Customer Loyalty

Table of contents

Abstract

1.0 Introduction 2.0 Brand loyalty 2.1. Loyalty typologies 2.2 Purchase patterns 3.0 Store loyalty 3.1 Different definitions of store loyalty 3.2 The “What” and the “How” factors 3.3 Store’s interests in customer loyalty 4.0 Customer satisfaction 4.1 Example: Customer satisfaction in the

telecommunication sector 5.0 Conclusion 6.0 Recommendations

References

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1.0 Introduction The aim of this report is to provide an idea of what loyalty is how it can be achieved and why it is important for businesses. This report focuses on brand and store loyalty. Furthermore it points out what customer satisfaction is and what it means to a business. It analyses the relation between customer satisfaction and customer loyalty, using customer satisfaction in the telecommunication sector as an example.

Loyalty is the regular repurchase of a brand or from a store, based on a commitment towards the specific brand or store (Neal, Quester & Hawkins 2002). A reason why marketers try to achieve customer loyalty is positive word-of-mouth advertising. A loyal customer is much more likely to practice positive word-of-mouth advertising than a merely satisfied customer (Schiffman, Bednall, Cowley, O’Cass, Watson & Kanuk 2001). Moreover, loyal customer are much less price-sensitive than switchers and thereby offer the company the possibility to sell their products at a higher price (Lawson , Tidwell, Rainbird, Loudon and Della Bitta 1996). Still, the main reason why it is important for marketers to achieve their customer’s loyalty is the enormous difference between the costs of keeping a loyal customer and gaining a new one (Clopton, Stoddard & Clay 2001). Therefore, satisfaction, meaning that the performance of a product matches a customer’s expectations towards it, is the main aim of marketing (Neal, Quester & Hawkins 2002) as it is fundamental to achieve customer loyalty (Hamilton 1997). However, a satisfied customer is not necessarily a loyal customer (Shrake 1999).

Information for this paper was obtained from several “Consumer Behaviour” books as well as from journal articles which partly provided empirical and research information.

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2.0 Brand loyalty Brand loyalty is the commitment towards a particular brand leading to a repeated purchase of that brand (Solomon 1999). Different types of loyalty typologies exist and there are various purchase patterns according to which customers purchase a particular brand.

2.1. Loyalty typologies

There are different ways of identifying brand loyalty, with the differentiation between behavioural and attitudinal brand loyalty probably being the most popular one. Behavioural brand loyalty means the consistent repurchase of that brand (Widing, Sheth, Pulendran, Mittal & Newman 2003). For this group of loyal customers, the attitude to the brand does not make itself felt until the customer experiences an interruption of that routine. For example, if the brand is not available for any reason (East 1997). Attitudinal brand loyalty on the other hand refers to a customer whose attitude to the brand is better than his attitude to products of a different brand (Widing et al. 2003). Buttle and Burton (2002) compare customer loyalty to friendship: A customer builds up loyalty to a brand if he had experiences with it that have been important for him. In the same way, friendship is developed through shared experiences.

In this context, it is possible to distinguish a customer with true loyalty, latent loyalty, spurious loyalty or no loyalty. The loyal customer feels a strong attitude towards the brand with his behaviour reflecting this attitude at the same time. Latent loyalty exists when a customer is strongly attracted by the brand but his behaviour is weak (Widing et al. 2003). For example he or she likes the brand but does not purchase it because of lack of need or opportunity (East 1997). Customers continuing to purchase a brand because it is the only available at the store come under the category of spurious customers (Schiffman et al. 2001).

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