Customer loyalty in a world of choices

Working Paper No. 16

 The world around has been constantly changing and we have come a long way since the times when buy behaviours were dictated by the products available in the market. The markets have come full circle with products today being dictated by customer behaviours and customers being ‘spoilt for choice’. The market dynamics have completely changed from the times when customers were loyal to a brand due to brand monopoly to the times of limited competition where customers chose to stick to brands that served their needs better to today, when customer centricity, customer experience and personalisation are the buzz words and every firm is trying to meet the customer needs and even demands.

Why will such a privileged customer stick to any particular brand? Definitely not to meet his needs because that mostly everyone is doing, and he sure can shop around. Is customer loyalty still possible today or is it now a concept of the past? I would say yes it still is relevant because there definitely are some who are getting it right, though of course the rules of the game have changed and there is something beyond customer needs that is required to be targeted. Customers of today have risen up in the Maslow’s need hierarchy and so should the firms

In this writeup I will look at four theories that have become more relevant today in gaining customer loyalty. Here I assume that products & services meeting extrinsic customer needs is the bare minimum that any firm needs to do

1)     Service recovery

Grievance redressal in most companies is a cost centre with the sole aim of resolving customer grievances. A complaining customer however is the biggest opportunity to not just redeem oneself but also to create strong brand loyalists. Most customers who have had a bad experience would not even complain but simply choose to leave the company. But those who do complain and the firms who turn around that experience by ‘Exceptional’ grievance handling have won themselves a loyalist. Mind you the key word here is ‘Exceptional’, just handling the complaint satisfactorily does not help because that is the bare minimum a customer is expecting but doing it in a way that the customer feels valued is important. It simply assures the customer that in the worst of times the firm was with him and comforts him at a psychological level. The TRUST is established, and it will not be easily broken by a new competitor.  It is this trust which is the cornerstone of all lasting human relationships.

2)    Cultivate team spirit

Let me illustrate this with a personal experience. During my postgraduation I did my internship with Coca Cola. It was a two-month internship where I studied their pre-sales process travelling practically whole of north India. And post that experience for years I did not even touch a Pepsi product. The loyalty towards Coca cola was so intrenched in me without any particular preference towards the taste, just because I had become a part of the team and as humans, we are still loyal to our own, whether it’s our own friends, family, nations, or TEAMS. This loyalty towards your own makes team sports such a big industry where team spirit in audiences comes from a shared culture or history. Outside of it, brands need to think of customer engagement as a way of including their customers into the process rather than merely engaging with them. Make them part of the team.

3)    Eliminate FOMO

Now this comes from experiences we all must have faced many times in our lives. It’s for a reason that the acronym FOMO has been coined. We indulge in activities, buy products, or even take photos without really feeling any need for it. This even translates in our purchase behaviours. We buy so many products when a new feature gets advertised and end up not using it. 

This is especially true for commodity products without much differentiation between competitors but customers switch responding to a new promotion. FOMO feeds on human insecurity arising due to lack of control, a lack of control on the choices we make.

Startbucks is one brand which was able to address this and created loyal coffee buyers in an age where coffee was just a commodity. It made consumers feel in control of their choices by educating them of the choices they were making, where the coffee came from, how it was made and how it altered the taste. It transformed normal coffee drinkers into coffee connoisseurs and became a brand that customers stuck to.

4)    Stay ahead and anticipate what the customer wants

Now, this one is expected I know, but it is so important that I had to include it. Since most of you know about the APPLEs and GOOGLEs of the world who are already doing it. I will talk about the reasons why it is important and what it does for human psychology. First, it is of course important because if you don’t do it someone else will. But it is also important because it signifies to your customers that you are thinking about them. So, if you develop products/services catering to customer needs ahead of them asking for it, they feel valued. It’s like how as kids if our parents know what present to buy without us asking for it, we are overjoyed and probably trust them more (Don’t quote me on this one)