The 3 key stages in the Customer Loyalty Lifecycle
Understanding that all loyal customer behaviour is not the same is a critical part of your CX programme or marketing strategy. It’s widely recognised that building customer loyalty is the most effective way to build growth in a business and limit the competition’s market share, but how sure can you be that your loyal customers are really that loyal? On the surface, all customers who consistently buy from you, leave good NPS scores and show frequent interaction with your brand would be considered loyal customers. And to a certain degree, they are. They display all the hallmarks of the brand advocate, the engaged customer and we have the indisputable metrics to prove this. Right?
But below the surface, inside the head and in the day to day lives of these customers there is a lot more going on than just data can tell us. We need to think about the ‘why’ of their behaviour, what may to an untrained eye look like a loyal brand advocate, may be one sales coupon, one bad experience or a change of personal routine away from leaving your brand behind. For good!
A DAY IN THE LIFE
To illustrate this point, let’s introduce our customers: John, Paul, George and Ringo. Actually, Ringo is not a customer in this story, but he does have a small part to play here. Hmmm, sounds familiar right? Next, let's also introduce our fictitious brand… ‘Penny Lane Pies’, a high street Pie Emporium selling top-notch grub that unites both vegans and meat lovers through great service, a quality product, an effective loyalty programme and ethical practices.
At first glance of the data, our mop-topped customers all seem to display the patterns of a gold star loyal customer:
1. They spend more than the average customer 2. They do this frequently 3. We even get a regular score of 9 or 10 on our NPS
But we need to remember that reviewing this data alone may not be enough to fully understand our customer. We need to dig deeper and reveal the drivers behind the behaviour of our fab 3 to get the full picture. Well, it seems our likely lads from Liverpool are each displaying 1 of the 3 key stages in the customer loyalty lifecycle. They can be distilled into 3 clear customer types within the timeline:
STAGE 1. Behaviourally Loyal STAGE 2. Attitudinally Loyal STAGE 3. Emotionally Loyal Let’s take a look at how these 3 stages manifest through the eyes of our customers.
GEORGE - Stage 1: Behaviourally loyal
George likes Penny Lane Pies and purchases from them frequently. He currently goes there as they are the only pie shop near to the recording studio, they are good value for money and they also have a great loyalty programme where every 10th pie is free. This is important to George as he doesn’t earn as many royalties as Paul and John as they write most of the songs on the albums. Also, the band have just announced they will never tour again which has messed up George's earning potential and holiday plans.
WHAT THIS MEANS
George is in stage 1 of the customer loyalty lifecycle and is Behaviourally loyal. His purchasing decisions are nearly always based on barriers: Price, Choice, Convenience and Rewards. This customer type is almost ‘forced’ to do business with us, and for now, at least, almost nothing will change that. Most brands ‘loyal’ customers are actually in this phase of loyalty and are the most likely to switch or churn.
REASONS GEORGE MAY LOOK ELSEWHERE:
Choice: Another food shop opens next to Penny Lane Pies selling a similar or better product Convenience: The studio builds a canteen so George no longer needs to go out for lunch Price: The pie shop puts its prices up due to production costs so George decides to bring a packed lunch instead Loyalty Rewards: A pie shop nearby may offer a free pie after 8 purchases rather than every 10. George would happily walk an extra 5 minutes to save a shilling or two.
SUMMARY IN A NUTSHELL:
George is very (very) close to churning - but also open to progressing to stage 2 ‘Attidunally Loyal’ if the right experience comes his way.
JOHN - Stage 2: Attitudinally Loyal
CURRENT BEHAVIOUR Like George and Paul, John likes Penny Lane Pies and purchases from them frequently, but he also goes to other food shops nearby which he likes equally. All shops consistently provide John with good food and he has never had a problem with any of them. All the food prices are similar and their rewards programmes all have value to John, but he likes to keep his options open and try new things.
WHAT THIS MEANS
John is ‘Attitudinal Loyal’. He is in the 2nd stage in the customer loyalty cycle and has already discarded other brands that do not meet his expectation. He enjoys the products and the experience from his chosen brands and is very likely to recommend these places the next time he talks to Mick and Keith at the studio. He is confident with the brands but has not yet created an emotional connection to any.
REASONS JOHN MAY LOOK ELSEWHERE:
Price: Penny Lane pies start to charge more than the others due to production costs. Johns not having any of this. Experience: A cold pie or even the inconvenience of running out of Steak and Kidney too often may turn John's head for good Rewards: They change their loyalty programme to something that doesn’t benefit John as much as other brands' scheme (he is currently part of 3 loyalty schemes) New competition: John is a curious customer and likes change. If a new brand offers something similar (not necessarily better) there is a danger he will forget Penny Lane Pies. Quickly.
SUMMARY IN A NUTSHELL:
John is still undecided on his ‘favourite’ brand, and very open to new experiences which could advance him to stage 3 ‘Emotionally loyal’. But he is also unsympathetic to anything that causes him inconvenience.
PAUL - Stage 3: Emotionally Loyal
CURRENT BEHAVIOUR Paul purchases from Penny Lane pies every day unless his wife Linda secretly smuggles one of her Broccoli Bakes into his backpack for packed lunch. The family-owned Penny Lane Pies has been part of the fabric of the area for over 50 years now and Paul admires that they have a strict no-waste policy and give the leftover pies to a local homeless charity every night. Paul also enjoys the down to earth authentic service that he gets every time from Rita and her music-loving husband Mr Kite who is on first name terms with Paul. He also believes the product is the best in the area, and anything else is just a poor substitute. He has defended Penny Lane Pies in heated lunchtime arguments with Ringo. The detractor.
WHAT THIS MEANS
Paul is emotionally loyal to the brand on many levels. Apart from having a complete belief that the product is the best, he genuinely feels proud of his affiliation and feels connected by mirroring his own moral beliefs of helping the community and supporting local businesses. For Paul, personal service is key to the experience. Knowing the names of faces of those serving him and being acknowledged as an individual makes him feel he is part of the brand rather than just another faceless customer.
REASONS PAUL'S STICKING AROUND:
Price: A fair price increase and transparency around this would be understood and accepted by Paul. He is happy paying more as he values the experience of Penny Lane Pies Experience: A cold pie or even the inconvenience of running out of stock would be tolerated by Paul (as long as this was not happening too often). It would not affect his perception of the brand or his propensity to recommend them Rewards: The shop may change their loyalty programme to something that does not benefit Paul, but rewards are generally seen as a bonus or a plus rather than a main driver for the emotionally loyal New competition: Paul would of course be curious and may even try the competition, but as long as the Penny Lane Pies stick to their strategy and keep their product aligned to his needs, then Paul is a fan for life
SUMMARY IN A NUTSHELL:
Total brand advocate. Unless something really goes wrong, he has no reason to look elsewhere.
ALL TOGETHER NOW
So as you can see what may look like a loyal set of customers on the surface, the ‘data view’ if you would, is a hotbed of entrapment, a propensity to switch and die-hard emotional fandom. Companies will benefit greatly by understanding the customer types in this loyal customer segment. This can be achieved using many different channels and methods of customer communication, both passive and active that form a bigger and more informative view through a CX or Voice of the Customer programme. It requires brands to not only hear, but actively listen to customers, wherever they are, and most importantly act on these insights. Without the action, there is little value in listening. Businesses should also do this not just because of the risk of churn and the inevitable fall in profits, but also because many brands are missing out on building more valuable connections with customer communities which can lead to more informed product innovations, monitored feedback channels as well as willing (and understanding!) beta release guinea pigs.
So the next time you visit your ‘usual’ shopping or eating venue, think about why you’re doing this? Is it because they are cheaper than the rest? Do they have the best product and experience? Do you have no other choice? Or are they the only brand you trust to deliver an acceptable experience? For now...