Nearly everybody agrees that customer loyalty is a vital ingredient of CX. In a recent co-authored report from Medallia and Ipsos, 97% of industry pros said that loyalty is critical. But aside from the headline figure, the report drew a more nuanced picture of customer loyalty that challenged common assumptions.
On a positive note, customers appeared to be more loyal than brands previously thought. The research, based on a study of 2,000 consumers, and a poll of 800 CX practitioners, found that organisations estimated that 60% of their customers were loyal.
In contrast, 70% of consumers professed some degree of loyalty for a brand, indicating brands were probably overlooking loyal customers.
Over half of consumers said they started developing a sense of loyalty after just one transaction. Whereas just 4% of pessimistic CX practitioners felt it was possible for customers to become loyal after a single transaction.
While that is good news, Andrew Custage, head of research insights with Medallia and co-author of the report was keen to add a caveat. “Even though customers can feel loyal fast — around half can feel loyal after the first transaction with a brand — they can very quickly end that feeling of loyalty,” he said.
Customers are more loyal but the situation can change quickly
“Over a third of consumers switched a brand they’ve used for years, just in the past three month[s],” he added.
Customer experience experts also adopted a pessimistic view on churn. Nearly 60% of CX pros believed just one or two missteps would result in a customer ditching a brand. In contrast, just over a third of consumers agreed.
Most consumers (72%) said they would only leave a brand after four (or fewer) bad experiences.
Loyalty evolves beyond transactions
It’s also evident from the research that customer loyalty has evolved past just price discounts, upgrades and gifts. Industry professionals and consumers agreed that the quality of products and the ‘experience’ mattered more than price when it came to building a sense of loyalty.
“There is an evolution beyond transaction data and a strict definition of loyalty based on customer retention and repeat purchases,” said Custage.
Jamie Thorpe, chief experience officer with Ipsos, and co-author of the report, said the definition of loyalty had changed. “Loyalty used to be reward programmes, stamps for things and your money back. Now it’s demonstrable behaviour, of people voting with their feet,” he added.
Organisations measure customer loyalty through multiple touchpoints. Making purchases remains an important metric, but engagement with a brand across channels, being an advocate, length of relationship, use of loyal programmes and provision of feedback are all commonly used criteria to measure customer loyalty.
There is also a trend to prioritise CX metrics, such as CSAT, NPS and social media engagement to evaluate loyalty. “We’ve seen how closely connected customer experience is to loyalty,” said Thorpe.
Maintain loyalty is harder than ever
Despite some stats indicating that CX professionals have underestimated the degree of customer loyalty, it’s clear that retaining customer support is poised to become more difficult. Over 70% of practitioners said that maintaining loyalty is ‘harder than ever’.
CX professionals blamed a combination of reasons, including intense competition (38%), price sensitive consumers (37%) and consistently delivering brand promises without ‘occasional’ issues (32%).
Further complicating matters is the need to create generation-specific loyalty strategies. Those brands excelling at customer loyalty are “recognising how important each channel is,” said Custage.
Gen-specific strategies
“Having age-specific strategies that recognise gen z doesn’t behave the same as earlier generations, is something that separate the leaders from the laggards,” commented Custage.
To keep up with customer loyalty, organisations are turning to artificial intelligence. According to the report, the fastest growing companies are already deploying AI to drive loyalty.
“There are a lot of internal use cases for AI around speed of data processing and quality of data insights. They are playing a very big role,” said Custage.
See other Medallia stories