Customer Loyalty

Definition of Loyalty:

Loyalty may be defined as “The biased behavioral response, expressed over time by some decision making unit with respect to one out of a set of processes resulting in brand commitment”.

Loyalty must be seen as “biased repeat purchase behavior” or repeat patronage accompanied by a favorable attitude. Loyalty can originate from factors extrinsic to the relationship such as the market structure in which the relationship exists, but also in intrinsic factors such as relationship strength and handling of critical episodes during the relationship.

Advantages for setting up Loyalty:

1. Building lasting relationships with customers by rewarding them for their patronage.

2. Gathering high profits through extended product usage and cross-selling

3. Gathering customer information

4. Decommodifying brands i.e., differentiating from crowds.

5. Defending market position

6. Planning against competitive activity.

Classification of customers with reference to Loyalty:

There are six classifications of customers in respect of loyalty:

1) Current loyal customers who will continue to use the product or service

2) Current customers who may switch to another brand

3) Occasional customers who would increase consumption of the brand if the incentives were right.

4) Occasional customers who would decrease consumption of the brand if competitor offered the right incentive.

5) Non-users who could become customers.

6) Non- users who could never become customers.

It is important to distinguish between loyalty to the generic product, the brand and particular supplier. Many people drink coffee as beverage. Those who drink considerable quantity of coffee can be described as having a product loyalty. Within the group, there will be some that buy just the cheapest coffee or drink whatever available. They are product loyal but not brand loyal. They are not disloyal as that implies that there has been a loyalty, but they have no loyalty at all to a particular brand. Those who have a particular brand loyalty, they always buy a particular brand or at least a brand from the same product.