Different Types of Customer Loyalty

Different Types of Customer Loyalty

in Nov 02, 2021

Different customers will exhibit different types of customer loyalty based upon their personal buying habits; whether we are playing the role of retailer or the role of consumer, we understand this foundational principle without giving it much thought. It is, in many ways, the basis for our desire to understand our clientele; understanding individuals’ buying habits helps us be better marketers, better salespeople and better retailers overall.

Our buying habits as consumers are determined first by our circumstances (e.g. geographic location, family situation, financial status, lifestyle) and second, by our relationship with the retailer and its products. This relationship – or relative attachment – is, in turn, influenced by our general need for the retailer’s goods or services, the opinions of our friends and family and by our past experiences with the product or the retailer.

Let’s look at the different loyalty characteristics with both high and low repeat purchase frequencies, and discusses the four different types of customer loyalty revealed through this comparison.

No Loyalty

For varying reasons, some customers do not develop loyalty to certain products or services. For example, I know a manager of a travel agency who goes anywhere in town to get a haircut, so long as it costs him $10 or less and he doesn’t have to wait. He rarely goes to the same place two consecutive times. To him, a haircut is a haircut regardless of where he receives it. (The fact that he is almost bald may have something to do with it!) His low attachment toward hair services combined with low repeat patronage signifies an absence of loyalty. Generally speaking, businesses should avoid targeting no-loyalty buyers because they will never be loyal customers; they add little to the financial strength of the business. The challenge is to avoid targeting as many of these people as possible in favor of customers whose loyalty can be developed.

Inertia Loyalty

A low level of attachment coupled with high repeat purchase produces inertia loyalty. This customer buys out of habit. It’s the “because we’ve always used it” or “because it’s convenient” type of purchase. In other words, non attitudinal, situational factors are the primary reason for buying. This buyer feels some degree of satisfaction with the company, or at least no real dissatisfaction. This loyalty is most typical for frequently bought products. It’s exemplified by the customer who buys gas at the station down the street, dry cleaning from the store down the block and shoe repair from the nearby cobbler. This buyer is ripe for a competitor’s product that can demonstrate a visible benefit to switching. It is possible to turn inertia loyalty into a higher form of loyalty by actively courting the customer and increasing the positive differentiation he or she perceives about your product or service compared to others available. For example, a dry cleaner that offers home delivery or extended hours could make its customers aware of this fact as a way to differentiate its service quality from that of competitors.

Latent Loyalty

A high relative attitude combined with low repeat purchase signifies latent loyalty. If a customer has latent loyalty, situational effects rather than attitudinal influences determine repeat purchase. I am a big fan of Chinese food and have a favorite Chinese restaurant in my neighborhood. My husband, however, is less fond of Oriental food, and so despite my loyalty I patronize the Chinese restaurant only on occasion and we go instead to restaurants that we both enjoy. By understanding situational factors that contribute to latent loyalty, a business can devise a strategy to combat them. The Chinese restaurant might consider adding a few all-American dishes to its menu to pacify reluctant patrons like my husband.

Premium Loyalty

Premium loyalty, the most leverageable of the four types, prevails when a high level of attachment and repeat patronage coexist. This is the preferred type of loyalty for all customers of any business. At the highest level of preference, people are proud of discovering and using the product and take pleasure in sharing their knowledge with peers and family. Loyal Swiss Army Knife users are constantly telling friends and neighbors how valuable the knife is; how many handy uses it has; and how often they have used it in a day, a week or a month. These customers become vocal advocates for the product or service and constantly refer others to it. When I was starting my business, a friend was newly inspired by the Quicken software program, which automates one’s checkbook. He insisted on bringing his program over and demonstrating it to me on my computer. He was displaying premium loyalty.

What examples do you have of these four types of retail customer loyalty at work in your business?

How have you encouraged Premium Loyalty in your customers?

What can you do (or suggest others do) to promote better customer attachment and/or improved visit frequency, particularly in “no loyalty” customers?

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