty: Does Generation Matter?

Article by on January 6, 2012 Editor's Pick No Comments

Marketers have long recognized the significance of generational differences in branding and the use of media and advertising. Branding and advertising aside, however, is there a generational effect when it comes to customer loyalty and satisfaction? How do the generations compare in terms of their level of loyalty to a brand? Or their satisfaction with a particular customer experience? Do they have the same drivers of delight and dissatisfaction? The same expectations?

Drawing upon GfK benchmark surveys [1] in the banking, automotive, credit card and cell phone sectors, this article explores the concept of generation and the extent to which various generations are both similar and different in their degree of loyalty and the drivers of loyalty to companies in the various sectors. The benchmark data captured Voice of the Customer input for consumers regarding:

  • Primary banking relationships
  • Cell phone service providers
  • Automobile driven most often
  • Primary general purpose credit card

A generation is defined in terms of a common sense of identity with “symbols, people, names” and the historical events, cultural works, media creations, technological innovations and social experiences in which they are preserved. Each generation is differentiated from its predecessor by its identification with different anchors and a shared feeling of newness, a different sense of identity, a communal perception of redefined norms. A generation is a collective persona that is given shape by connected rites of passage and events that create a shared uniqueness that helps define both the individual and the larger group with which they instinctively identify.

There are an endless number of dates by which generational segments have been defined and, to a lesser extent, labeled. Based on a review of the literature we decided on the following definitions:

  • Traditionals: born before 1946
  • Baby Boomers: 1946-1964
  • Generation X: 1965-1979
  • Generation Y: 1980-1992
  • Generation C (or Z): 1993 onwards


But does the degree of loyalty differ across generations?

To determine if the level of customer loyalty varies by generation, we compared key loyalty metrics using the GfK LoyaltyPlusSM framework. LoyaltyPlus categorizes customers into loyalty groups based on scoring customer loyalty across four dimensions (emotional and rational attachments, as well as actual and intended behavior) and the extent to which a customer expresses dissatisfaction on any of the key “drivers” (those attributes with the greatest statistical impact on loyalty scores).

The data from the benchmark surveys confirm that the various generations do exhibit different degrees of loyalty across the industries measured, although the differences are not as dramatic as some marketing pundits imply. In general, the level of loyalty follows a similar pattern across categories: Traditionals exhibit the highest level of loyalty (defined as having the largest proportion of Loyal Advocates, the most loyal customer group in the LoyaltyPlus paradigm), followed by Boomers, then Gen X, with Gen Y displaying the weakest customer bonds.


As would be expected, the differences in the magnitude of loyalty are greatest between Traditionals and Gen Y, the generations with the most degrees of separation. Both figuratively and literally, Traditionals are the grandparents of Gen Y. In looking at the share of loyal customers, Boomers lag slightly behind Traditionals, while Gen Y is close on the heels of Gen X. Between Boomers and Gen X, however, there is a relatively sharp drop in the percentage of Loyal Advocates.

On the flip side, however, when looking at customers categorized as least loyal (those classified as Exit Bound), we find that the break occurs between Traditionals and Boomers. In each of the four sectors, Traditionals have the smallest share of customers considered Exit Bound, while Boomers, Xers and Ys are relatively closely clustered in the proportion of customers in this most vulnerable group.

While the patterns of loyalty between the generations are relatively consistent spanning the sectors we explored, there also are some distinct variances between the industries. Despite the widespread erosion of trust in the financial services sector, banking registers the strongest share of Loyal Advocates for each of the generations. Conversely, credit cards, which have undergone intense scrutiny with regards to interest rates and fees both leading up to and following passage of the Card Act (enacted in 2009, with changes implemented in 2010), record the weakest levels of Loyal Advocates in every generation. The modest levels of loyalty to credit cards notwithstanding, wireless service providers and auto manufacturers compete for the “lead” in terms of having the largest share of Exit Bound customers in each of the generational cohorts, with numbers hovering around 25% for Boomers, Xers and Ys, and slightly lower for Traditionals.

Are the key drivers of loyalty consistent for the generations?

While the level of loyalty exhibits a clear pattern across the generations, the configuration of key drivers is far more complex. The blend of performance criteria that emerge as key drivers for the various generations is mixed, with the picture further complicated by the extent to which for any given generational group a specific dimension is a positive driver of loyalty (an enhancer), a negative driver of dissatisfaction (a dissatisfier) or a dual driver of both. [2]

In banking, which enjoys the strongest overall loyalty measures of the sectors covered, the extent to which the bank is seen as looking out for the customer’s best interests is a common theme that cuts across the generations.


When it comes to telecom providers, (un)reliability of coverage jumps first for Traditionals, Boomers and Xers, but this doesn’t raise a ripple for Gen Y, who are the only group to attach significance to having access to phone apps.

When it comes to cars, the key drivers are somewhat more consistent across the generations than what we see in the other sectors. Cost of ownership and ease of maintenance are sore spots for every group, although Boomers see easy maintenance also as a plus. Dependability also is a vulnerability with Traditionals, Boomers and Xers, although this is a positive driver for Gen Y.

Taking the time and effort to help cardholders (or failing to do so) registers as highly important for Traditionals, Boomers and Xers when it comes to their credit card relationships. The importance all of the generational groups attach to clear communications and flexibility in handling requests almost certainly has been influenced by changing regulations for cards.

A few takeaways

The perceptions of consumers, their likes and dislikes, the issues that motivate them to be loyal customers or to defect show both areas of similarities and differences between the generations. Navigating generational similarities and differences in building customer loyalty is anything but black and white, but here are a few tips and takeaways.

  • The level of loyalty consumers express across the four sectors measured show clear and consistent differentiation, with the degree of loyalty steadily weakening from the oldest generation (Traditionals) to the youngest (Gen Y). But don’t take the loyalty of Traditionals for granted: they expect performance and aren’t willing just to settle because of inertia. And don’t make the corresponding mistake of assuming Gen Ys are inherently fickle customers.
  • The drivers of loyalty – and whether those drivers are positive enhancers or negative dissatisfiers – are quite mixed, with no clear pattern between the generational cohorts. One-size-fits-all approaches, as such, promise to hit a lowest common denominator that isn’t maximized for any group.
  • Given this patch quilt of drivers and the nature of the generational personas, it is clear that the positioning of products, services and brands and the associated messaging to build loyalty with the different generations needs to be customized. Even when the products or services are the same, marketing still demands differentiation to cultivate relationships with different target audiences.
  • While generational differences are real, the generations themselves are porous. There obviously are other ways to segment consumers. Be sure to think of generations as a state of mind, a type of attitudinal age, and not a strict chronological definition.
  • Get over the misguided assumption that Traditionals reject technology. From home banking to computerized cars to cellphones, Traditionals have embraced technology and use it on a daily basis. Do they show more reluctance, less early adoption and different reasons for employing technology than is the case for Gen Y? Sure. Gen Y is literally “wired” (or “wireless”) to technology solutions in a different way than Boomers or Traditionals, but don’t make the mistake of treating the older generations as techno-adverse.
  • Emotional and rational bonds are important to the relationship glue with customers from every generation. In general, emotional connections seem to be somewhat more important to Traditionals and Boomers than Xers and Gen Y, while the opposite seems to be the case for the more rational, functional-performance type of measures.

Next up, Generation C, the oldest of which are just turning 18. This could get really interesting.


Footnotes:
[1] The 2011 GfK Benchmarks are based on a series of online US nationwide surveys using the GfK panel. Respondents had to be at least 18 years of age, own/use the product in question and be a relevant decision maker in each product category. The data are weighted to be representative of the US population. The Benchmarks are drawn from surveys completed between December 3, 2010 and January 27, 2011 and involved the following samples:
Banking: 4,065 surveys
Automotive: 6,222 surveys
Credit Card: 3,055 surveys
Cell Phone: 4,642 surveys

[2] Because the world is not linear or symmetrical, GfK distinguishes between positive drivers of loyalty or enhancers and negative drivers or dissatisfiers. Those performance criteria that “pop” in both directions are considered dual drivers. Because of space limitations and the number of industries and generations involved, however, this paper focuses on “drivers” in general. Additional detail on enhancers vs. dissatisfiers is available.

273116

Categories: ! Article! Editor's PicksCustomer Loyalty
310 views

No comments yet.

Leave a Reply