Defining Customer Loyalty

There are many ways we can define customer loyalty. A loyal customer is a customer who is extremely satisfied with your service and your after sales service as well that they remain your customer forever. You not only get repeat business from your loyal customers but they are the ones that are happy to refer their friends and family to you as well.

 

So going deeper into loyalty, first lets look at the 3 main components of customer loyalty:

 

1- Customer Satisfaction – customers need to feel that what they get is what they were both promised and expected.

2- Customer Involvement – a reflection of how much the customer has invested in the relationship and how difficult it would be to sever the links.

3-  Customer Affinity – how customers feel emotionally about the brand

 

So what is it that drives customer loyalty?
With the exception of true loyalty each of these as a standalone tactic for retaining customers is fragile and unlikely to prevent customers from defecting. Incentive loyalty – competitors may offer a better incentive. Customers may use incentives from more than one organisation therefore does not truly drive loyalty Inertia loyalty – contract end is a pain free way to defect.  Lazy loyalty– a nearer or more convenient store could encourage customers to defect Monopoly loyalty – drives resentment. Not really loyalty. As soon as customers have a choice more likely to defect Price loyalty – competitors may undercut and offer lower prices and better offers.  Trend loyalty – is fickle and product driven. Competitors may have same product range All these types of loyalty are so fragile and do not lead to a lifetime loyal customer. So what do you think drives real loyalty ?

 

Lets look at the daffy model and equation below:

Loyalty = Affinity x Satisfaction x Involvement.

By focusing on increasing Customer's affinity , satisfaction and involvement we do not only end up with a lifetime loyal customer but we also increase our average customer value By focussing on keeping the customer loyal, we increase their annual value to us and the lifetime of that value. Every customer becomes worth more to us. Lifetime Customer Value:

Average Annual Purchase Value X Potential Lifetime of Purchasing =  Average Customer Relationship Value

 

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