Do you have a company with loyal customers or maybe only returning customers?
Many companies claim they want loyal customers and consider themselves to have many loyal customers. They then define loyal customers as the customers that return to the company several times. But is it really a true sign that a customer is loyal only because the customer comes back?
No, it is not! Even if a customer comes back many times, it doesn’t necessarily mean that the customer is truly loyal. A truly loyal customer likes the company and talks well about it, simply an ambassador for the company. A returning customer can also be a loyal customer but doesn’t necessarily have to be one.
Maybe you think it is hair-splitting to distinguish between loyal and returning customers? Isn’t the most important thing that the customers are coming back to buy more products or services? Yes, it is of course important that the customers are coming back, but what if a returning customer talks very badly about the company? There could be many reasons why people go to a specific shop or company. It doesn’t have to be based on loyalty.
How about yourself, are you an ambassador for the place where you buy your food, your home electronics, your furniture, or your hobby stuff? Many people go to the same shop by habit, because they do not know of any alternative, because of the shop’s geographical location, or because the prize is good.
The problem with returning customers without loyalty is that they are relatively easy for competitors to attract. Customers without loyalty do not have any real relationship with the company that can make the customers stay.
Loyalty in real life
Consider the following:
Think about a product that you own where you feel like an ambassador for the manufacturer/brand. It should be a company that you really like. It could be your car, your cell phone, or some of your clothing. Would you without consideration change to another brand?
Now think about a product that you have in your home where you do not feel anything special for the manufacturer/brand. It could be washing detergent, furniture, or something else. Would it be easy for you to switch to another brand?
Probably a lot easier compared to the product above where you feel like an ambassador for the brand.
The fact that truly loyal customers are profitable has been shown in a lot of academic research and many large companies use loyalty from their customers as an important building block to become successful.