Simply put, Loyalty is important. It is a collection of attitudes aligned with purchase behaviors that favor one business among competing businesses. But it is so much more. Loyalty is comprised of a constellation of concepts, the Customer Ecosystem, that come together to influence a customer, but it also has a huge impact on business outcomes for our clients.
The concepts that make up and define loyalty include: Commitment, Trust, Incentives, and, most importantly, Satisfaction. All of these are moderated by Quality, the ability of a company to perform a service dependably and accurately. The more successful a business’s quality, the higher the overall Trust, Commitment, Incentives, and Satisfaction, of the customer – therefore creating stronger Loyalty. These antecedents, customer outcomes, and business outcomes are all part of the Customer Ecosystem.
Loyalty is a strong driver of business outcomes, providing direct impact on performance. Performance has historically been composed of traditional measures such as sales, share of wallet, profit performance, ROI, and other KPIs. These have been the standard bearers of what drives business decisions, but today, we know better. There is so much more to Loyalty than just business outcomes and understanding this will help to drive not only profits, but also to create a loyal customer base. A satisfied customer is more likely to not only buy more and more often, but to tell friends and family about their positive experiences.
Just as Loyalty is important for businesses, it is just as important for the consumer, affecting both their attitudes and behaviors when it comes to your brand. Behaviors are the easiest to see and measure. At its core, Behavioral Loyalty is the repeated purchases by a consumer favoring one business over another that can provide a similar service. When I consumer is satisfied, they are more likely to engage in behavioral loyalty and are willing to pay more for a similar service if they have a connection to the brand or business. Attitudes are bit more ephemeral.
It is hard to measure cognitions. You can’t just crack open a consumer and weigh attitude, so we must break them down into constituent parts that can be measured using a survey or series of surveys. What we can measure is: Connection to Brand, Behavioral Interdependence (the mutual impact of attitudes and actions in everyday life), Passion (a desire for a brand/business/service), and Intimacy (a connection that is formed through knowledge over time). It is much easier to form these connections, behaviors, and passions in a satisfied customer base. Over time, these attitudes only become stronger as a brand/company develops higher satisfaction with their consumers.
So here’s where we’re at:
We’ll get to rest of this chart as our series on Loyalty continues.
So…why Satisfaction? Why is it so important? There are three major reasons:
- No company can survive without appropriate customer satisfaction.
- Customer satisfaction is tied directly to profitability.
- Customer loyalty is assumed to be a consequence of customer satisfaction.
As we see here in the first of four posts, Loyalty is a complicated issue but necessary in creating a satisfied customer base. There are many drivers of Loyalty, but Satisfaction is the strongest. Not only is Satisfaction a primary driver of Loyalty, it is closely related to the other main components of the Customer Ecosystem. Next, we will explore how Satisfaction impacts the Quality of service and Personalization strategies.
Follow along with our series on Loyalty here and come back next Thursday for part two.