Understanding loyalty with today's customer: Why customers stay put in sub-optimal business relationships

Analysis

Understanding loyalty with today's customer: Why customers stay put in sub-optimal business relationships

Cultivate customer relationships to build customer stickiness in body and spirit

A primary goal of marketers is to develop repeat customers. To achieve this goal, marketers employ a number of tactics and allocate significant resources, such as incentive programs, to garner loyalty. While some customers tie their behaviors to lock-in strategies, such as contractual obligations some firms use, other motives include softer measures driven by customers’ emotional and cognitive biases.

Deloitte’s research on behavioral economics—the examination of how psychological, social and emotional factors often conflict with and override economic incentives when individuals or groups make decisions—provides marketers with insights into the effects brand switching resistance strategies have on customers’ behavior and attitudes. Here we explore four recent findings1 and provide marketers with behavioral-based guidance strategies, or calls to action, to minimize risk cultivated by customer relationships that exist in body but not in spirit.2

1. Beware of relying on repeat behavior as a proxy for success: It does not guarantee satisfaction

While customers may stay in existing business relationships, their continued association with a company does not imply they are necessarily content. Negative consequences that may occur when a dissatisfied customer remains in a relationship include disaffection on the part of the customer negative feelings, detachment, and emotional disconnection—and risks the customer may vent frustrations to others, including potential customers

2. Consider the power of carrots over the prevalence of sticks: Positive reinforcements (incentives) are better for maintaining upbeat attitudes

Although company-imposed lock-in sticks strategies such as contract termination clauses or cancellation fees prevalent and keeps customers behaviorally loyal, carrots or positive reinforcement programs such as rewards and incentives are more powerful in terms of maintaining positive customer relationship sentiment.

3. Strive to provide a consistent contact: Recognize the power of a personal relationship

When there is a personal service agent relationship in place, meaning the customer has ongoing contact with one representative of the company versus an ever-changing contact, customers are more likely to be positive about the relationship than those relationships without a single contact.3

4. View long-term customers as advocates, not cash cows: Don’t take long-term relationships for granted.

The tendency for customers to stick with the status quo gets stronger over time, and consequently legitimizes companies’ propensity to abuse existing relationships for the sake of new prospects. Whereas companies that employ stick tactics may keep existing customers, marketers pay a price in terms of customers’ attitudes toward the company and its products and services. Consider nurturing existing relationships using carrots and viewing long-term customers as potential advocates for the company’s offerings–versus cash cows.

A customer’s decision to remain in a suboptimal service relationship is not passive. It’s an active, complex decision, and more often than not, it’s driven by multiple reasons.4 The marketer’s call to action includes employing positive versus negative reinforcement strategies, providing the customer with a consistent point of contact, and nurturing and celebrating long-term customers. These strategies can further the likelihood of having customers who not are not merely loyal (or present) in body, but also in spirit.

For more information, visit our article Breaking up is hard to do.

Written by Susan K. Hogan and Timothy Murpy on January 11, 2016.

Sources:

1 M. Harrison, S. Beatty, K. Reynolds, and S. Noble, “Why customers feel locked into relationships: Using qualitative research to uncover the lock-in factors,” Journal of Marketing Theory and Practice 20, No. 4 (Fall 2012), pp. 391-406.

2 T. Rooney, K. Lawler, and E. Rohan, “Through the looking glass; understanding consumer inaction in retail financial services,” Arrow@DIT, Dublin Institute of Technology Reports: School of Marketing at Arrow@DIT, 2014.

3 M. Harrison, S. Beatty, K. Reynolds, and S. Noble, “Why customers feel locked into relationships: Using qualitative research to uncover the lock-in factors,” Journal of Marketing Theory and Practice 20, No. 4 (Fall 2012), pp. 391-406.

4 M. Harrison, S. Beatty, K. Reynolds, and S. Noble, “Why customers feel locked into relationships: Using qualitative research to uncover the lock-in factors,” Journal of Marketing Theory and Practice 20, No. 4 (Fall 2012), pp. 391-406.

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