Brand loyalty might not be what it was in previous generations, but it’s still an integral component of building a successful company. The question is, how do you cultivate it?
Brand loyalty on the decline
The old 80/20 Rule said that 80 percent of sales were driven by 20 percent of the customer base – the 20 percent most loyal customers. But it appears that this long-held principle no longer applies. Loyalty is shrinking at an alarming pace and it’s no longer possible for most companies to bank on a loyal segment of their customer base bearing the torch.
According to research curated by V12 Data, just 8 percent of global customers are loyal to the brands that they’ve always purchased from. An alarming 42 percent of customers say they “love to try new brands and products,” while 49 percent say they “sometimes try new brands and products.”
The reasons for these choices are multi-faceted, but 38 percent say their decisions to shop around are based on value for money. Approximately one-third of customers say prices or promotions compel them to choose a competitor over a company they’ve purchased from in the past.
This decline in loyalty also speaks to the disparity between consumer expectations on customer service and the level of customer service that businesses are actually delivering. A study by Parature shows that customers have 60 percent higher customer service expectations today than they did just a few short years ago.
With so many different competitors to choose from, customers aren’t afraid to ditch a company that doesn’t deliver good service in exchange for another option. In fact, high levels of competition are another driving factor.
The internet has lowered barriers to entry across most industries. As a result, the marketplace is saturated with options. It used to be that a customer only had one or two realistic options to choose from in their area. Today, a customer is one Google search away from dozens or hundreds of choices. Loyalty suffers as a result.
What’s the answer?
Objectively speaking, the data shows that brand loyalty is disappearing. But with so many different factors working against us, the question becomes: How do individual businesses respond? Brand loyalty still matters in this marketplace as much as it ever has. Is there an answer to these troubling trends?
Perhaps the issue is that businesses take the wrong approach to loyalty? We often assume that the best way to make a customer loyal is by offering the lowest price.
Another commonly held belief is that the “best” product wins. In other words, the answer is to have the highest quality product or most innovative features. And while these are good things – and they’re certainly better than the alternatives – they are not always the answer.
What is the answer? It seems to be customer experience and satisfaction
The V12 Data study shows that 86 percent of consumers are willing to pay more for a great customer experience. Likewise, 73 percent believe customer experience is an “important factor” in purchase decisions. On the other side of the coin, 65 percent of buyers say a positive experience with a brand is more influential to their decision making than great advertising.
In other words, you can’t fake your way into loyalty. You can’t buy it, either. The only reliable solution is to give customers a positive experience and to ensure their satisfaction. You can use something like Net Promoter Score software to begin measuring where things currently stand (so that you can focus on improving).
Once you have a baseline understanding of how customers feel about your business or brand, the focus shifts from measuring to improving. This starts with empowering your employees and training them to be the kinds of people who exceed expectations. The focus should be on under-promising and over-delivering. Give your team the freedom to make the right decisions (rather than loading them down with complex bureaucratic processes).
Putting it all together
Is loyalty on the decline? It’s hard to argue otherwise. But does that mean it’s impossible to retain customers for the long-term? Absolutely not. The solution is to prioritise customer experience so that they feel appreciated and valued.
Businesses that do this well will continue to win.