Are your customers loyal for the right reasons?
Being a frequent customer doesn’t always equate to true loyalty. Sales data shows how often customers make purchases, but it doesn’t say why.
I may do my weekly shop with one major supermarket because it’s close to home, but would I still shop there if I moved? Do I go out of my way to find a metro branch of the same supermarket near to my workplace, or do I just shop at the nearest competitor?
Once in the supermarket, do I buy product X because its product placement draws my attention. Would I hunt down the item if the store changed its layout?
Loyal customers will actively select the brand they’re buying or the store they’re buying it from, rather than buying it due to convenience. They don’t just buy products on offer, or because it’ll make them look good. They buy because they have a connection to the brand.
Brands need to distinguish between regular purchases inspired by habit and ease-of-access, and genuine loyalty to the brand.
Deloitte’s five reasons for staying loyal
In its study on consumer loyalty, Deloitte University asked respondents why they stayed in both positive and negative business relationships. The top five reasons were:
Deloitte found that 86% of respondents remained in business relationships due to their levels of satisfaction. In fact, 55% said that they had a negative relationship, yet they were satisfied enough with the service to stay.
Satisfaction has a wide spectrum. It can mean, “I find shopping here annoying at times, but overall it’s okay”, but it can also mean “I love shopping here! I’d never go anywhere else.”
Customers could also love the products, but hate the customer service. Yet they can overlook the shoddy service they receive because the product is just what they want. (Of course this means that if a competitor with excellent customer service releases a comparable product, the customer might not hang around.)
The longer we’re customers, the more likely we are to stay customers. Deloitte found that 79% of respondents stayed in a business relationship due to the length of time they’d been in it. This held true even for those with a negative relationship, 59% of whom stayed loyal.
This is the ‘sunk cost effect’. We feel like we have invested time, energy and money into something, so we almost feel obliged to keep the relationship going.
Deloitte found that 57% of people stayed in business relationships because switching would be too much hassle.
While some behaviour may look like loyalty in action, it may be that we simply can’t be bothered to look elsewhere. People naturally look for the easiest, quickest route to solving problems and competing tasks.
Benefits and perks are obvious ways to keep customers loyal. But it only works well when customers already like the brand. While 67% of people with a positive business relationship cited rewards as a reason to stay loyal, only 25% of those with a negative relationship felt that this mattered to them.
Using rewards to encourage loyalty requires brands to develop a relationship with its customers. They need to know what the individual wants, not chuck generic discount codes at every customer who walks through the door.
A lot of us stay with brands because our friends and family do. Deloitte found that 46% of respondents stayed loyal to a business due to social obligations.
We know that recommendations from friends and family have a high impact on our spending (Nielsen found that 84% of people saw recommendations from friends and family as the most credible form of advertising) but these recommendations come with added social pressure. (Will the person feel insulted, rejected or isolated if you switch brands?)
This is loyalty to friends and family, not brands.
Businesses are always thinking about how they can encourage their customers to stay loyal. But loyalty isn’t a simple equation (if the brand does x then people will be forever loyal).
Loyalty exists on a spectrum, and it’s inspired by a variety of factors – some of which are outside of the brand’s control.
Learn more about how businesses can spark that initial trusting relationship that can, eventually, grow into long-term loyalty.
Our next blog post will examine our 6 critical elements to a successful loyalty programme.