Is Customer Loyalty Dead or Are You Doing It Wrong?

In 2017 we heard the question more than a few times, is customer loyalty dead? It’s being asked more and more because of the changing dynamics in the retail industry. Brands are under enormous pressure to maintain consumer loyalty through sustainable differentiation given the explosion of choice that consumers have. It is tough to compete on just product or service alone anymore.

Understanding consumer psychology and knowing what is expected of your company is a major component of building and generating loyalty.

Companies have witnessed consumer choices grow exponentially in recent years. What makes customers stay loyal to your brand? Has analysis paralysis caused a decline in your customers’ loyalty? Are you doing the right things to ensure relevance among your customer base?

Is Customer Loyalty Dead?

We set out to answer these questions by engaging with 2,700 consumers across the United States, representing all demographic segments.

Using our proprietary artificial intelligence software for analyzing text responses we asked open-ended questions aimed at eliciting organic data. This method allows us to capture data with no structure to it and avoid any assumptions about what drives consumers to be loyal or disloyal.

To avoid leading questions with something like a multiple choice option we asked, “Is there a product or brand that has ‘won you for life’ as a customer? A product that you have purchased more than once and would buy from again?”

Surprisingly, it was revealed that in fact 88% of respondents consider themselves loyal customers to a company/brand that has “won them for life.” Those brands ranged from electronics to food and everything in between, big brands to small brands. It was definitively shown that brand loyalty is alive and well.

The next, and arguably the most important question, was why? What did these companies do exceptionally well that got consumers to proclaim their allegiance? We were told that it was actually product quality and customer service that were the leading indicators for customer loyalty. Over 40% of consumers said that product quality and customer service are what drives their loyalty to a company.

We also asked what would be a deterrent from someone purchasing again. No surprise, more than 40% of consumers told us that it would be poor product quality, consumer service, and a bad shopping experience that would drive them away. These trends held true across age groups and ethnicities.

Some retailers still want to believe that price is a determining factor. In more competitive product categories, price is actually something that you don’t have a lot of control over. But the customer experience and perception is something where you do have control. We found that price, while it can play as a purchasing factor and can help with loyalty, actually has very little effect on whether or not customers will decide to be loyal to a brand.

So what?

While clicks and shares are indicative signs of consumer psychology, companies can’t solely rely on them to understand what drives consumers to stay loyal to your brand.

Our findings point to the fact that price discounts and sales are not a sustainable strategy for growth. Understanding your consumers’ drivers to continue and love your products is critical.

If you are an established brand, hopefully you are leveraging what is known as processing fluency. When consumers mentally associate your brand and products with quality and good service they are more likely to buy going forward, aka be loyal customers. An advantage built up over time leads to easy decision making for a customer. But this is only established with an on-going and holistic understanding of your customers’ psychology and behavior.

If you are a young company without the decades long track record of product releases, have no fear, that’s where effective consumer research makes a big difference. Understanding your customer’s psychology can help you get ahead of the game.

To learn more about our study or our products contact sales@frontier7.com.