Introduction
It’s not meant as a rhetorical question when I ask, “does customer loyalty exist?” Before we go too far, let’s define our terms thanks to the Oxford Dictionary:
Customer – a person or organisation who buys your solution.
Loyal – Giving or showing firm and constant support or allegiance to a person or institution.
Loyalty – The quality of being loyal.
Exist – Have objective reality or being.
Byron Sharp has written a fascinating book called How Brands Grow – What Marketers Don’t Know (Sharp, 2014). In his book, which I value highly, Sharp discusses at length customer loyalty, and how important customer loyalty really is to a business (spoiler alert – not as much as you assume). Loyalty in that book’s sense is the likelihood of repurchasing a specific brand as opposed to another.
Classic Textbook Examples Of Loyalty
The classic examples many authors use of customer loyalty are customers of Harley-Davidson Motorcycles (HDM) and Apple. For our discussion, which adequately makes the point, we will confine ourselves to HDM.
The devotees of HDM are legendary, even reputed to have HDM tattoos. But legend and anecdote are typically unreliable, and not the basis for a sound Marketing Strategy. Sharp refers to research performed by (Swinyard, 1995) who sent out a questionnaire to HDM owners. Based on the responses, at one extreme were the HDM owners labelled by Swinyard as Dream Riders. These owners most frequently agreed with statements such as “Most of the time my motorcycle is just parked,” and ”I don’t know many other people that ride motorcycles.” At the other extreme were the HDM owners labelled as Hard Core who agreed most frequently with statements such as “My bike is everything to me,” and “I like tattoos.”
Typical marketing instincts or logic would have us focusing our marketing resources on the most loyal of our customers, but is that wise? Swinyard found that Hard Core riders made up 9.7% of the HDM segment, but only provided 3.5% revenue, whereas Dream Riders made up 39.8% of the segment and provided 47.7% of revenue. Furthermore, Sharp points out the HDM buyers only buy their machines about 33% of the time, which means that they buy twice as many other motorcycles as they buy HDMs. Still think we should focus our marketing resources on the loyal fans, that Sharp pointed out are least likely to have purchased their motorcycles new?
Surely, you’re probably thinking, “the HDM example is an aberration, of course there are brand fanatics who are worth a great deal to a business!” And, you would be wrong, or at least, mostly incorrect, as I was. The point of Sharp’s book is 1) You should prove your guesses, assumptions, and hypotheses, and 2) the percentage of sales attributable to loyal brand fans is much lower than you believe (assume). Your business’s largest market is likely to be the infrequent customers and those people who are not customers yet. Yes, brand fans are important, but their frequent purchasing multiplied by their small population is dwarfed by the infrequent (and non-) purchasers multiplied by their much larger population. Furthermore, it is entirely likely that brand fans have purchased all they can, so over-devoting marketing budgets on these people is likely to be largely wasted.
If marketing is your interest, Sharp’s book(s) is worth a read, but a word of warning. Be prepared to have some of your dearly held beliefs questioned and thrown out by decades-old evidence from research! Evidence that does not support the current marketing dogma or seem to be finding its way into marketing books.
Customer Loyalty
Now to my peeve about the term loyalty.
As per the definitions above, loyalty as a concept and behaviour is important. For example, we can’t defend our sovereignty with an army comprised of only 9.7% loyal people!
I have to admit that the terms loyal and loyalty have appeal not only for what they infer but because the terms are short. The problem I have is that words and labels influence our thinking, behaviour, and our expectations; what are your expectations of someone labelled as a terrorist? And if our labels are inappropriate or inaccurate, we can hardly expect our expectations to contradict our labels. My expectations of loyal customers are different from my expectations of infrequent purchasers and different again from those of people who are yet to become purchasers. I’m not suggesting that we neglect loyal customers, only that we 1) should devote marketing resources where there is the highest Return On Investment (ROI), and 2) should use appropriate terms, such as propensity or inclination (to re-purchase), and not loyal.
An example use of the term comes from Sharp:
“Buyers are polygamously loyal; they have personal repertoires of brands that they purchase repeatedly; they are seldom 100% loyal, and are never exclusively loyal in the long term. Therefore, competing brands share consumers; they do so with every other brand in the category, and how much they share depends on the other brand’s market share.” (Sharp, 2014).
Based on my understanding of the term, I find it hard to understand why Sharp, after using the more accurate term repertoires persists in using loyal. And what does “polygamously loyal” even mean? Regarding my marriage, I have a fair idea of what my wife would make of it! Irreverently, Humpty Dumpty’s statement from Lewis Carroll’s book Through the Looking-Glass (1871), comes to mind:
“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
When I think of loyal customers, I expect that if I keep them happy, occasionally remind them that my business and its solutions still exist, and do nothing to antagonise them, then they will buy from me again. However, Sharp points out that there is a large amount of churn with our supposedly loyal customers. This leads me to think of the (small number of) supposedly loyal customers as having a purchasing repertoire, who occasionally demonstrate a propensity to repurchase. Sharp points out that in general, it is better to market to your whole category. In this way, you remind your previous customers, that demonstrate a repertoire (a minority), that you still exist while you simultaneously reach the infrequent customers and the yet-to-be customers (a majority), who are your biggest potential for growth. The aim of this marketing to your whole category is to increase your brand availability for purchase. Where availability means:
- Mental availability – the number of associations a buyer has about the brand, the strength of those associations, and the relevance of the associations to the buying context.
- Physical availability – making the brand as easy to find and buy as possible. (Sharp, 2014).
Summary
Loyalty, in the sense that it means certain customers have a repertoire of buying behaviours, or a propensity to repurchase the same brands, does exist. But this loyalty is not what you assume, it doesn’t contribute to revenue as much as you believe, and it certainly isn’t love for the brand. It is more likely to be the outcome of purchasing heuristics, not some necessarily conscious choice.
As Sharp repeatedly points out and provides evidence for, check your assumptions. As I often repeat, Don’t Think, Check!®. It turns out that the marketing dogma, perpetuated by marketing books, is very absent evidence to back up their claims.
I recommend Sharp’s books (Sharp, 2014) and (Sharp, 2017), they’re worth the investment.
References
Sharp, B. (2014). How Brands Grow: What Marketers Don’t Know. Oxford University Press.
Sharp, B. (2017). Marketing: Theory, Evidence, Practice 2nd Edition. (2nd ed.). Melbourne, Victoria, Australia: Oxford University Press.
Swinyard, W. (1995). The hard core and zen riders of Harley-Davidson: a market-driven segmentation analysis. Journal of Targeting, Measurement and Analysis for Marketing, 4, 337-62.
