I have been trying to find a good definition of customer loyalty in this wide world of the Internet, and I have come to the conclusion that 1) no one has figured out how to define customer loyalty or 2) I am really bad at finding information on the Internet.
Do some searches yourself; you’ll find a lot of general discussion of what customer loyalty is or concepts that are important in evaluating it — but few definitions, and no good ones.
I believe customer loyalty is one of the most important aspects of the customer service experience, and if I am going to talk about it frequently, I ought to know exactly what it is. So, I decided to take a stab at a definition:
My Definition of Customer Loyalty
Customer loyalty is the continued and regular patronage of a business in the face of alternative economic activities and competitive attempts to disrupt the relationship.
Customer loyalty often results in other secondary benefits to the firm such as brand advocacy, direct referrals, and price insensitivity.
While certainly sounding a bit wonkish (sorry, the academic inclinations slip through on occasion), the definition above is admittedly a theoretical approach. It succeeds as a theoretical construct in that it is comprehensive, but it fails in practical application because it is not easily measurable. The two qualifiers in the definition demonstrate this well.
Your Customer Could Have Gone to Olive Garden
I have always been grateful for business, but since the crash, that gratitude has been taken to another level. For the most part, people’s dollars are more precious now. The $50 someone spends at my place could have been used to take their family to dinner or to pay down their mortgage. Understanding the opportunity costs, the alternative economic activities, of your customers is a great mindset with which to approach their business, but it is not measurable and is ultimately useless as a way to measure customer loyalty.
When the Customer’s Away, The Competitor Will Play
As the saying goes, you don’t know what you don’t know. You really don’t know when, where or how often your competitors are interacting with your clients. Sure, you will have a sense of some things. You might see a competitor’s major marketing campaign or a friendly receptionist at your client’s company might tip you off that the competitor was in for a meeting. But you will never really know how often competitive interests are attempting to interdict the relationship between you and your customer. And you almost certainly cannot use this concept to definitively measure customer loyalty.
In the end, your customer’s loyalty can be difficult to define and difficult to measure. On a theoretical level, they either did something else with the money or they spent it with a competitor. That simple. However finding the measurements that allow a business to accurately define and gauge the loyalty of their customers is much more challenging, varying by industry and even niche.
Is loyalty the same for a restaurant and a PR firm, for a day spa and maintenance company? Once you begin to drill down to measurable metrics, probably not.
I will leave methods for measuring customer loyalty and techniques for how to increase customer loyalty for future posts. For now, we can find value in the theoretical and simply consider what the concept means in our own businesses. We can look at the people we consider to be our most loyal customers and see what they have in common. What, in our mind, makes them loyal, and what did we do to make them that way? So let me know…
How would you define a loyal customer in your business? What behaviors does that person exhibit that make her loyal? Have you ever tried to measure loyalty or at least think about the differences between your most loyal and your least loyal clients? How can we improve my definition?
PS. If you find a good definition of customer loyalty elsewhere, please share it in the comment section, along with the source.