Customer Loyalty

At Imonic, we view loyalty as the maximisation of value, rather than simply 'retention or loss'. Success factors and measures are therefore concerned with development, growth and optimum delivery of value to customers.

Value is defined as the measure of improved and increased use of goods and/or services in the supplier/customer relationship (Barnet, A. and Banamy, J. 1988). This suggests that achieving loyalty has to be a multi-dimensional approach, not merely concerned with the customer's presence or otherwise within the customer base, but instead focusing on 'share of wallet', repeat purchasing trends and long term partnership allegiance.

There is a significant body of research on customer loyalty. Most is interesting, but either too specific to a given situation (or point in history) to be able to apply today, or not convertible to practitioner tools and methodologies for application.

Imonic have synthesised some of this research and matched it with our own industrial research and practical experience to segment key reasons for 'customer loyalty' and 'customer disloyalty'. Our findings are listed below.

Why are customers loyal?

• They are bonded by relationship (building customer relationshipsto the point of emotional attachment)
• They perceive the barriers to exit too high (a recent article on bank customers summarised this well: although it is a simple process to switch direct debits and standing orders from one bank to another, this was perceived as a major obstacle to switching accounts by customers). If contractual barriers can't be built, then other examples could include: developing and demonstrating high levels of customer knowledge, building in customer preferences and providing customer reporting
• They have high levels of customer satisfaction - satisfied with the deal they are getting/satisfied with performance
• Confidence in supplier is robust - continuity of supply/problems will get addressed/responsiveness is assured.

We have also discovered some fundamental causes for customer disloyalty:

When are customers disloyal?

• Change of needs - due to movement in their business, customer technology or products, their need for your product/service changes
• Customer dissatisfaction - with the deal they are getting (most detrimental when they see peers or competitors getting a better option)/with performance (usually due to multiple causes or problems)/bad experience (a major complaint or issue - rare but can occur).

As you can see, it's quite possible to assess your customer management strategy against these critical success factors, and as a result strengthen the loyalty of your most valued customers. Pleas refer also to migration and retention, customer satisfaction, customer satisfaction surveys, customer behaviour.