Marketing tactics impact on customer loyalty
Name
BUSI 3004 - Entrepreneurship for Small Business
Walden University
2022
Customer Loyalty
Customer loyalty is the most important goal of implementing relationship marketing activities.
Oliver (1997) defined customer loyalty as a “deeply held commitment to rebury or repatronize a
preferred product or service consistently in the future, thereby causing repetitive same-brand or
same brand-set purchasing, despite situational influences and marketing efforts having the
potential to cause switching behavior”.
Customers are the driving force for profitable growth and customer loyalty can lead to
profitability (Hayes, 2008).For a customer, loyalty is a positive attitude and behavior related to
the level of re-purchasing commitment to a brand in the future (Chu, 2009). Loyal customers are
less likely to switch to a competitor solely because of price, and they even make more purchases
than non-loyal customers (Bowen and Shoemaker, 2003). Loyal customers are also considered
to be the most important assets ofa company (Blackton, 1995).
It is thus essential for vendors to keep loyal customers who will contribute long-term profit to the
business organizations (Tseng, 2007). Attempt to make existing customers increase their
purchases is one way to strengthen the financial growth of a company (Hayes, 2008).
Furthermore, organization’s financial growth is dependent on a company’s ability to retain
existing customers at a faster rate than it acquires new ones (Ibid). Therefore, good managers
should understand that the road to growth runs through customers – not only attracting new
customers, but also holding on existing customers, motivating them to spend more and getting
Reichheld (1996) particularly reports that bringing in a new customer is times as costly. Despite
this unanimous conviction, that loyalty affects company performance, there are continuous
debates around the nature of loyalty. Specifically, it is not very clear what exactly loyalty means,
how it drives company’s profits, if it does at all, and what in turn, drives this act of commitment.
The very first issue that catches attention is the actual definition of loyalty. The common practice
among market players implies that an action of repeated purchase of the same product/service or
from the same supplier is already potentially a consumer loyalty. According to a more academic
approach by Oliver (1999), consumer loyalty is “a deeply held commitment to rebuy a preferred
product/service consistently in the future”. It is therefore ambiguous whether a repeated purchase
or retention can be fully regarded as customer loyalty, or whether a deeper sense like emotional
commitment or even devotion should be considered as such. For example, can we consider a
routine act of buying bread at the corner shop an act of loyalty to the brand/shop, or is it subject
to mere convenience? Indeed, as reported by Seiders et al. (2005), convenience and habit play a
major role in determining behaviour in the context. The theory seems to address this ambiguity
of meanings by segmenting loyalty into different categories. Broadly, two main categories are
traditionally separated: behavioural loyalty indicating the observed action, and attitudinal loyalty,
referring to perceptions towards the product/service. Further, some authors refer to other types of
loyalty such as polygamous or multiple loyalty, habitual loyalty, price and situational loyalty,
emotional loyalty, etc. By doing so the researchers imply, that loyalty is a rather complex
mechanism and has various levels. It is worth to note that these levels are often presented in a
hierarchical order, where the top level is considered to be the emotional/attitudinal based
preference for certain products/services. As Kumar et al (2006) argue, the customers who are just
behaviorally loyal, are inclined to cease the relationship at earliest available opportunity. Thus
even if behavioural loyalty (or any low-in-the-hierarchy loyalty) is likely to generate positive
cash flows for the company, at some point the company will need to incorporate strategic
approach to gaining attitudinal loyalty in order to pursue “sustainably superior profits”.
Nonetheless, the majority of companies today still seem to address just the behavioural
constituent of loyalty.
Accordingly, they design the loyalty schemes in ways that do not seem to work very efficiently.
Meller (1993) argues that very few airlines, for example, benefit from the frequent flyer loyalty
schemes. The reason might be the fact that many of them still rely on the assumptions of
traditional marketing, viewing marketing as a tool to gain, rather than retain customers. It might
also be the fact that the companies are simply avoiding the costly process of deeper research into
the motivation behind the continuous purchase. Yet to be successful in the highly competitive
markets, the companies will need to challenge traditionally dominant misconceptions about
loyalty, and (2) judge customers by more than their actions.
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