Customer LoyaltyCustomer Loyalty

Customer LoyaltyCustomer Loyalty

I.I. Perspectives of customer loyaltyPerspectives of customer loyalty

II. Factor that affect customer loyaltyII. Factor that affect customer loyalty

III. Attitudinal and behavioral components III. Attitudinal and behavioral components of loyaltyof loyalty

I. Perspectives of I. Perspectives of customer loyalty (1/2)customer loyalty (1/2)

customer loyalty—acustomer loyalty—a customer’s customer’s commitment or attachment to a brand, commitment or attachment to a brand, store, manufacturer, service provider, or store, manufacturer, service provider, or other entity based on favorable attitudes other entity based on favorable attitudes and behavioral responses, such as and behavioral responses, such as repeat purchasesrepeat purchases

I. Perspectives of I. Perspectives of customer loyalty (2/2)customer loyalty (2/2)

1-1 Brand loyalty as behavior1-1 Brand loyalty as behavior

1-2 Customer loyalty as attitude1-2 Customer loyalty as attitude

1-3 Relationship commitment1-3 Relationship commitment

1-1 Brand loyalty as 1-1 Brand loyalty as behavior(1/3)behavior(1/3)

behavioral approach to brand loyalty—behavioral approach to brand loyalty—assesses how consistent customers are assesses how consistent customers are in repurchasing brands and is measured in repurchasing brands and is measured by the proportion of purchases – the by the proportion of purchases – the number of times the most frequently number of times the most frequently purchased brand is purchased divided by purchased brand is purchased divided by the total number of times the product the total number of times the product category is purchasedcategory is purchased

1-1 Brand loyalty as 1-1 Brand loyalty as behavior(2/3)behavior(2/3)

Researchers view a brand loyalty continuResearchers view a brand loyalty continuum and classify customers from complete um and classify customers from complete undivided loyalty to completer brand indiffundivided loyalty to completer brand indifferenceerence

Customers can also be classified into diffCustomers can also be classified into different categories based on the sequence erent categories based on the sequence of their brand switchingof their brand switching Exhibit 5.1: Variations in Behavioral Brand Exhibit 5.1: Variations in Behavioral Brand

LoyaltyLoyalty

1-1 Brand loyalty as 1-1 Brand loyalty as behavior(3/3)behavior(3/3)

undivided loyalty—theundivided loyalty—the behavior of a customer who always selects behavior of a customer who always selects the same brandthe same brand

occasional switcher—usually selects the same brand over time occasional switcher—usually selects the same brand over time but may want a change of pace now and then, or may face an out-but may want a change of pace now and then, or may face an out-of stock situationof stock situation

switched loyalty—aswitched loyalty—a customer who has experienced a change of customer who has experienced a change of heart, or a change of brandheart, or a change of brand

divided loyalty—adivided loyalty—a customer who is loyal to more than one brandcustomer who is loyal to more than one brand indifference—theindifference—the customer who sees no distinctions between customer who sees no distinctions between

brands or who could care less which brand is purchasedbrands or who could care less which brand is purchased

A strict behavioral definition of loyalty does not attempt to understA strict behavioral definition of loyalty does not attempt to understand why the behavior is occurring, nor does it distinguish between and why the behavior is occurring, nor does it distinguish between loyal behavior and behavioral inertialoyal behavior and behavioral inertia Exhibit 5.2: Loyalty versus InertiaExhibit 5.2: Loyalty versus Inertia

1-2 Customer loyalty as 1-2 Customer loyalty as an attitudean attitude

attitudinal approach to customer loyalty—takes attitudinal approach to customer loyalty—takes the view that loyalty involves much more than the view that loyalty involves much more than repeat purchase behavior and must also repeat purchase behavior and must also include a favorable preference or commitment include a favorable preference or commitment that has been expressed over timethat has been expressed over time

inertial loyalty—also called spurious loyaltyinertial loyalty—also called spurious loyalty ,, indicates that behavior appears to be “bogus” indicates that behavior appears to be “bogus” because there is no strong attitudinal influencebecause there is no strong attitudinal influence

latent loyalty—customers have strong attitudes latent loyalty—customers have strong attitudes but repeat purchase is lowbut repeat purchase is low

1-3 Relationship 1-3 Relationship commitmentcommitment

Relationship commitment—a desire to Relationship commitment—a desire to keep a valued relationship that endures keep a valued relationship that endures over timeover time Exhibit 5.3: Transactional/Relational Exhibit 5.3: Transactional/Relational

ContinuumContinuum

II. Factor that affect II. Factor that affect customer loyaltycustomer loyalty

Some fundamental components that are Some fundamental components that are expected to affect customer loyaltyexpected to affect customer loyalty Exhibit 5.4: What Affects Customer Loyalty?Exhibit 5.4: What Affects Customer Loyalty?

II. Factor that affect II. Factor that affect customer loyaltycustomer loyalty

2-1 Customer satisfaction2-1 Customer satisfaction

2-2 Emotional bonding2-2 Emotional bonding

2-3 Trust2-3 Trust

2-4 Choice reduction and habit2-4 Choice reduction and habit

2-5 History with the company2-5 History with the company

2-1 Customer satisfaction2-1 Customer satisfaction

customer satisfaction—influenced not only by the overacustomer satisfaction—influenced not only by the overall performance of a brand, company, or experience, but ll performance of a brand, company, or experience, but also by how well the actual performance meets or excealso by how well the actual performance meets or exceeds expectationseds expectations Exhibit 5.5: Confirmation/Disconfirmation of Expectations DetExhibit 5.5: Confirmation/Disconfirmation of Expectations Det

ermines Disatisfaction/Satisfaction/Delightermines Disatisfaction/Satisfaction/Delight delightful surprises—situations where customers receivdelightful surprises—situations where customers receiv

e fulfillment that exceeds the satisfaction of unexpected e fulfillment that exceeds the satisfaction of unexpected needs or wantsneeds or wants

zone of tolerance—a range where expectations (and szone of tolerance—a range where expectations (and satisfaction) vary from what customer’s hope to receive atisfaction) vary from what customer’s hope to receive and what is minimally acceptable to unacceptable perfoand what is minimally acceptable to unacceptable performancermance

2-2 Emotional bonding2-2 Emotional bonding

brand affect—anbrand affect—an affinity with the brand or affinity with the brand or an attachment to an organizationan attachment to an organization, w, which hich means the customer likes the means the customer likes the organization which can be an organization which can be an instantaneous responseinstantaneous response

2-3 Trust2-3 Trust

trust—one party has confidence that he otrust—one party has confidence that he or she can rely on the other exchange partr she can rely on the other exchange partner; or, the willingness of the customer to ner; or, the willingness of the customer to rely on the organization or brand to perforrely on the organization or brand to perform its stated function which reduces uncerm its stated function which reduces uncerstainty/risk and is viewed as a carefully thstainty/risk and is viewed as a carefully thought out processought out process

2-4 Choice reduction and 2-4 Choice reduction and habithabit

choice reduction—a natural tendency to reduce choice reduction—a natural tendency to reduce choices to a manageable set that may be three or choices to a manageable set that may be three or fewer options for many people fewer options for many people

habitual choices—based on an accumulation of habitual choices—based on an accumulation of experiences over time that result in positive or experiences over time that result in positive or rewarding outcomesrewarding outcomes

switching cost—the costs associated with change to switching cost—the costs associated with change to the unfamiliar, the untried, or the new which may the unfamiliar, the untried, or the new which may include time, money, or personal riskinclude time, money, or personal risk

perceived risk—customer uncertainty about the perceived risk—customer uncertainty about the consequences of making a purchase which may consequences of making a purchase which may include performance or social risksinclude performance or social risks

2-5 History with the 2-5 History with the company company

intergenerational influences—within-intergenerational influences—within-family transmission of information, family transmission of information, beliefs, and resources from one beliefs, and resources from one generation to the nextgeneration to the next

III. Attitudinal and III. Attitudinal and behavioral components behavioral components of loyalty of loyalty

3-1 Loyalty as one-to-one relationships3-1 Loyalty as one-to-one relationships

3-2 Factors that may lessen customer 3-2 Factors that may lessen customer loyaltyloyalty

3-1 Loyalty as one-to-one 3-1 Loyalty as one-to-one relationshipsrelationships

multi-faceted loyalty—emphasizes that loyalty is more than a multi-faceted loyalty—emphasizes that loyalty is more than a repetition of a behavior where customers can exhibit loyalty to repetition of a behavior where customers can exhibit loyalty to price, the brand, the company, other customers, or to a place to price, the brand, the company, other customers, or to a place to name a few potential options name a few potential options Exhibit 5.6: Loyalty and Organizational OptionsExhibit 5.6: Loyalty and Organizational Options Exhibit 5.7: Loyalty and CRM System GuidelinesExhibit 5.7: Loyalty and CRM System Guidelines

recognition—implies a personal greeting that is based on recognition—implies a personal greeting that is based on knowledge of the past history of interactionsknowledge of the past history of interactions

cultivation—implies meaningful interactions between the cultivation—implies meaningful interactions between the organization and the customer, similar to the courtship phase prior organization and the customer, similar to the courtship phase prior to marriageto marriage

development—implies that customers have a clear image for the development—implies that customers have a clear image for the organization and all of its services or brands which defines the organization and all of its services or brands which defines the relationship or the strength of the tie with customers relationship or the strength of the tie with customers

3-2 Factors that may 3-2 Factors that may lessen customer loyaltylessen customer loyalty

3-2-1 Competitive parity3-2-1 Competitive parity

3-2-2 Variety-seeking behavior3-2-2 Variety-seeking behavior

3-2-3 Low involvement3-2-3 Low involvement

3-2-4 Low share of voice3-2-4 Low share of voice

3-2-1 Competitive parity3-2-1 Competitive parity

High competitive parity—theHigh competitive parity—the offerings of offerings of different organizations are not different organizations are not differentiated and if customers perceive differentiated and if customers perceive that brands are identical, perceived risk is that brands are identical, perceived risk is low and there is a greater tendency for low and there is a greater tendency for brand switchingbrand switching

3-2-2 Variety-seeking 3-2-2 Variety-seeking behaviorbehavior

high variety seeking behavior—occurs high variety seeking behavior—occurs whenwhen people become bored and have a people become bored and have a need for a new experience because of need for a new experience because of declining benefits associated with repeat declining benefits associated with repeat patronage or because they feel patronage or because they feel energized by the prospect of having a energized by the prospect of having a new experiencenew experience

3-2-3 Low involvement3-2-3 Low involvement

low involvement—a low level of personal low involvement—a low level of personal relevance or perceived importance of a relevance or perceived importance of a product or service for the customer which product or service for the customer which can lead to higher levels of deal can lead to higher levels of deal proneness and price sensitivityproneness and price sensitivity

3-2-4 Low share of voice3-2-4 Low share of voice

low share of voice—alow share of voice—a brand’s, store’s, or brand’s, store’s, or organization’s relative promotional organization’s relative promotional expenditures; where problems occur with expenditures; where problems occur with insufficient share of voice to provide a insufficient share of voice to provide a clear picture of the organization to the clear picture of the organization to the target basetarget base