What is a loyal customer? What kinds of loyalty are there? Are there different degrees of loyalty?
These are all great questions, and of critical importance to businesses that rely on repeat sales from returning customers. A loyal customer is someone who tends to shop consistently at a certain place or for a particular brand, as well as someone who speaks positively to others about the brand.
Attitudinal vs. Behavioral Loyalty
A person who shops at the same place regularly is “behaviorally” loyal, while a person who tells others how great a product is, or simply feels really positive about the brand him or herself internally, is “attitudinally” loyal. Continue reading
PR Loyalty Solutions Resources
Between 2005 to 2007 we did extensive academic research on the topic of customer loyalty and reward programs. Click here to see some of our bibliographical reference resources. We hope you find them useful.
There is a lot of debate about loyalty programs – what can the experts agree on?
Despite all the many differences of opinion among academics, there are a number of observations regarding customer loyalty and reward programs that few experts (both critics and proponents) would deny. PR Loyalty Solutions has created a list of major assumptions and Continue reading
Keiningham, Vavra, Aksoy and Wallard (2005)
Loyalty Myths: Hyped Strategies That Will Put You Out of Business and Proven Tactics That Really Work
(Keiningham, Timothy L., Terry G. Vavra, Lerzan Aksoy and Henri Wallard. New Jersey: John Wiley & Sons, 2005).
Loyalty Myths is a great 2005 book that challenges 53 assumptions about customer loyalty, including those put forward by Reichheld (1996). The authors are from Bain & Company consulting competitor, Ipsos Loyalty.
It can be easy challenging a small number of assumptions, but 53 is a lot. Continue reading
12 Things Reward Programs can do for Businesses
There are many reasons why businesses embrace reward programs and invest so heavily in their implementation and maintenance. The following is a compilation of the major functions of loyalty programs (with academic and business expert references). Continue reading
Yi and Jeon (2003)
“Effects of Loyalty Programs on Value Perception, Program Loyalty, and Brand Loyalty”
(Yi, Youjae and Hoseong Jeon. Journal of the Academy of Marketing Science, Vol. 31, 2003 (3), pp.229–240).
Yi and Jeon (2003) examine how reward program characteristics affect the perceived value of programs and how this affects customer loyalty overall. Their work examines reward programs with respect to timing and type of reward, Continue reading
O’Brien & Jones (1995)
“Do Rewards Really Create Loyalty?”
(Harvard Business Review, May 1995)
O’Brien and Jones argue that despite the critics, reward programs can indeed enhance loyalty, when designed and implemented correctly. It is critical, however, that program value be in proportion to the economic value of customers’ loyalty to the organization. With references to such companies as General Motors, Neiman Marcus, AIR MILES and American Express, O’Brien and Jones’ most noted contribution to loyalty program literature is their outline of five key elements critical to a program’s success. “Customers prefer rewards programs with cash value, relevance, choice, aspirational value, and convenience” (p.80). Continue reading
Coupons and direct discounting are not always effective tools for enhancing customer loyalty and improving profits.
There is a lot written about coupons and discounting in academic literature, and most experts agree that tactics like these don’t generally enhance customer loyalty. Here’s what some loyalty experts have had to say: Continue reading
The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value
(Reichheld, Frederick F., Boston: Bain & Company, Inc., 1996).
A highly respected authority on the topic of customer loyalty, Reichheld (1996) notes that, “on average, U.S. corporations now lose half their customers in five years, half their employees in four, and half their investors in less than one. We seem to face a future in which the only business relationships will be opportunistic transactions between virtual strangers” (p.1). Also, “in a typical company today, customers are defecting at the rate of 10 to 30 percent per year; Continue reading
Nunes and Dréze (2006)
“Your Loyalty Program Is Betraying You”
(Harvard Business Review; April 2006, Vol. 84 Issue 4, pp.124-131.)
This is a very valuable article and can be purchased from the Harvard Business Review (and no, we aren’t paid to say this).
In this excellent article (one of our favorites), Nunes and Dréze (2006) identify five main objectives, five critical components and five common mistakes of loyalty programs. The authors present, in their opinion, what an effective loyalty program should look like and they give a broad overview of loyalty programs. Continue reading