The concept of customer loyalty is far from dead – research suggests it has just been redefined by modern consumers, who yearn for a long-term brand relationship that will develop with their needs
Energy providers such as British Gas, npower and Powergen have been under the spotlight as the price of domestic energy has rocketed over the past year. A flurry of promotions, advertising and PR activity has occurred, urging consumers to switch supplier. Yet, according to uSwitch, just 50% of domestic energy consumers have changed provider.
This could be down to loyalty, but is generally recognised as the result of widespread consumer inertia. Nonetheless, customer loyalty today remains the holiest of marketing grails, a mantra on the lips of all senior executives.
Interesting then, that our understanding of the notion is misunderstood. Loyalty conjures up evocative images of times and places past, where people and their relationship to companies and organisations existed without question or the opportunity to move. But today this no longer holds true – the concept of customer loyalty has morphed into something new. The question is, importantly, what? A recent report on the concept of loyalty in the 21st century by the Global Future Forum (GFF) and O2 helps to answer this.
The study instantly casts aside the most presumptive cause of this change, that the shift has been a generational one. Loyalty is found to be, in fact, close to young people’s hearts, with over 80% of 16- to 24-year-olds believing loyalty is just as relevant today as it was 40 years ago. What has changed though, is their notion of loyalty, which has become something better identified as “episodic loyalty”. Like a brief and passionate affair – deeply meaningful for both parties, but not intended to last forever.
The challenge for any marketer is how to go about prolonging these episodes of emotional commitment. Companies today face a loyalty/satisfaction paradox. Consumers can be satisfied with the performance of an existing product but at the same time be readily prepared to shift allegiance when a new one enters the market.
O2 asked the 76% of survey respondents who said that people are less loyal to brands these days why they thought this was: 56% blamed the decline in loyalty on new products coming onto the market that people want to try. Innovation, an inherent and increasing characteristic of contemporary capitalism, has a damaging impact on customer loyalty.
Marketing strategies themselves were also found to have a destructive impact on customer loyalty. Among the same group of people, 67% cited special offers and promotions as a direct cause of people changing brands frequently. The conclusion to be drawn from this must be that special offers and promotions form a useful part of the marketing armoury to snatch customers from competitors – but it also flags the urgent need to protect a brand from such attrition.
So what tools do we have at our disposal to positively influence loyalty? The winner in the race for influence by a long way is friends and family (77%), illustrating the central role that trust and real people play in opinion formation today. Nowadays, it isn’t commerce and technology that have the potential to drive loyalty, but people. A clear new hierarchy of loyalty is emerging which businesses and brands need to understand. Personal comes top, followed by work, then the sports team we trust. By focusing on pure commerce, rather than relationships, companies are failing to tap into the principal mechanism driving loyalty in the modern world.
In the future it will all be about the human touch. Consumers want to talk – both among themselves but also to the people they buy from, which is consistently cited as the reason that we return time and time again to a company. The importance of customer service, therefore, cannot be discounted. But in addition, new exciting tools of peer-to-peer communication, such as viral marketing, play a prime role in engaging effectively with consumers in today’s competitive landscape.
Understanding our customers is of prime importance. Loyalty frequently atrophies more because consumers outgrow suppliers and their brands, than as the result of a failure to maintain performance standards. Of those surveyed, 41% believe that people change brands more frequently to show they are up-to-date and know where to get the best buys. Given that people themselves are more innovative and flexible in their own identities; the key to prolonging episodes of emotional commitment must be to keep pace with the personal growth of your customers.
The fact is that people from all walks of life and all ages, but particularly the young, want to be loyal – it is how companies move with that loyalty that will determine who finds the holy grail that becomes the winner in the episodic world of loyalty.
Satisfying consumers must be viewed as a logical process, but to reach loyalty, customers must take a leap beyond logic to feel an emotional tie. Companies employ different techniques to establish these emotional connections. Bonding means building reliance and an ongoing connection with the customer. People bond with organisations that are friendly, knowledgeable, and available when the customer wants. Personalisation involves tailoring every contact to specific products and services, asking for and honouring customer preferences. This makes customers feel understood and valued. Thirdly empowerment means giving customers the ability to control their own situation. For example, providing stellar web self-service, so customers can manage their own accounts.