The Three Types Of Loyalty And Why So Few Companies Excel At Reaching The Pinnacle

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In a recent article, Judd Marcello, former EVP of Global Marketing at Cheetah Digital and current EVP & CMO at Conexiom, suggested that there is “ no customer journey” and so marketers should stop trying to manage it. Instead, marketers should focus on developing engaging experiences that lead to loyalty. Below, I invited Marcello to share his thoughts on the different types of loyalty and why so few companies every make it to the pinnacle.

Kimberly A. Whitler: You mentioned that you believe that there are three levels of loyalty. Can you describe these?

Judd Marcello: Sure. The first is habitual loyalty. For example, consider somebody who buys food at the nearest Kroger. They started shopping there because it was on the way home from work, but they continue because it’s a habit. They have no preference for Kroger over other grocery stores. It simply is a habit. In fairness, there would be some switching costs as they’d have to learn about a different store, but there is no emotional connection to Kroger. They shop there because it is convenient and part of their routine and if there was a better option, they may use it because there is no emotional connection to Kroger.

The second type is transactional loyalty. In this case, loyalty occurs typically because of a non-emotional reason, such as to accrue benefits through a loyalty program. People who are loyal to an airline or hotel in order to reach a certain threshold is an example of transactional loyalty. If a consumer flies 125,000 miles on Delta (and spends $15,000) they then receive benefits in a quid pro quo, transaction-based exchange. This effectively drives loyalty but it isn’t built on passion or emotion for the brand. As soon as somebody offers a better transaction (or in this case tangible benefit), they will switch. You can think about a lot of consumers who view credit cards in this vein. The observable behavior is loyalty – consumers only use one or two cards. But they do it to receive points, etc. As soon as a new credit card pops up that has better benefits, they switch.

The third type of loyalty is emotional loyalty and is the most desirable. This occurs when consumers are deeply connected to the brand because of an emotional bond and is created through the brand’s ongoing value creation. You see this with lifelong fans of sports team. The degree to which they defend, support, and commit to their team is the highest level of loyalty.  It’s not just that they support their teams by purchasing tickets and apparel, their fandom is part of their life. They will worship, argue and defend their team even when they have consecutive years of losing seasons. And, they never stop showing their support by buying tickets, jerseys and following them online.

In the consumer space, some brands have earned this type of loyalty with subsegments of their consumers. Dunkin versus Starbucks. You can find emotional loyalists on both sides. Blackberry used to have ardent loyalists and Apple does today, but I still know a lot of people that wish that they could have their old blackberry again. They loved the experience and still have a connection with the brand. Consumers don’t evolve to the level of emotional loyalist for every product, but the goal of brands is to help elevate the relationship, when possible, to this level.

Whitler: Why are so few companies capable of elevating the brand-consumer relationship to this emotional level?

Marcello: It is a few things. Firstly, brands are still building plans that service and drive habitual and transactional behaviors. Consumers have too many options, more means and are more informed than ever before. Trying to win the competitive struggle through price and marginal improvements in your offering is a race to the bottom.

Secondly, while we can’t ignore profiles and segments completely, especially when marketing at great scale, brands need to prioritize marketing to the individual customer as much as possible. The emotional connection needs to be based on a 1:1 relationship, and for this to happen, brands need to prove how well they understand their customer’s preferences, motivations and desires. This doesn’t happen without data. The marketer’s greatest competitive advantage is their customer data and how they use it.

Lastly, emotional loyalty is created and sustained with an ongoing value exchange. To build brand attachment, affinity and trust you have to deliver offers, incentives and appreciation that not only results in a transaction for your brand, but creates what I think is the most important metric of success for a marketer, brand advocacy. Brand advocacy is the outcome of emotional loyalty and it can drive organic sales. Advocacy is effectively an advanced state of word of mouth – the most effective and cost effective marketing!

Whitler: Any examples of a brand in a more mundane product category that has developed a level of emotional loyalty among consumers?

Marcello: With respect to the category, right away I thought of notebooks. Who still uses paper and pen any more? A lot of people, and they are very particular about the type and brand of notebook that they use. Moleskine is probably the most mainstream example. They have excelled in the premium notebook category with many loyal customers that only use their notebooks for their most important personal and professional work. To use anything other than a Moleskine would denigrate their work. That is how strongly they feel about them. And don’t even get the premium pen people started on their preferred writing weapon of choice!

Join the Discussion: @KimWhitler



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