The people who've tried to define customer loyalty have usually approached it from one of two different directions - attitudinal and behavioral. Although each of these directions is valid, they have different implications and lead to very different prescriptions for businesses. (This is analogous, but I don't think it is precisely aligned, with Estaban Kolsky's distinction between "emotional" and "intellectual" loyalty.)
The attitudinal definition of loyalty implies that loyalty is a state of mind. By this definition, a customer is "loyal" to a brand or a company if they have a positive, preferential attitude toward it. They like the company, its products or its brands, and they therefore prefer to buy from it, rather than from the company's competitors. In purely economic terms, the attitudinal definition of customer loyalty would mean that someone who is willing to pay a premium for Brand A over Brand B, even when the products they represent are virtually equivalent, is "loyal" to Brand A. But the emphasis is on "willingness," rather than on actual behavior, per se. In terms of attitudes, then, increasing a customer's loyalty is virtually equivalent to increasing the customer's preference for the brand. It is closely tied to customer satisfaction, and any company wanting to increase loyalty, in attitudinal terms, will concentrate on improving its product, its image, or other elements of the customer experience, relative to its competitors.
The behavioral definition of loyalty, on the other hand, relies on a customer's actual conduct, regardless of the attitudes or preferences that underlie that conduct. By this definition, a customer is "loyal" to a company if they buy from it and then continue to buy from it. Loyalty is concerned with re-purchase activity, regardless of any internally held attitudes or preferences. In the behavioral definition, loyalty is not the cause, but the result of brand preference. A company wanting to increase customer loyalty will focus on whatever tactics will in fact increase the amount of repurchase behavior - tactics that can easily include, without being limited to, improving brand preference, product quality, or customer satisfaction.
For a variety of reasons, Martha Rogers and I have always preferred working with the behavioral definition of customer loyalty, because it's simply more useful and practical. You can observe behaviors, while you have to conduct polls and surveys to gauge attitudes. But this doesn't mean we consider attitudinal loyalty not to be important. Positive attitudes do tend to drive positive behaviors.
That having been said, defining loyalty purely as an attitude is just not useful. For one thing, attitudinal loyalty and brand preference are redundant, so why introduce a separate term at all? Moreover, an attitude can exist completely separate and apart from any continuing relationship on the part of the customer, and this simply flies in the face of the common English definition of the word "loyalty." Customer A and Customer B might have an equally loyal attitude for a particular product, but what if Customer A has never even consumed that product before, while Customer B has consumed it regularly in the past? Rather than "loyalty," a far more useful attitudinal concept to use is simply "preference."
But finally, in our view the concept of customer loyalty should have as direct a connection as possible to a company's financial results. That is, we ought to be able to "connect the dots" between whatever strategies and tactics a company employs to increase its customers' loyalty, and the actual economic outcomes of those actions. An enterprise should be able to see a clear and direct economic benefit of some kind, as the result of a customer's loyalty. Gupta, Lehman and Stuart's "Valuing Customers" paper for the Journal of Marketing Research (2004), for instance [you can download it for free here, from Gupta's list of papers] clearly analyzes the economic value of an increase in loyalty, in contrast to an increase in margin or customer acquisition efficiency.
If, on the other hand, loyalty is just an attitude, then it has no immediate economic result. Internally held attitudes have no intrinsic value to a firm, because there is no financial result to measure until and unless these attitudes are somehow manifested into actions.
Great ideas on working with the behavioral aspect of customer loyalty. Thanks.
You can easily have what appears to be “loyal” behavior without any great degree of emotional loyalty whatsoever. Consider for example behaviorally loyalty to a supermarket, or a bank closest to home, or the cell phone company with the most towers on the route to/from work. If there is no attitudinal loyalty, and another supplier comes into the geography and provides even greater convenience, or better reception, that supposed “behavioral loyalty” can quickly vanish. Consider the customer who appears behaviorally loyal but whose behavior is actually driven by the insurance provider’s low prices or the hotel chain’s loyalty points program. If there is no emotional attachment to the brand, then the introduction of an even lower price competitor, or the devaluation of the points being rewarded, and the once “loyal” customer can easily be gone. In an ever changing competitive environment we can make similar cases regarding product innovation, customer service policies, store design, and much more. Guiding a brand based solely on behavioral loyalty is like driving your car while looking only in the rear view mirror.
Using research to measure attitudinal or emotional loyalty present challenges as well. When questioned, customers really do express preference for a given company, and they do envision themselves as loyal to that brand. But when it’s not convenient, or when a competitor is on sale, or when they stop to really think about their choice, they may behave differently.
In the short term the buying behavior is critical, but studying it doesn’t really help plan for the future. Emotional glue likely leads to future purchases, but the depth of such “loyalty” and its impact at the cash register is difficult to truly measure.
I would like to suggest that in planning for the future we instead consider the perceived “value” being delivered to customers by a brand. Such value typically being a subconscious calculation (benefits/cost) made by customers each time they make a purchase in the brand’s category. Current customers collect data for this calculation at every interaction with the brand, and through all their senses. Data comes from traditional variables such as benefits delivered by the product or service itself, quality of customer service, the brand’s loyalty program benefits, the physical presence, etc. and cost variables such as price, difficulty in gaining access to the product, and risk of changing suppliers or brands. Additionally data is collected in reaction to how the customer feel about the brand’s latest advertising campaign, the way company representatives dress, the design of the package, the smell of the store, and much more. Perceived value is the measure driving both attitudinal and behavioral loyalty as we move forward.
Hi Don,
Inspiring memo. I tend to subscribe Mr. Ratekin's view that behaviour loyalty is biased by those customers who'd would like to be rational, but continue to be loyal only because sticking to the existing brand is a more convenient option than changing habits. This is particularly true in the service sector, less in FMCG sector. So one can question the loyalty horizon of these customers, just waiting for the next Moment of Truth to leave. We believe that a(ny) measure of client prefererences that overcomes these hurdles better predicts long term loyalty.
Chris twitter @chrisgossye
(reposting my comments without links to make it pass the spaminators)
Don,
First, I am humbled and honored to be quoted by you - even if to say I am not exactly right.
Second, I think we are closer than you see. Your attitudinal is my rational, your behavioral is my emotional. Of course, everyone prefers emotional loyalty (sorry, behavioral) since it has long-term implications and much-higher financial repercussions. Alas, it is more complicated to master and to manipulate (sorry, influence may be a better word) than attitudinal (rational) loyalty.
However, in the short term, I prefer to address attitudes and convert them to behaviors in the long-term. That is the way it naturally happens anyways. With few exceptions for beloved brands (harley davidson, four seasons, starbucks to a certain extent) you don't develope behaviors immediately, you develop habits and behaviors over time (the rule of thumb is that it takes 21 days with continuous repetition to change a habit or behavior, longer with non-continuous activity -- thus, rehab programs are usually 28 days... although logic says they should be longer since they break a bad habit and instill a good one -- but I digress).
My bottom line, I think Mark got something when he said both exist, and I think that also you have to address both as an organization: short term attitudinal (rational) to bring them on board, and long term behavioral (emotional) to keep them in the program and reap the benefits of their loyalty.
Finally, and this is a shameless plug - feel free to delete, we also did an experiment in openly defining loyalty over at my blog (link at the end) with 30+ people contributing different definitions and concepts. Very interesting for those getting into the loyalty discussion.
Thanks for shout-out! and for the platform for this great discussion.
As a marketer I have long held with; 'In God we Trust - everybody else has to bring data' so I certainly agree with Don on his behavioural emphasis.
There is another valuable customer behaviour that should perhaps be considered for measurement, (after purchasing of course). Recommendation.
Palmatier in a 2008 (MSI) Relevant Knowledge Series Meta Analysis "Relationship Marketing" found a strong statistical relationship between high levels of the mediators customer; trust, commitment, relationship satisfaction, etc.... and referral behaviour. He looked at a LOT of primary research so there is a chance he found something.
Hard to measure! But so is Return on Customer for most firms. Does not make it less important
Don,
Excellent post. Your EDS story points out how easy it is to confuse "customer loyalty" and "customer retention" programs as one can "retain" customer by threat of a contract, but it surely does not build much loyalty. This is a great illustration of Mark Rateikin's warning about dangers of separating attitude and behavior - EDS (and similar) long term contracts can create an illusion of customer loyalty, because their customers keep making payments coming on time.
Is anyone aware of a methodology for measuring impact of Customer Loyalty?
Don,
First, I am humbled and honored to be quoted by you - even if to say I am not exactly right.
Second, I think we are closer than you see. Your attitudinal is my rational, your behavioral is my emotional. Of course, everyone prefers emotional loyalty (sorry, behavioral) since it has long-term implications and much-higher financial repercussions. Alas, it is more complicated to master and to manipulate (sorry, influence may be a better word) than attitudinal (rational) loyalty.
However, in the short term, I prefer to address attitudes and convert them to behaviors in the long-term. That is the way it naturally happens anyways. With few exceptions for beloved brands (harley davidson, four seasons, starbucks to a certain extent) you don't develope behaviors immediately, you develop habits and behaviors over time (the rule of thumb is that it takes 21 days with continuous repetition to change a habit or behavior, longer with non-continuous activity -- thus, rehab programs are usually 28 days... although logic says they should be longer since they break a bad habit and instill a good one -- but I digress).
My bottom line, I think Mark got something when he said both exist, and I think that also you have to address both as an organization: short term attitudinal (rational) to bring them on board, and long term behavioral (emotional) to keep them in the program and reap the benefits of their loyalty.
Finally, and this is a shameless plug - feel free to delete, we also did an experiment in openly defining loyalty over at my blog (link at the end) with 30+ people contributing different definitions and concepts. Very interesting for those getting into the loyalty discussion.
Thanks for shout-out! and for the platform for this great discussion.
Link to Open Exeriment http://www.estebankolsky.com/2009/09/02/what-is-loyalty-an-open-experiment-to-define-it/
Link to Lessons Learned http://www.estebankolsky.com/2009/09/07/the-loyalty-open-definition-experiment-lessons-learned/
Hi Don,
Great post & thanks for letting me know. Personally I'm more of a behavioral-loyalty kind of person. This is exactly what I like about your post. I can also relate though, to the comment by Mark Ratekin: "Loyalty is a very complex concept". It does "require us to think beyond a single dimension to be maximally effective" indeed...
But, we have to be clear: it is and should be the behavioral loyalty we are after, not the attitudinal. This will probably require insight in a Customer's attitude as well, which will help you to better drive behavioral loyalty. Yet, one should keep the goal in mind: we want Customers to continue buying and buying more of what we have to offer..
(little break question: wonder if you are aware or have knowledge of any "evidence" that attitudinal loyalty is the adolescence of behavioral loyalty, or is there no sequentiality involved?)
On top of our desire to have behavioral loyalty, there are an increasing number of companies that seem to aim also at "intentional" loyalty... By that I mean: aiming at improving the intention of Customers to positively advice the company or product to people within their community (also known as positive Word of Mouth or NPS ;-).
This I have never understood. Intentions really do not mean a lot to me, it is actions that drive business (Customer's or business's actions). Why all the "fuss" about Promoters? How do you feel about this? Or: can you explain to me: what is the importance of driving "intentional" loyalty over "behavioral" loyalty..?
Thx for a great post!
Wim Rampen
I can understand the "logic" of course, but if "behavioral" has presence over "attitudinal", does this imply that "behavioral" also goes over "intentional"?
Mark:
Nice comment, thanks. And we vehemently agree with you!
Attitudes are important, but only to the extent they are integrated with behavioral outcomes. One of the drawbacks of relying ONLY on outcomes is that these outcomes can sometimes even be driven by overtly hostile customer relationship policies.
For instance, years ago, Martha and I met with some senior EDS folks at their HQ in Plano, TX. This company has customer relationships that are massive and long-term, involving the multi-year contracted outsourcing of enterprise-wide IT functions. I'll never forget what one of their senior people said about customer loyalty. He said "Sure, we have a customer loyalty program, and it's very effective, too. Lawsuits usually are."
Interesting blog, but I think the main point is missing here – the answer to the classic question of whether loyalty is a behavior or an attitude is a resounding “YES!” By blending the two dimensions of attitude and behavior, we overcome many of the drawbacks inherent in the single-dimension approach. My colleagues and I have worked with numerous clients using the blended attitude/loyalty framework, and it can not only point out where systemic and account-level changes need to be made to become more customer-centric, but it also allows us to articulate the rationale for change in financial terms.
For example, a firm with a high concentration of revenue among customers who are behaviorally loyal (that is, they will continue to purchase goods and services in the short run) yet attitudinally disloyal (that is, they may not like or have a connection to your company) are, in the long run, carrying a great deal of risk. If we were to focus solely on the behavioral definition of loyalty, we would not be able to detect this level of risk.
Our firm has repeatedly shown that this blended definition of loyalty outperforms the traditional satisfaction metric as a predictor of financial performance; moreover, loyalty leaders tend to outpace laggards across a number of financial metrics such as operating margin, revenue growth, and stock price appreciation.
Bottom line – loyalty is a complex concept that requires us to think beyond a single dimension in order to be maximally effective.