Customer Loyalty: Is It an Attitude Or a Behavior?
The people who’ve tried to define customer loyalty have usually approached it from one of two different directions – attitudinal and behavioral. Although each of these directions is valid, they have different implications and lead to very different prescriptions for businesses. (This is analogous, but I don’t think it is precisely aligned, with Estaban Kolsky’s distinction between “emotional” and “intellectual” loyalty.)
The attitudinal definition of loyalty implies that loyalty is a state of mind. By this definition, a customer is “loyal” to a brand or a company if they have a positive, preferential attitude toward it. They like the company, its products or its brands, and they therefore prefer to buy from it, rather than from the company’s competitors. In purely economic terms, the attitudinal definition of customer loyalty would mean that someone who is willing to pay a premium for Brand A over Brand B, even when the products they represent are virtually equivalent, is “loyal” to Brand A. But the emphasis is on “willingness,” rather than on actual behavior, per se. In terms of attitudes, then, increasing a customer’s loyalty is virtually equivalent to increasing the customer’s preference for the brand. It is closely tied to customer satisfaction, and any company wanting to increase loyalty, in attitudinal terms, will concentrate on improving its product, its image, or other elements of the customer experience, relative to its competitors.
The behavioral definition of loyalty, on the other hand, relies on a customer’s actual conduct, regardless of the attitudes or preferences that underlie that conduct. By this definition, a customer is “loyal” to a company if they buy from it and then continue to buy from it. Loyalty is concerned with re-purchase activity, regardless of any internally held attitudes or preferences. In the behavioral definition, loyalty is not the cause, but the result of brand preference. A company wanting to increase customer loyalty will focus on whatever tactics will in fact increase the amount of repurchase behavior – tactics that can easily include, without being limited to, improving brand preference, product quality, or customer satisfaction.
For a variety of reasons, Martha Rogers and I have always preferred working with the behavioral definition of customer loyalty, because it’s simply more useful and practical. You can observe behaviors, while you have to conduct polls and surveys to gauge attitudes. But this doesn’t mean we consider attitudinal loyalty not to be important. Positive attitudes do tend to drive positive behaviors.
That having been said, defining loyalty purely as an attitude is just not useful. For one thing, attitudinal loyalty and brand preference are redundant, so why introduce a separate term at all? Moreover, an attitude can exist completely separate and apart from any continuing relationship on the part of the customer, and this simply flies in the face of the common English definition of the word “loyalty.” Customer A and Customer B might have an equally loyal attitude for a particular product, but what if Customer A has never even consumed that product before, while Customer B has consumed it regularly in the past? Rather than “loyalty,” a far more useful attitudinal concept to use is simply “preference.”
But finally, in our view the concept of customer loyalty should have as direct a connection as possible to a company’s financial results. That is, we ought to be able to “connect the dots” between whatever strategies and tactics a company employs to increase its customers’ loyalty, and the actual economic outcomes of those actions. An enterprise should be able to see a clear and direct economic benefit of some kind, as the result of a customer’s loyalty. Gupta, Lehman and Stuart’s “Valuing Customers” paper for the Journal of Marketing Research (2004), for instance [you can download it for free here, from Gupta’s list of papers] clearly analyzes the economic value of an increase in loyalty, in contrast to an increase in margin or customer acquisition efficiency.
If, on the other hand, loyalty is just an attitude, then it has no immediate economic result. Internally held attitudes have no intrinsic value to a firm, because there is no financial result to measure until and unless these attitudes are somehow manifested into actions.
Let’s grant that behavioral loyalty is what pays the bills, but that attitudinal loyalty is also important, especially when it can be used as an indicator of higher behavioral loyalty. I think that’s the general, if not unanimous, conclusion of the discussion on this topic.
And when it is positioned as a straight yes-or-no proposition, the concept of customer loyalty, as a behavior, is relatively easy. A magazine subscriber who elects to renew her subscription at the end of the first year is engaging in loyal behavior.
However, the real world is rarely described adequately in strict yes-or-no terms. If the magazine subscriber renews her subscription again in the third year, and perhaps again in the fourth, fifth, and sixth years, doesn’t her behavior exhibit a greater and greater degree of “loyalty?” In other words, loyalty is not simply a yes-or-no proposition at all, but is a matter of degree.
And it can get more complicated than that. Consider a new car buyer. The owner of a Brand A car who buys another Brand A when he retires the first one would be said to be loyal, of course, but what about when he chooses to use his dealer’s service area, or to get his car financed from Brand A’s financial services division? Or what if he owns two cars, but only one of them is Brand A?
The “loyalty” concept is equally difficult to deal with in other categories – most categories, actually. Because most business categories are not simple subscription businesses. If a breakfast cereal consumer buys one box per month of Brand B for her family, and then begins buying two boxes a month, does this mean she is twice as loyal as before? What if she also went from buying one box a month of Brand C to buying three boxes a month? Would that mean she is LESS loyal to Brand B? (Note that we are still describing her behavior, here, even though we might be inferring her attitudes.)
The fact is, a much more useful concept than “loyalty,” when thinking about desirable customer behaviors, is probably “lifetime value.” The net present value of the expected stream of future profits attributable to a customer is a much more rigorous and useful variable, simply because it is a vector: it has both a direction AND a magnitude. In its ideal state (a state that can never actually be measured precisely, of course), lifetime value would capture all the various behaviors and activities of a customer that have any bearing at all on the enterprise’s profit from that customer.