The Two Types of Loyalty, and How to Earn Them
I had waited weeks to take my wife to the Greek restaurant. It was MY restaurant. I didn't own it or even work there, but I found the small joint tucked away in a typical nondescript strip mall just a mile or so away from our home. The food was out-of-this-world amazing, the service personable and the prices cheap. Perfect.
The food was brought out, and I was so excited for her to try it that I didn't even notice my own plate. I just wanted her to love the place like I loved the place.
She took a bite.
Another bite. A slight look of concern.
"Well? Isn't it just the best you've ever had?!" I asked.
I was emotionally connected to that restaurant, and was heartbroken when she didn't see it in the same light. She didn't hate it, she just didn't fall in love with it as I had.
I still go there frequently, and my wife comes along on occasion. Our experiences are perfect illustrations of the two primary types of loyalty in the world: transactional loyalty, and emotional loyalty.
Transactional Loyalty vs Emotional Loyalty
Emotional loyalty is the ultimate, where consumers will look to one particular brand regardless of price, convenience or other outside factors because they have a personal connection to the brand. I have a personal connection to the restaurant because I was one of their first customers, I met the owner and connected with him, and oh yeah, the food was great.
Transactional loyalty is slightly different. That's the retailer closest to home, or the one that consistently has the lowest prices. When certain conditions change - say a retailer opens even closer to home, or they have to raise prices - then the customer's dollars are at risk of being spent elsewhere. My wife goes to the Greek place because its close and good enough (and because I guilt her into coming with me on occasion).
Transactional loyalty is underrated. At the end of the day, isn't loyalty about where the consumer is spending their dollars? Every loyalty marketer daydreams about having a brand that speaks to the needs of the masses, but let's be honest - every consumer is different and every experience is different. But most emotionally loyal folks probably started out as transactionally loyal customers.
Emotional loyalty is the summit of the mountain, though. That's when people go out of their way to spend with a particular brand, when they feel like they're part of it and want others to feel the same.
The Science of Emotional Loyalty (or Lack Thereof)
A recent Nielsen survey showed that 78% of consumers are not loyal to a particular brand. It seems like every week in our customer engagement recaps there's another story about people bailing on brands in favor of prices. Purchasing decisions are being made less and less on emotion and more on a cold, hard ratio of pure bang-for-the-buck - just 25% of US consumers consider brand loyalty as something that impacts their buying behavior, according to Ernst & Young.
Emotional loyalty is not easily obtained. As we mentioned with a focus on retention vs acquisition, it's an organizational commitment. It requires great in-store experiences, a product that delivers as promised, an engaging loyalty program (85% of consumers say companies could have recognized & rewarded them for doing business with them), a fair price point - and even then, there are no guarantees.
Emotional loyalty can't be purchased, but it also isn't entirely earned either. If there was an absolute formula for it - well, that'd be a big mess of stubborn consumers.
Three Emotional Loyalty-Earning Behaviors
As much as we want to try, there is no science to earning emotional loyalty. There are, however, a few best practices that can be applied that will put any business in position to connect on a deep level with customers. If these three behaviors are built into a company's DNA, they're going to have a lot of people fall in love with them:
1. Customer Involvement
People need to know the organization they're doing business with. What are their values? Do your values match theirs? A bit of organizational transparency helps people feel like they're part of the overall effort. This is especially true for young adults, 80% of whom prefer to do business with an organization that supports good causes.
This also means a highly responsive organization - poor customer service is the leading reason people bail on brands. If customers are dissatisfied with an aspect of a brand, let them win and change it. It sounds obvious, but a lot of companies still whiff on this point.
2. Customer Empowerment
Every effort should be made to ingrain a product or service into a customer's life. That means constant customer engagement and touchpoints. It means making every effort possible to make customers experts at using that product or service. Customers should be involved in shaping every aspect of the business, from product development to marketing.
This point also goes back to number one - customers need to feel like they have a say. If a business wants its customers to go all-in on loyalty, the entire organization needs to go all-in on serving their needs.
3. Customer Recognition
People want to feel important. We're suckers for personal recognition. On a local level, this means store managers are expected to learn people's names and buying preferences. It means a bottle of a guest's favorite wine when they check in to the hotel, or a personal text just before a sale. These are the relationship-building tactics that put a human face on a brand. They're tough to scale, but worth the effort.
On a larger scale, loyalty programs are a great way to do this. While some will shy away from loyalty programs, classifying them as "buying" loyalty, the bottom line is a well-crafted, thoughtful program can systematize recognition and rewards. Remember, 85% of the population wish they had been recognized for a purchase. Adding an effective loyalty program into an organization that has a customer focus is going to ensure the capture of both transactional and emotional loyalty.
The Engagement Factor
Constant relevant communication that provokes engagement is the final element to these three characteristics. As we've mentioned, loyalty is in part a result of frequency. Emails, texts, branded apps, mobile coupons, even printed newsletters are all important to cut through the clutter and remind people of brand value.
The bottom line is customers need to know how they're being impacted by associating with a brand. The companies best able to form that relationship are the ones who'll be in position to have the feeling reciprocated.
Eventually, my wife may become a little more invested in the Greek joint. And it probably won't take a life-changing souvlaki to do it. It may just be her proximity to a brand advocate (me!), or it could be that the owner knows her name and offers up free appetizers he thinks will suit her taste.
Or, she may never go beyond the occasional customer that stops in for a convenient take-out dinner. Which is still a pretty good customer to have.
Topics: Customer Engagement, Customer Incentives, Mobile Coupons, Member Benefits, Access Development, customer service, customer loyalty
Written by: Brandon Carter
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