The value of a loyal customer is obvious — there is plenty of research available that demonstrates a loyal customer’s tendency to spend more, stay longer and advocate to others. For example, a study by the Centre for Retail Management found that retailers could tie 55–75% of their revenue to their loyal customers, which usually represent just 12–15% of the entire customer base.
Before you pull everyone into the boardroom to develop a loyalty programme that will reap the benefits, you should be aware that there are actually three different types of customer loyalty. And most importantly, these different types of loyalty — behavioural, rational and emotional — can have a significant impact on the longevity and value of the loyalty relationship.
This article will outline the three different types of loyalty and discuss the implication of each.
James only buys Manly Shoes because they are the only brand of shoe that comfortably fits his wide feet.
Behavioural loyalty is loyalty driven by behaviour and action, not attitude or preference. Most simply, a customer exhibits behavioural loyalty when they continue to purchase the same product or service. In this case, they just continue the relationship because it’s easy to do so. The customer doesn't make a conscious assessment of the brand’s value before or after each interaction.
Some scholars argue that the lack of emotion or rationality in these transactions means that behavioural loyalty isn't actually loyalty. Brands with high levels of behavioural loyalty need to be aware that their customers do not feel anything for their product or service and that a change in situation or behaviour may significantly alter the relationship.
Edward only buys Manly Shoes because he believes that they are the longest lasting leather shoes in his price range.
Rational loyalty occurs when a customer chooses — after considering all their options — to continue their relationship with a brand. In this case, the choice to maintain the relationship is driven by the customer’s appraisal that the brand represents the best value. Value in this instance isn’t always about price — it could be related to quality, availability or any other characteristic that the customer thinks is important.
The danger for brands with high levels of rational loyalty is that they must continue to meet their customers’ perceptions of value. If they do not, there is the very real chance that their loyal customers will consider another brand. There are many situations which may result in value being undermined. The threat can come from within the organisation (e.g. a change in manufacturing processes), from another organisation (e.g. the launch of a cheaper or higher quality alternative), or from the customer themselves (e.g. an increase or decrease in disposable income).
Richard only buys Manly Shoes because he feels that their style intensifies his tough guy persona.
Emotional loyalty occurs when a customer develops a preference for or attachment to a brand that is beyond a rational assessment. These customers just love the brand. Generally speaking, emotionally loyal customers are the most valuable to a brand. Gallup research has shown that customers with an emotional attachment spend 46% more than other customers. They also spend more time in store or engaged with the brand online. Customers who are emotionally loyal will continue to engage the products or services regardless of changes in price or the emergence of competitors.
There are two strategies for building emotional loyal customers — build the brand or offer additional value.
Companies like Nike and Apple have established brands that are conducive to emotional loyalty. They have identity and personality. Customers become emotionally attached because they believe in the brand and what it stands for. In some cases, the brand actually becomes an extension of their own personality.
The second strategy is to offer further value, beyond what is traditionally associated with the product or service. The customer loyalty programmes we develop align with this strategy. Customers associate the satisfaction and value they get from our discounts portal with the brand that has provided them access.
It is important to have a strategy to convert prospects or one-time customers into loyal customers. When planning or reviewing your strategy, consider the type of loyalty you are fostering. Will your campaign develop customers who will engage you because it’s easy to do so, because they feel you provide value or because they love who you are and what you do for them?
Does your organisation measure customer loyalty?
If so, do you delineate between customers who are behaviourally, rationally or emotionally loyal?
Has understanding of your loyal customers changed your relationship with them?
For over 15 years Xexec has been building customer loyalty programmes for small and large companies all over the world. Learn how Xexec can help you boost customer loyalty.