Declining Customer Loyalty

“Customer loyalty is a two-way street. Loyalty begets loyalty. Be loyal to your customers and they’re more likely to be loyal to you and your company.” – Steve Dorfman

There is no doubt that customer loyalty continues to be the most potent asset for any company, and is the foundation of a successful customer-company relationship. Every company today aims for loyal customers, since not only do they continually buy, but also share a strong personal and emotional connection with a company, and would be willing to pay more for a company’s products and services. The longer such customers remain with a company, their potential to be effective brand ambassadors, increases and they would be extremely influential in gaining attention and additional business for a company. Obviously, then the trend of declining customer loyalty is causing worry and anxiousness for companies.

It is important to understand exactly how loyal are customers today, and is loyalty possible or feasible for customers today? Loyalty implies that customers would be dedicated, passionate, committed, unfailingly trusting, highly emotional, and show consistent allegiance to a company and or a brand. How many customers actually have such ‘feelings’ towards a company in today’s business scenario? Declining customer loyalty is a harsh reality today, especially amongst ‘online’ customers – the ones that prefer to use digital tools and platforms to connect with a company. However, this is not the only reason (obviously) for the fading trait of loyalty.

Companies tend to confuse customer loyalty with brand advocacy. A customer who may be loyal to a company may not necessarily be a raving fan – a brand advocate. Conversely, a person may love a brand, and would whole-heartedly endorse it, but may not necessarily be able to buy from the brand given that the products may be beyond the person’s means. However, loyal customers can become brand advocates, over time.  Another reason for declining customer loyalty is possibly confusion that exists within companies leading them to believe that being able to retain a customer means they would naturally be loyal. A customer may continually buy from a company, but could also be buying products from another company – this essentially means that the customer is not loyal, even though a company may have retained the customer. It is essential for a company to take into account the kind of business, frequency, and other elements when defining customer retention and to understand declining customer loyalty. Hence, it would seem that there would be varying degrees and types of ‘customer loyalty’ and it would be prudent for a company to know where it stands with its customers.

Companies must understand that declining customer loyalty cannot be remedied through loyalty programs. Only in very few instances, do properly executed loyalty programs actually translate to customer loyalty. For others, they are just a means to gain discounts, and get special and preferential treatment – resulting in customers become habituated to not paying full price. This would not lead to loyalty, if anything it would be a reason for declining customer loyalty, since as soon as a company were to remove these benefits, these ‘opportunity seeking’ customers would be on the lookout for companies that would continue giving them these ‘benefits’.

Lastly, but equally of significance is the fact that loyalty is not the same as customer satisfaction. The latter is a driver and an indicator of whether customers would reach loyalty, depending on the ‘trends’ of the levels of satisfaction. Customer loyalty is a lot more than good experiences, consistent service across all touch-points, and good quality products. The entire ‘journey’ of a customer with a company would contribute and lead to loyalty, depending on how well the company would have served the customer. The more engaged a company can make a customer, the higher the possibility of loyalty.

As mentioned, declining customer loyalty is a source of concern since loyal customers are usually as precious and valuable as gold. These customers not only buy continually but also stay with the company in every situation, have a strong personal and emotional connection, and influence others to buy from a company too. In essence, these customers not only add to the revenue of the company by spending their money on its products, but also become an ‘unofficial’ part of a company’s sales and marketing team! Obviously, customer retention ties in with customer loyalty. For one, acquiring new customers is at least 5-10 times tougher and more expensive, and selling to them is tougher too. On the other hand, existing customers would not need as much effort or convincing to buy – they would already be past their initial apprehension and doubts. The longer a customer stays, the higher is the likelihood of them becoming loyal – may not be a given, but a company does get more time to please and serve them in a way that would turn them towards loyalty.

With so many digital channels, most interactions today have become robotic and digital. The personal touch is missing and while these digital transactions may be faster and more efficient, they do leave customers yearning for the humane touch. All these factors are surely contributing to the trend of declining customer loyalty. Companies therefore, must understand this need of customers and do whatever possible to personalize the relationship with their customers, which would appeal to their emotions and feelings. Research proves that emotional reasons are amongst the most important and play a significant role in leading customers to, and keeping them with a company. Customers want to know that they are being served by actual people, who care and empathize with them. Personalization in the relationship with a company tends to make customers feel valued and important – the absence of which could be one of the reasons contributing to declining customer loyalty.

The strange part is that despite the importance and significant role of emotions in creating and building customer loyalty, many companies continue to neglect this important aspect. They must understand that caring for the emotions of customers is essential, and the more consistently a company can do so, the higher the possibility of customer loyalty. Declining customer loyalty is a harsh fact of today’s business world, and as mentioned, there are several factors contributing to this trend. According to popular belief, declining customer loyalty is not only a factor of increasing digitization and online interactions. The other factors are an increase in the number of options by way of companies, products, and brands that customers now have access to and the decline in personalization on the part of companies owing to an increasing customer base.

There is a strong correlation between trust and loyalty, and as companies becoming seemingly occupied with expansion, while forgetting existing customers, trust levels drop contributing to the declining customer loyalty. Customers of today want more and better and refuse to settle for less. Companies struggle on various fronts and hence the gap, between customer expectations and the ability of companies to keep pace with the expectations, continues to increase. As customers find that their expectations remain unmet, their satisfaction and trust levels in a company, leading to the extremely apparent declining customer loyalty levels. It is therefore, becoming critical for companies to step up and pay close attention to the changing needs of customers. If not, declining customer loyalty could lead to the complete ‘wipe out’ of this essential requirement in customer-company relationships.

 

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