Loyalty: Real or Fiction?

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Dictionary meaning of Loyalty: unswerving in allegiance

I keep reading loyalty is wonderful and how Customers are loyal or can be made to be loyal. And therefore there should be loyalty programs and efforts to get Customers to become loyal. Is this because the Customer is not given enough value, or is this because Customers display infidelity or fickleness (Companies never do!)?

My article on Company Loyalty evoked many positive responses. Companies are seldom loyal to people, though they can pretend to be.

Is loyalty akin to being faithful? Or is it meant for dogs (If you want loyalty, buy a dog, said Will Roche)? Is there such a thing as multiple loyalties (one Customer being loyal to more than one brand) in the same product category?

Then, there is a school of thought that loyalty is fictional. That NPS is built on a myth?

What is loyalty? Something that keeps you coming back to buy, even when there are better options. Is loyalty like love (I am with you whatever happens)? Are Customers in love? I think not. Loyalty is not love.

Is it infatuation that means a short term affair? I leave this to the reader to answer.

Is it a result of happiness? Or are there grades of happiness, starting from just being satisfied to absolutely delighted. Are these feelings transient?

Tim Keiningham and Lerzan Aksoy, say that happiness and loyalty are linked in their book Why Loyalty Matters. Does that mean happiness is a pre-requisite for loyalty, or is it enough to ensure loyalty?

Ask, why are people crazy about Apple? Are companies crazy about Intel? Can companies be loyal to their suppliers? For example can a company be loyal to their consultant, let’s say McKinsey? Or the reverse? And the loyalty programs that companies start, do they bring about loyalty or are they giveaways? Why do I join loyalty programs? For rewards or to be loyal? Are these rewards or payback for loyalty, or are they meant to hook?

In Apple’s case is there an emotional connect? Or a connect because of the entire product and eco-system relationship? Or is being an Apple owner important to their wellbeing, their sense of belonging, and their comfort level? Is there something called blind loyalty? If that is the case why did Samsung become number 1? In one study on smartphones in 2015, Apple was number 6. Of course being a leader and loyalty may not be miscible. (The latest is Apple sales are declining)

Gordon Kelly in Forbes called these Apple Customers iSheep

Are companies or people loyal or mistaken to be loyal for the following reasons:

  1. The company and the supplier have a symbiotic relationship. An example is a can maker supplying Coke and Pepsi. One cannot exist without the other, and the supplier must make money. The loss of the customer or the supplier can be disastrous.
  2. Is someone loyal to Coke or Pepsi or loyal to the taste (see familiarity below)?
  3. Does familiarity have anything to do with loyalty? So we remember the taste of Mother’s apple sauce and we crave for it. The reverse is fear of trying something new.Sometime it is the consistency of the product we like.
  4. Are people loyal because they are comfortable, and have a problem in moving. Is inertia mistaken for loyalty?
  5. Are people loyal because of convenience? A neighbourhood gas station or a close by mechanic are examples.
  6. Are people looking for a relationship with their product or service provider? This happens in commodities such as fertiliser where the farmer wishes to have a relationship with the company. This can be a feel good factor, and the sense of belonging and trust.
  7. Is it circumstances that determine loyalty? For example, I must buy a book when I am about to fly, and I buy at the only book store at an airport. Can companies do something about this? There may be no viable alternative.
  8. Emotional desire to remain with a company or brand, or to own a brand or be seen owning or using the brand, like a branded shirt, or a BMW.
  9. Sometimes it is a brand lock-in. For example I am forced to buy an original spare part for my car.  You could have a financial or circumstantial lock in.When you go to rebuy, you may get a great buyback to exchange your model for a new one. This can be mistaken for loyalty by others.

Let’s explore further. Are soccer fans loyal? Is there an emotional connect?

There is likely a feeling of connection and being part of a movement not different from owning a designer bag with the designer’s name on it. The swoosh of Nike, the polo emblem and so forth.

Is loyalty promoted by consultants and loyalty vendors and the NPS people? Is it (loyalty) easy to sell to companies?

Olaf Hermans of NHTV Breda University said: Loyalty is here and now, a motivated behavior concept. It does not mean it will last over time. He adds:

Yes, loyalty is not the bonus of one doing a good job for the other, but the daily process of being mutually invested beyond what is expected. Loyalty is here and now, a motivated behavior concept. And yes, that means that companies need to prove to be loyal for their Customers to be loyal to them

Does that mean it is an affinity or stickiness?(Someone said stickiness is when there are choices, loyalty when there are no real choices, basis, strength, scope, legitimacy, and attitude).

So, I start from the very beginning. Why do people buy? Because they perceive one offering is better than the other or is giving them more value. And value is what you pay and what you get. What you pay can be divided into price and non-price terms. Non-price includes emotional attachment which could be termed as loyalty.

What you get is the benefit of the product, the service, its people and many imponderables which are termed as emotion, but could include familiarity, attachment, need to own, belonging (a major reason for loyalty of football fans) etc. You do this for competitive products (Apple vs, Samsung) and you buy one or the other because the one you buy gives you greater value. Is it affection, connection or passion or desire (I must own)? All these create a value for the Customer. And people buy because of the Value and not so much because of loyalty. Although the various aspects mistaken for loyalty do play a role in creating Value. The above loyalty ideas can be used to create value.

And what happens to my football fan? He changes towns, and he may become loyal to the new town’s football team.

We must work on the value aspect of loyalty and the reverse to become winners. Create value to get here and now loyalty. Continue creating higher value than competition to get longer term re-purchase.

Do you agree?

Would love your comments and help. We are happy to help others in education and executive education on courses in Value Creation

Republished with author's permission from original post.

Gautam Mahajan
Gautam Mahajan, President of Customer Value Foundation is the leading global leader in Customer Value Management. Mr Mahajan worked for a Fortune 50 company in the USA for 17 years and had hand-on experience in consulting, training of leaders, professionals, managers and CEOs from numerous MNCs and local conglomerates like Tata, Birla and Godrej groups. He is also the author of widely acclaimed books "Customer Value Investment: Formula for Sustained Business Success" and "Total Customer Value Management: Transforming Business Thinking." He is Founder Editor of the Journal of Creating Value (jcv.sagepub.com) and runs the global conference on Creating Value (https://goo.gl/4f56PX).

5 COMMENTS

  1. Hi Gautam – Like other newly-popularized marketing words (e.g. love!), loyalty has suffered from overuse, and become trivialized. Rarely, if ever, have I observed unbreakable customer loyalty. Weird, because loyalty connotes unswerving commitment. But most marketers would agree that there are boundaries or limits to customer loyalty. So is loyalty the right word when describing customer relationship nirvana?

    I think it’s the wrong word. But the one that I prefer, inelastic demand, doesn’t fit cleanly either, and above all, it isn’t catchy! (Who would be so idiotic to set up an inelastic demand program?)

    I don’t know when loyalty became commonplace in customer relation dialogs, but I looked in my 100-year-old book, Salesmanship and Business Efficiency as I often do when I seek insight on how selling ideas have evolved. Interestingly, Loyalty appears in the index, and is mentioned on two pages (out of nearly 400).

    But the author, James Knox Polk, would probably be laughed out a training session today if he attempted to advance his definition:

    “Loyalty defined: Loyalty consists in giving faithful allegiance to your employer. It demands whole-hearted, untiring service to the concern that furnishes you with bread and butter. It involves doing everything within your power to evolve some new idea or improved method that will in some way advance the interests of your concern. Every wise manager is eager to obtain help of this kind. He is also on the alert to promote any employee who renders such service.”

    After reading this, I also had to check whether passive-aggressive was mentioned anywhere in this book. It wasn’t. And nowhere in this two-page mini-essay about loyalty is there a shred of similar bombast about customer loyalty.

    For me, a vendor-customer relationship that fully deserves the loyalty attribution is when mutual commitments remain stable even in situations when logic and good business sense dictate otherwise.

    This can and does occur. I’ve worked with many companies who tolerate mighty supplier deficiencies because of the vendor’s rock-solid record on bailing them out of horrendous problems.

    But because loyalty has become so trivialized today, the issue I often see is that vendors aspire to having that coveted status, but they are too driven by “the numbers,” they are motivated only by short-term profits, and they don’t want to expend the effort.

  2. Hi Gautam – To me, loyalty is the propensity of a customer to continue to do business with a company. So, if I buy “Apple” I will continue to buy from Apple as long as I receive approximately the same or greater value than if I would buy from a competitor. If I am in the market for an electronic product and Apple offers “significantly” less value than Sansung then Samsung earns my money.

    However, Value is what is perceived by the buyer and I may feel that the Samsung phone is technically superior to Apple but its App Store has a much better selection, or I am a frequent FaceTime user then I buy Apple.

    If Value is measured relative to alternatives then Loyalty is a measure of the incremental value.

  3. As others have described, an excellent article Gautam. I personally do not believe that loyalty is a myth in totality – it is often difficult to create the link between loyalty and commercial value though. My latest blog post is a good example of how brands create loyalty and how they completely lose it – you may be interested in having a read as essentially, I also believe that emotional engagement plays a huge part… http://www.ijgolding.com/2016/02/09/say-elephants-never-forget-customers/

  4. Thanks, Ian. Very perceptive and what a wonderful link on loyalty,
    I think we should all make a little booklet on Loyalty

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