I’m taking off the gloves and issuing a challenge to practitioners and students in the arena of Customer Loyalty research.
I’m not a language “priss”, and I know that outcomes and actions are what matter and always will trump debates about definitional purity. But am I the only one who is tired about the failure of people in our field to distinguish between key concepts – loyalty, experience, satisfaction, advocacy, promoter, etc. – and to treat them as interchangeable synonyms? This is not an academic issue of semantics. It’s about taking aim at business objectives and clarifying what we purportedly are trying to measure and how we go about designing an appropriate research program to hit those objectives.
I know this sounds more like geek-speak than applied and practical research, but who (sample audience), what (survey content), when (timing) and why (analysis) all flow from the business objectives and need to be logically related to those objectives. If a bank wants to measure customer loyalty, using surveys of online bill-pay customers triggered by a specific transaction and asking about their most recent experience misses the mark. Perhaps the bank should and does want to examine satisfaction with the bill-pay experience. That’s fine. But that should not be treated as a measure of loyalty.
While I know that reasonable people may still disagree, I’d like to put a stake in the ground and start a dialogue and, perhaps, tease out the similarities and differences between what it is we are trying to measure (while always keeping in mind that the measurement is a means to a business objective, not an ends in itself).
Loyalty, I would argue, is a relationship concept. It is not an interaction or a transaction. Loyalty is about the stickiness of the relationship with the customer. Loyalty is a mindset, an abstraction, not a behavior. Loyalty is made tangible and expressed through behaviors (or the absence of behaviors). “Loyalty behaviors” are the expressions of loyalty that create value for the company or organization. In general, those behaviors include continued purchases, brand permission (consideration and purchase of related goods and services) and positive word of mouth (WOM).
Loyalty is not an experience. Every experience, every customer touch can undermine or strengthen the relationship (loyalty), but it is not the relationship itself. Experiences matter because they are part of the gestalt of the customer relationship. Dissatisfaction with an experience might weaken the glue of the relationship, threatening to dissolve the bonds of loyalty, while exceeding customer expectations can further reinforce those bonds. But loyalty is more than the sum of the customer’s experiences.
So at the risk of taking some daggers: you can effectively measure satisfaction with an experience; but asking the “based on your most recent experience with XXX, how likely are you to continue to use/buy again/recommend/what-ever-behavior” types of questions misses the relationship dimension of loyalty behaviors. People no doubt might talk about particular experiences – good, bad or otherwise – but asking people to parse out how they responded to a particular experience separate from the larger relationship usually is misguided. (Yes, I intentionally hedged to permit for exceptions to which someone no doubt will point, such as once-in-a-lifetime experiences that leave indelible impressions. So if you sell helicopter tours over Grand Canyon, there probably is no relationship beyond “the experience.”)
Satisfaction, I would suggest, is both a dimension of loyalty and an overall measure of performance with regards to an experience. There are some who argue that satisfaction has nothing to do with loyalty. I invite these people to post their data sets, as I have never seen an instance in which satisfaction with a company is not highly correlated with any reasonable measure of loyalty to that company. Some people may prefer to use the term “delight” or some other more emotive term than satisfaction; either way, any particular experience can lead to sentiments ranging from elation (i.e., further supporting the relationship) to disappointment (i.e., eroding loyalty).
Advocacy – saying or writing good or bad things about a firm and spreading positive or negative word of mouth is, as described above, a loyalty behavior. That is, advocacy is not the same as loyalty; rather, it is a behavioral manifestation of loyalty. The willingness to be an advocate or to recommend often is part of a loyalty construct. In the NPS (Net Promoter Score) world, willingness to recommend is the single measure used to classify people as Promoters, Detractors or Neutrals.
The best measures? That is an empirical question: what approach best predicts the customer behavior the firm wants to encourage? The answer may vary based on the company, its value proposition, business model, competition, footprint and other variables. At GfK, we have found that our Loyalty Plus approach is more predictive of customer behaviors than other models. That said, we also recommend testing and improving on our own approach to best adapt Loyalty Plus to the individual client’s needs. A one-size-fits-all approach guarantees a lowest common denominator that probably doesn’t meet anyone’s needs. We apply the same way of thinking to our Guest Experience Measurement (GEM) work: start with a proven approach, modifying it as appropriate to best meet client needs.
Companies need to measure and understand customer loyalty and customer satisfaction with interactions or experiences at key touch points – and they need to understand the role of the customer experience in building customer loyalty. But they should not confuse loyalty, experience, satisfaction or other concepts as one and the same. At best, this reflects sloppy writing and lack of attention to detail. At worst, it indicates a lack of clarity in conceptualization that can totally undermine the validity of research findings and lead to misdirected decisions.
I invite you to pick up a glove and share your thoughts.
Excellent.
Howard a great article.
I’m one of those ‘loyalty sceptics’ in that I believe what many companies measure and track as ‘loyalty’ should be more adequately described as customer intertia or customer imprisonment. i.e. in many instances, customers remain with an organisation because they’re too lazy to move (banking), that they are bound by contracts or other financial constraints (telco contracts), or they are locked into a certain product through learned behaviours (software).
Many marketers mistakenly record these customers as loyal – and even more remarkably go on to reward their ‘loyalty’ with discounts and other benefits that essentially reduce the value of that customer to the organisation over time.
Agreeing with your point that loyalty is a relationship concept, I consider loyal customers as those who stick with an organisation despite higher relative prices and despite the odd hick up in service delivery – i.e. they are willing to pay more and put up with more due to being loyal to the brand.
The key of course is being able to isolate the variables of behavioural, contractual or intertial drivers that cause customers to ‘stay’ and truly understand what are the real reasons a customer will remain a customer.
Thanks for your kind words, Cyrus.
Nothing wrong with some healthy skepticism regarding how firms measure and track loyalty. That said, I see clear differences between customer inertia and imprisonment in the examples you cite. There is a world of distinction between customers who literally have no choice – be it the personal cell phone customer with a two-year contract or the energy firm with a ten-year commitment to a pipeline that was necessary to justify the required infrastructure investment – and those who elect not to switch companies, for whatever reason, but have the clear prerogative to move their business.
I also think it is important to look at issues from the perspective of the degree of customer involvement in the category. Is it customer “laziness,” as you put it, or is it low customer involvement? Or is it simply a customer preference for convenience, whether locational or familiarity with a brand?
In many instances, I’ve heard marketers rail against “irrational” consumer behavior. I would argue, by contrast, that, in most instances, consumers are perfectly rational, but their decisions reflect a different cost/benefit analysis than the critics permit. Why can’t someone legitimately prefer the convenience of what they know instead of incurring the “cost” (in terms of time and effort) of learning about alternatives, especially if they are dealing with a low involvement category?
And “learned behavior” isn’t necessarily bad. After all, we’re talking about people making decisions and investing the time and effort to become familiar with a product or service. Once people have made a decision, what’s wrong with their continued use of that initial decision as a reference point to simplify future decision making? To a large extent, isn’t this why we brand products and services?
Yes, it is all about the relationship. Otherwise, as you note, customers would defect with every glitch in service. Clearly, the customer relationship is more than the sum of all experiences, but each and every experience has some bearing upon reinforcing or weakening the relationship.
Howard, I think we’re in violent agreement. Absolutely there is a vast difference between customers held hostage and those who stay due to intertia – my point was focused on what I see as the mistaken assumption that customers are loyal to a brand simply because they haven’t gone elsewhere, and recognising there are several reasons for why that might be the case.
I think there are different shades of the learned behaviour paradigm. In the mobiles sector, for example, there is ample evidence to suggest customers are dissatisfied with a particular brand but that they do not change due to the difficulty in learning a new interface/operating system. Drilling down to brand perceptions, CSAT etc., the data has often shown lower levels of satisfaction and ‘brand loyalty’ as indicated by competitor brand purchase intention/consideration, however customers haven’t moved. The advent of Apple and Android has shaking that paradigm up a lot as the UIs finally become more intuitive from a learning perspective.
My point is that whilst inertia due to learned behaviours isn’t as detrimental to a brand as contractual lock-in, brand erosion can still occur as consumers convey there overall dissatisfaction with a brand to those around them.
Lastly – I completely agree with you that each and every experience has some bearing upon the relationship. It’s a fascinating field!
Yes, Cyrus, we are in agreement that marketers often mistake the non-defection of a less-than-delighted customer as being the same as the retention of a loyal customer. There is no doubt that the former is ticking bomb.
A client with whom I worked for a number of years often was critical of what she described as her company’s “we suck less” mentality. That is, they knew their customers were not particularly happy with them, but they took solace in knowing that the competition was even worse. Scarcely a long-term recipe for customer loyalty!