Overview
This lecture explains the value of customer loyalty, distinguishes between attitudinal and behavioural loyalty, and describes the components and effects of successful loyalty programs.
Value of Customer Loyalty
- Loyal customers cost less to market to and are willing to pay more for a brand.
- Loyal customers are more likely to recommend products and try new brand offerings.
- The benefits of loyalty require sustained, careful management.
Types of Loyalty
- Behavioural loyalty is repeat purchasing based on habit or convenience, not necessarily preference.
- Attitudinal loyalty is a strong positive feeling toward a brand, often leading to advocacy and preference.
- Habitual purchases and convenience often drive behavioural loyalty.
Methods to Build Loyalty
- Cause-related marketing fosters attitudinal loyalty by aligning with customer values.
- Advertising, sponsorships, and community-building enhance attitudinal loyalty.
Loyalty Programs
- Loyalty programs reward frequent purchases and collect valuable customer data.
- Cross-promotion marketing introduces new partners to loyal customer communities.
- Data from loyalty programs informs targeted offers and product development.
Positive Effects of Loyalty Programs
- Longevity effect: Increases customer lifetime value by raising switching costs.
- Blocker effect: Loyal customers ignore competitor messages and offers.
- Spreader effect: Loyal customers are more likely to buy related products or services.
- Accelerator effect: Customers buy more frequently to reach rewards or higher status.
Criteria for Successful Loyalty Programs
- Good company performance is essential; poor performance cannot be offset by a program.
- Responsiveness to customer feedback builds trust and loyalty.
- Recognition and a sense of community among loyal customers reinforce the program.
- Benefits of loyalty must be clear, exclusive, and desirable to participants.
Creating Loyalty Without Programs
- Consistent high-quality service and responsiveness foster loyalty without formal programs.
- Community activities and offering input opportunities (e.g., contests) can build loyalty informally.
Key Terms & Definitions
- Behavioural loyalty — Repeated purchasing of a brand due to habit or convenience.
- Attitudinal loyalty — Customer’s positive emotional connection and preference for a brand.
- Loyalty program — Rewards system encouraging frequent purchases and engagement with a brand.
- Switching costs — Barriers or inconveniences that make changing brands less attractive.
- Blocker effect — Tendency for loyal customers to ignore competitors’ marketing.
- Spreader effect — Loyal customers purchasing additional or related products.
- Accelerator effect — Increase in purchase frequency as customers near a rewards threshold.
- Cross-promotion marketing — Joint offers between brands to attract each other's loyal customers.
Action Items / Next Steps
- Review the main differences between attitudinal and behavioural loyalty.
- Consider how loyalty programs can produce different effects.
- Be prepared to answer: How can loyalty be created without a loyalty program?