Business and marketing perspective
Loyalty can be seen in a business sense or in a social sense. Business wise we can distinguish between loyalty as a business model. The reasoning behind that model, is that when employees are loyal, the quality of the service will improve, leading to customer satisfaction, leading to loyal customers. Customer satisfaction in this case is almost seen as a substitute for loyalty. But they are two very different things.
You can also view loyalty from a marketing perspective in which case a program is created by the marketing department of a company, to increase customers loyalty. Most of the time such programs take on the form of ’saving’ extra miles or points. Such a scheme program was first created by American Airlines in 1981: the AAdvantage Miles Program. It rewarded frequent fliers with reward miles that could be saved and later used for free travel (with the same company). The model has since been copied by many airlines and the AAdvantage program now has some 50 million members.
The question is: are those members truly loyal to American Airlines, or is it a tie in, that, once you’ve started it, you can’t easily get out of. Not because it’s impossible, but because it appeals to one of the basic emotions of people, which is to avoid loss. If you’ve saved a lot, switching to another airline means not using (or: losing) all your miles. And that feels a lot worse than earning them in the first place. The American Psychologist Kahneman, who developed the prospect theory, calls this phenomenon ‘loss aversion‘. So this would actually be more of a tie-in that people can’t get out of, instead of loyalty.
Social perspective
I prefer the more social perspective of loyalty. In that sense loyalty is much more a process of free will. Meaning, that loyalty is given without having to get back anything in return. True loyalty is reached when someone stays ‘loyal’ to the brand, to his company, to his rock-star or sports club, even if they take a turn for the negative. Loyalty then evolves from a fellow-feeling of a specific group of people that share something. It comes most naturally amongst a tribe, or in popular terms a community (although I do believe there’s a difference between tribes and communities. More on that in later posts)
Kjell Nordström has written extensively about the power of such tribes and the loyalty associated with it. He talks about the ‘people’s republic of Britney Spears’. In my opinion the fan base of Britney Spears has a loyal following, but not all of them are loyal to her. The loyal fans of Britney Spears are those who still back her up after all her drug abuses, drinking, and shaving of her head. All those that don’t anymore, can’t be called loyal. They were just in it for the positive ride. Maybe because they felt pressured by their peers. But as soon as they had an opportunity, they abandoned her. So much for loyalty.
Trust as an essential part of loyalty?
The truly loyal fans or customers are very valuable to a brand indeed, because they stick with the brand no matter what. Why do they do that? Most importantly I guess, because they share ‘values’ or ‘beliefs’ with a brand that are very important to them. Based on those values and beliefs a certain level of trust has been created. Although ‘trust’ is a debate worth on its own, I do believe that it’s essential to having a loyal relationship with any customer. People that don’t trust you, will never be loyal to you. Those fans of Britney are still her fans, because they trust her to have good reasons for it, or trust her to overcome her problems.
With trust comes the power of referral, that has been claimed by Moloney and Reicheld. People that trust a brand, will become loyal customers. And because the link between the brand and the customer is that strong, they will refer others to the brand as well. Sure, satisfaction has got something to do with this, especially at the start of the relationship, but that’s not all it takes. So how is loyalty created?
Which brings me to my final remark for now. Or actually it is more a question. Is loyalty inherently part of a relationship? If so, that would imply that loyalty is an interactive process as well in which the brand, as much as the customer should give and take a little. What do you think?
The problem with comparing loyalty to Britney to loyalty to AA is that supporting Britney in ‘bad’ times is not a loss in economic terms, at most a loss in social terms.
To not take part in a frequent flyer program (or to not play the postal code lottery; another great example) is a loss.
I think the long lasting trust and loyalty (without the help of loss aversion) are only created by rebel companies which have an image of risktaking and a high coolness factor people like to be associated with, like Apple or a sportscar brand like Ferrari. For other products I think the days of customers ‘giving a little’ are over.
what about the libelle?
Good one, I think a magazine can create a fanbase (although the Libelle’s fanbase consists mostly of creatures of habit). But has Libelle ever led its readers down? Their magazine formula hasn’t changed much over the past 50 years.