OPINION9 February 2012

Is there really such a thing as customer loyalty?

Dunkin’ Donuts has just been named by Brands Keys Customer Loyalty Engagement Index as number one in customer loyalty for the highly competitive US coffee sector for the sixth year in a row. But when it comes to brands are we really talking about loyalty or are we talking about convenience and opportunism on the part of the consumer?

Dunkin’ Donuts, that staple of the American mall, has just been named by Brands Keys Customer Loyalty Engagement Index as number one in customer loyalty for the highly competitive US coffee sector for the sixth year in a row. It doesn’t take a marketing guru to see that they’re obviously doing something right, but is customer loyalty a genuine phenomenon and, if so, what can brands do to influence it?

On one level, of course, loyalty schemes have as much to do with loyalty as reality television is about reality. Loyalty cards are simply promotional devices that work in both directions; as a customer I get money off my next bill and the retailer in turn collects a lot of data about me they wouldn’t otherwise have got. But is this really inspiring my loyalty?

There will always be individuals or groups of consumers who align themselves with brands with which they think they have something in common or which they feel say something about them and their status. This is particularly the case with high end fashion or jewellery brands or consumer electronics, of which Apple is the prime example.

But this aside, when it comes to brands are we really talking about loyalty or are we talking about convenience and opportunism on the part of the consumer? Loyalty as a concept speaks of our unwavering need to stick by something even in the face fierce opposition – the way football supporters, for instance, stand by their team through thick and thin.Convenience, though, is something different. I may have a Tesco loyalty card because I shop there three times a week. I may not be doing that out of loyalty, but out of convenience. If I move house and Sainsbury’s becomes my nearest supermarket, the likelihood is that because of convenience my “loyalty” would transfer to them.

It is too easy to confuse loyalty with frequency. Loyalty is much more about emotion and an instinctive reaction to a brand and this has to be considered differently.

Good customer service is certainly an important factor in brand loyalty but there has to be a good product too. Brands also have to stand for something; if you know what the brand is about and why it is right for you, you will almost always pick that brand over a competitor at price parity and, most likely, even at a premium price position. Sometimes, though, what we believe is loyalty may just be inertia. We may be inherently dissatisfied with our bank, utility company or broadband provider, but we simply can’t be bothered to switch because it seems like such a hassle.

The flip side to this loyalty question is the lack of rewards for being loyal versus the bonuses you might get for switching brands. This is more likely to occur in the services sector but there doesn’t seem to be many advantages in staying with, say, a bank or a savings provider. Often, introductory offers are better than the ones available to existing customers. The ‘savvy’ consumers are thought to be those who are the most promiscuous in terms of brand behaviour.  

Whether it is loyalty or not, what is clear is that people warm to brands that show a degree of humanisation. Consumers like it when they can see a brand that displays the characteristics of its community, no matter how large a corporate it is, and avoids adopting a rather soulless “one size fits all” approach. McDonalds and Dunkin’ Donuts are particularly good at this. Although the consistency of the brand experience is paramount it is the little things that make the difference that makes customers want come back and repeat purchase. 

3 Comments

12 years ago

An interesting post, Andy. I am skeptical about the extent to which loyalty schemes (i.e., loyalty cards, point systems, etc.) are really effective in creating sustainable customer loyalty. My decision to become loyal to your company, product or brand is an emotional decision - I have to FEEL something that compels me to return or buy in a repeating cycle. It is also a function of how easy your company is to do business with. If you can deliver a great customer experience that combines those two elements, and give me what I need or want from a practical standpoint, it is highly likely that I will not only want to come back again and again, but also promote your business when the opportunity arises. Just look at Zappos or Amazon. The reason so many people are crazy happy about doing business with those companies is they deliver on all three elements (practical, emotional and low-effort) over and over and over again. There is no loyalty scheme in the universe capable of matching that kind of loyalty-generating power. Scott Heitland Principal | Pretium Solutions www.pretiumsolutions.com

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12 years ago

Hi Andy Brand Keys Customer Loyalty Engagement Index needs to be interpreted for what it is, an assessment of customer’s ATTITUDINAL loyalty towards brands (peoples emotional or stated connection towards the brand). This is in contrast to BEHAVIOURAL loyalty (what they actually do when purchasing in the category). Often this distinction is not made, and these two very different concepts are amalgamated into one labelled “Loyalty”. “So what?” you might say, surely if a customer is attitudinally loyal to a brand, it will transform into some behavioural loyalty...... • Repeat purchase • Tenure • Share-of-wallet • Average purchase frequency • 100% solely loyal In recent years the question has been asked “Does (behavioural) loyalty actually exist?” Or in other words does Dunkin’ Donuts have a higher proportion of customers, scoring higher on all the metrics mentioned above. The research has looked primarily at panel data FMCG but also other areas to see whether brands of different sizes, with and without loyalty programs differ on the above metrics (when the size of the brand is taken into account). Let’s just say there are some results contrary to the ‘common’ thinking out there. So I say to Dunkin’ Donuts – while you may have won the trophy for another year, there is clearly a hole in your loyalty strategies if you think that winning in attitudinal loyalty alone is the recipe to your success. A few other points.... There are likely to be extreme loyalists (100% solely loyal) but they are (inherently) also likely to be extremely light buyers. I buy donuts 2 times a year, and 2 times a year it’s Dunkin Donuts. There are also likely to be die hard loyalist, (every brand family has one) but they are likely to be die hard loyalists with or without a loyalty program. The key rational that I have found from my reading into loyalty is grow your brand through penetration – and loyalty will follow. Sam

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12 years ago

Is there really such a thing as customer loyalty? Certainly, a customer can easily identify culturally and even personally with a client. It ideally works well for both in good times and otherwise. However let a client feel betrayed just once and all is lost. Clients beware the reverse is also possible though not quite as conceivable.

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