Why Measure – What is Loyalty?

It's All For Naught, if They Don't Come Back

What is loyalty? Why is it so important? How does it differ from satisfaction? This is probably the most hotly debated issue in all of customer research.

Customer Loyalty Summarized
One easy-to-understand definition of loyalty is:

Share of wallet, mind, and mouth.

- Richard D. Hanks

Share of wallet:

Of all the money I spend on your service or products, what percentage do I give to your company? (Behavior)

Share of mind:

Of all the time I spend thinking about your category, what % do I think of your company? ("Considered Set")

Share of mouth:

How much do I "talk you up" to others? (Referrals & Credibility-building)

Customer Loyalty Further Defined
Loyalty is a higher-order measure of customer attachment than satisfaction. Loyalty involves an emotional commitment to your brand. It usually has an attitude component ("I feel closer to it, so I'll keep using it") and a behavior component ("I'll keep buying it, regardless."). The reason that attitudes come into play, is because re-purchase alone doesn't always mean a customer is emotionally invested. For example, you may not particularly like your insurance agent, but you go back year after year because you have neither the time nor energy to look for a new one. Then you get a great referral for a new agent and you switch. Your perceived loyalty was actually nothing more than convenience.

Loyalty Means Active Choice
True loyalty manifests itself in customers making active choices between options. You don't want customers to continue buying from you simply because of inertia or an absence of an alternative. When a customer is loyal to a brand or service, he is less likely to defect, more likely to buy again, to buy add-on products, and to refer you to others. True loyalty, in its most basic sense, leads to customer retention, re-purchase, and a deeper long-term commitment.

But What of Satisfaction and Operations Feedback?
Unsatisfied customers will never become loyal customers. Customer satisfaction plays a key role in retaining customers and driving them toward loyalty (i.e., if your operations are horrific, customers will never get to the point where emotion and attitude transform their satisfaction into loyalty). That's why real-time customer and employee feedback is so important. It's also why Mindshare's stated goal for our clients is "Operations Improvement through Customer Involvement." The better your operations, the more satisfied your customers, and the better chance you have at gaining their loyalty.