UK: Selling Points - Loyal yes, staying no - Customer loyalty versus commitment.

UK: Selling Points - Loyal yes, staying no - Customer loyalty versus commitment. - What makes a consumer stay with your brand? Could analogies with religious conversion provide the answer?

by Alan Mitchell.
Last Updated: 31 Aug 2010

What makes a consumer stay with your brand? Could analogies with religious conversion provide the answer?

What more can you do? A leading UK financial institution (which shall remain nameless) was recently mortified to discover that one in 10 of its customers who rate it 10 out of 10 in satisfaction surveys nevertheless reward it for this achievement by defecting to a rival brand over the following year.

It is not an isolated case. Marketers have been searching for the holy grail of customer loyalty and satisfaction for decades and discovered again and again that apparently satisfied customers defect while quite often customers who could be described as dissatisfied stay 'loyal'.

The widespread assumption that increased customer satisfaction translates directly into increased customer retention (and improved profitability) just doesn't appear to hold water. Now, thanks to the insights of a South African religious psychologist-turned-market researcher, Jan Hofmeyr, companies are at last beginning to uncover some of the dynamics that drive consumers' apparently perverse behaviour.

According to Hofmeyr, who developed his theories while studying the process of religious conversion, satisfaction with a brand's performance is only one factor that drives a customer's brand loyalty. Their affinity to the brand (how they feel emotionally about it and would-be alternatives) is also crucial. So, too, is their degree of involvement - a reflection of how much they have invested (financially or emotionally) in the relationship and how difficult they feel it is to sever the links.

Marketers who fail to understand all these dimensions can easily misinterpret the signals, Hofmeyr argues. Apparently loyal behaviour, such as consistent repeat purchases, may represent a deep emotional attachment to the brand - or a mindless habit. It may even conceal a high degree of antagonism countervailed by a high level of involvement. For example, a couple's heavy emotional and financial investment in an unhappy marriage may deter them from suing for divorce. On the other hand, where there is minimum involvement, say, with a cat litter brand, consumers may be quite happy to switch brands the instant a more attractive alternative catches their eye.

Marketers are increasingly analysing the interaction between these different dimensions of commitment to shape their marketing initiatives. First, they find out how well the existing brand satisfies customer needs, how involved they are, the availability of attractive alternatives, and how ambivalent they feel about these choices. Then they categorise customers by different levels of commitment to the brand: entrenched, average, shallow or convertible. If it is feasible, potential customers are also analysed into ambivalent, weakly unavailable or strong unavailable. Tests over time have proved that these categories help marketers to predict future behaviour. For example, in one study of beverage brands in Canada, 54% of those identified as convertible defected to a rival brand within a year, compared with just 4% of those identified as entrenched.

Likewise, the UK financial institution with the satisfied but ungrateful customers found that, among those giving it 10 out of 10, there was a distinct group whose involvement or affinity with the brand was minimal - and this group was leading the defection charge. 'Satisfaction scores, in isolation, are not particularly reliable predictors of future behaviour,' notes Trevor Richards, managing director of market researchers Taylor Nelson AGB, which has licensed Hofmeyr's research methodology for use in the UK. 'Our hypothesis is that commitment predicts behaviour.'

But the Conversion Model, as it is called, only really gets valuable when marketers can use it to influence customers' future behaviour. A good example is the TSB. It found itself with a particularly knotty problem, discovering to its horror that its committed customers tend also to be its most unprofitable customers - and vice versa. 'Our greatest potential lay among those customers where the relationship was weakest,' explains Alan Gilmour, head of business development at Lloyds TSB. 'Those customers most at risk (of defection) provided the greatest opportunity for additional profit in the future.'

To tackle the problem, TSB marketers are now carrying out tests, assigning customers individual 'commitment codes' and finetuning marketing activities for each coded group. For example, Gilmour is thinking of customising the content of the TSB customer magazine by commitment code so that the particular version that each customer receives is 'carefully designed to manage commitment and improve product holding'.

Likewise, if a committed but profitable customer's commitment score starts to decline, he or she might receive a letter suggesting a meeting with his or her local branch manager to review the relationship (and to top up his or her involvement). More intriguingly, Gilmour is now considering scaling back marketing efforts directed towards customers whose codes indicate that they are shallow or convertible and 'that their lack of commitment would make such approaches futile'.

So far, Conversion Model enthusiasts have only been able to test their theories on smallish samples. The next big step is to find some way to score every customer's commitment, either by modelling or intensive research.

Meanwhile, the evidence it is throwing up suggests that marketers who build programmes around the assumption that improved customer satisfaction equals improved customer loyalty are probably barking up the wrong tree.

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