Back to Marketing September 30, 2014

What is the key to long-term customer loyalty?

You think satisfaction is the key to long-lasting customer loyalty? Well, maybe you don’t see the full picture. Loyalty expert Jan Wieseke explains what really matters when it comes to building long-term customer relationships.

Professor Wieseke, every company strives for long-lasting customer loyalty. Is there a magic formula to obtain it?

Well, not too long ago, the stock response to your question would have been that you have to satisfy your customers, for example through superior products or services – and that customer loyalty will follow automatically.

And that’s not true anymore?

We now know that to achieve loyalty, achieving customer satisfaction is only one facet in a set of several methods. Companies are ill-advised to solely rely on the achievement of customer satisfaction as a “magic formula” for success.

Why is that?

Relying on customer satisfaction has a few drawbacks we need to consider. For one we have learned that satisfied customers are loyal only in the short-term – they tend to forget satisfying experiences rather quickly. In other words, the longer ago a satisfying experience occurred, the less likely a customer will purchase from the same supplier again. Second, customers become more discerning and therefore more and more difficult to satisfy. This has to do with the fact that customer expectations have a tendency to increase over time. As a result, companies have to invest more and more money in order to satisfy their customers and achieve customer loyalty. We call this the “satisfaction trap”.

So, if satisfaction isn’t the key to long-term customer loyalty, what is?

A key success factor that has long been overlooked is how strongly customers identify with a supplier. This means, do I as a customer perceive my supplier to basically be one of my own kind? Such identification has a very strong effect on customer loyalty – even in the long-term. We have observed this effect across many industries, from retailers to banking to large technology corporations: when it comes to building a loyal customer base, the effect of customer-supplier identification consistently outpaces the effect of customer satisfaction.

That’s interesting. But how do I get my customers to identify with my company?

You need to create a sense of belonging for your customers. There are several ways. For example, it’s very effective to organize events or groups that foster this sense of belonging. Take the Harley Owners Group (H.O.G.). Harley Davidson has managed to create a community of over 1 million members who regard themselves as one big family. When these members go on rides or rallies in their local groups, they basically meet in order to jointly celebrate their love for Harley Davidson. You could say H.O.G. members have become one with the brand.

This may work for motorbikes. But can technology companies who sell to other companies use the same method?

While the context is different, the method is the same. Some technology companies unite their customers at fairs where they present their most recent innovations, accompanied by an attractive entertainment program. This utilizes the same mechanism as the H.O.G. and is a very effective strategy to instigate the identification process between customers and suppliers.

What else do you recommend?

You need to be careful when it comes to positioning your brand. Many marketing professionals spend too much time thinking about what they want their brand to be like. My recommendation is to spend more time thinking about what your customers’ brands are like – and then position your brand in a similar way. The more similar your brand image or brand personality is to the one of your customers, the stronger your customers will identify with your company.

So what should be our readers’ next steps to put your research findings into practice?

First, in order to manage customer identification, you need to monitor customer identification. Hence, in my eyes, you should include appropriate measures in your customer surveys and not just focus on customer satisfaction. Then, once you have the capability to track your customers’ identification, define your identification-building strategy. I recommend focusing on one or two initiatives for a start, possibly setting these up as projects. And then, enjoy watching your customer relationships become stronger and stronger.

Thank you very much for the interview.

Marketing

Marketing

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