The traditional reasons to be loyal to a brand are:
- Perceived risk
- Inertia, Habit
- Involvement
- Satisfaction
- Relationship between product or service providers
(Source: Rundle-Theile and Bennet, 2001)
I’m going to argue that for many products there is no need for customer loyalty any more, based on the above parameters.
Perceived Risk:
While certainly I would still worry about a durable purchase with easy-return policies and ever-dropping prices the risk of making the wrong choice in clothes, furniture, home furnishing, media, toys, and food products is almost nil. Moreover with consumer reviews available widely for categories like airlines, holidays and hotels the uncertainty involved is dropping. So transparency of information is reducing risk.
Secondly, just as in the days of unbranded commodities you rested your faith in the individual shopkeeper’s personal credibility, now you rely on the aggregator – this is the marketspace tapped by Amazon, Flipkart, Uber, Oyo Rooms, iTunes et al. You may be loyal to the aggregator but not to the actual provider.
Only large purchases with delivery of functionality spread over a longer period or with a high risk of failure will still require brand loyalty.
Inertia, Habit:
This depends on switching costs. If an alternative is free or 30% cheaper, it’s surprising how fast we can adapt to change! The only reason a person won’t switch is if there is a big eco-system around it (eg Apple or Android) or the alternative doesn’t look much better (telecom) or there is a human ecosystem (locations, schools, jobs).
Involvement:
If the brand has somehow made you participate in its creation or existence you tend to be loyal. The reason why most are nostalgic for childhood treats or alumni associations. Or why it’s hard to move house or change phones.
Satisfaction:
This is of course a given. But just satisfaction with the product will no longer assure you of loyalty if the cost of searching for a ‘better’ alternative is zero (ie an internet search) or switching cost is zero. Even in the case of services aggregators like Zomato, Housejoy etc have changed behaviour patterns.
Relationship between product or service providers:
This is one of the few reasons left for stickiness. When you get not just a product or service but a whole ecosystem. One that hopefully enhances your experience and gets you to be more involved within. While Apple is a well known example, there are other more ephemeral ones like Citibank’s restaurant week or Harley Owner’s Group.
Summary: In a perfect market where the consumer has perfect visibility into price and past performance, loyalty will decline. The marketing solution to this is to disrupt the market so that the price is not comparable and past performance of a product is irrelevant to the current product.
