Four Flavors of Customer Loyalty
In this episode, we're focusing on loyalty - customer loyalty which is a reflection of customer equity.
When digging deep into our individual businesses, we must look beyond sales, focusing on the relationship and what it truly means to have customer loyalty within our brands.
Like how home equity highlights your property's lifetime value, which is the difference between market value and any mortgage loan balances, customer equity is defined as the lifetime value of your customer's retention rate and spend value.
How can your company grow rich in customer equity?
By understanding the true meaning of customer loyalty and ensuring your products are interconnected with their different flavors!
Customer loyalty is more than the simpler version we know – repeat purchasers. There is a proper art form toward getting the formula of loyalty right, and that's what we're discussing today!
Why does this matter for you as a business owner?
Intentional customer loyalty techniques equal a longer lifeline for your business and its bottom-line. If you are a marketing executive who wants to deliver bottom-line impact by identifying and connecting with revenue-generating customers, then this is the show for you!
Joining us in the conversation of customer loyalty is Professor Pete Fader. Pete is the Frances and Pei-Yuan Chia Professor of Marketing at The Wharton School of the University of Pennsylvania. He's also the founder of two predictive analytics startups, Zodiac, which Nike acquired last year, and Theta Equity Partners. He's also an established author.
We are deep-diving into the four types of flavors of genuine customer loyalty:
Affective Loyalty
Conative Loyalty
Action Loyalty
Cognitive Loyalty
Affective and conative loyalty is driven more by emotions, while action and cognitive loyalty are driven more by features, amenities, and action initiation. However, let's briefly break each one down to get your feet wet into today's podcast's conversation.
Affective loyalty is based on emotions that affect your experience. Brand love, credence, missions, and other reasons that tug at the heartstrings create affective loyalty.
Conative loyalty is also based on emotions with differences focused around intention or willingness to buy. Have you ever driven to four different supermarkets to get that one product made by that specific brand? Why? The reason is more than likely surrounded by positive results. Conative loyalty is driven by your intention or level of intent to buy the product.
Cognitive loyalty is based on products with the features you love. You've made a clear decision that the car or computer with a specific set of features or capabilities has won you over other brands. Because the product features meet your needs, your loyalty will remain (or at least until its competitor introduces or enhances those features).
Action Loyalty is based on the actions you take toward acquiring the product. This level of loyalty is driven by your willingness to search for a favorite offering despite the considerable effort necessary to do so. In this situation, the competitor's version simply will not do.
Companies realize that while these 4 flavors of loyalty have their differences, all companies should strive to gain customers in all loyalty areas. Customer loyalty layers are more like levels, interconnected with one another at which its artful merge provides the most effective toward the bottom-line.
Pete will also touch base on the effects of switching costs. Many companies are misled to believe and confuse the appearance of loyalty when the truth is masked by their customer's unnecessary high risks penalties if they choose to opt-out of their services. The customer doesn't really like the product or the brand but is in a hostage situation until the switching cost level decreases.
Pete teaches us to:
Consider the stages of loyalty when developing a product.
Consider the switching cost by creating a healthy attachment for your customer without inadvertently creating a hostage scenario.
While listening to this episode, you will understand that we are playing chess, not checkers, on the creative board for today's marketing tactics.
Join us in this thought-provoking podcast!