Loyal customers are the Holy Grail of the supply world; finding them is the topic of a mountain of business manuals. But when we stop to think about it, is it really loyal we want? The dictionary definition of loyal is ‘faithful to one’s friends, country or government.’ Honourable? Yes. Emotional? Yes. Maybe even a little old fashioned. But in today’s aggressively consumerist world, these are notions which hardly seem to apply.
Take the example of banks/building societies and supermarkets: at first glance, recent research that we carried out on behalf of loyalty scheme consultants, the Logic Group, shows that banks/building societies and supermarkets seem to be doing rather well in the customer loyalty stakes. Two-thirds 66% of the British public said they feel loyal to their bank or building society and 60% said the same of their supermarket.
But when we scratch the surface what we see at play here are powerful factors that influence the consumer outside of the definition of loyalty:
In both cases consumers make repeated (financial) transactions with banks/building societies and supermarkets, and in that sense are ‘transactionally’ loyal. However, there is limited evidence here for emotional attachment or traditional loyalty.
Both sectors have mechanisms in place to foster this transactional loyalty; also known as the carrot and the stick.
Banks/building societies employ the stick to encourage repeat transactions by typically creating high barriers to switching (forms, financial penalty, charges etc).
Supermarkets, on the other hand, are adept at providing carrots to reward repeat transactions – particularly in the form of loyalty schemes. The same research we conducted for the Logic Group found that 68% of the general public have membership of at least one supermarket scheme and 21% do not even admit to feeling loyal despite their membership. This illustrates the power of the loyalty scheme to encourage repeat transactions without engendering emotional attachment.
So what goes into making a good scheme? Well for supermarkets it appears to be points and vouchers. Consumers want money off (subtext: consumers expect supermarkets to buy their repeat business by offering freebies). Effectively the consumer is consciously entering into a ‘you scratch my back, I’ll scratch yours’ pact with supermarkets; any old fashioned notion of faithfulness here is long gone.
In light of this evidence, isn’t it about time we stopped talking about loyal customers and started talking about retained customers? For some the difference might be semantics. But for others, it’s the difference between understanding what motivates your customers to spend or not.