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Customer Loyalty is a Sentiment, not a Scheme

At one time or another, most of us have been in some kind of committed relationship. What makes you loyal to your partner? Maybe it’s that quirky sense of humor. Or their intelligence. Or the way you just seem to get each other.

What loyalty is not is all the auxiliary stuff – the dinners out, taking turns doing the dishes, or the day-to-day routine. It’s the feeling that you get just being a couple, an experience you can’t get with anyone else. You make each other feel happy, smart, and proud to be the better half. And that’s what (hopefully) keeps you coming back. Out of that feeling that your relationship grows stronger, more resilient. In other words, you become loyal.

This is as true for you and your partner as it is for customers and the companies they buy from. Loyalty is an emotion, not a reward system. It springs from a strong relationship between a brand and a customer. For brands, it’s that loyalty that stimulates growth.

Loyalty also isn’t easy. Companies tend to resort to points-based programs, special discounts, and other schemes to engineer return business with customers, and label it “customer loyalty.” While the perks, discounts, and freebies may be great, they don’t build loyalty in its truest form. All they do is reinforce a transactional relationship between customer and business. And when was the last time you heard of a relationship lasting that was built on transactions alone?

It’s no wonder, then, that so many companies struggle to pinpoint what actually drives loyalty, what really resonates with their customers. But here’s the secret: it’s not one thing. It’s five. Our Customer Quotient™ (CQ) research identifies and describes the five key qualities of a brand that customer value and that drive loyalty: empathy, openness, relevance, experience, and emotion. These are the qualities that draw customers to certain brands like Dove, Disney, Google, and Subaru. All companies that led their respective industries with the highest CQ scores this year.

What we’ve found is that how well a company performs against these five qualities is a predictor of how loyal its customers are. The CQ model treats intent to purchase and recommendation behavior as outcomes of true loyalty, not the definition of it. We found in both this year’s and last year’s CQ studies that the customer-centric brand behaviors identified by CQ predict these two key variables with over 90% accuracy. As Katrina Lerman and Julie Wittes Schlack, two of the authors of the 2016 CQ report, state, “brands with strong intuition naturally engender advocacy behaviors, but these behaviors are a result of the emotional connection companies have created with their customers, not the reason for it.”

CQ is also a predictor of business growth. Our research shows that the stronger the relationship a company has with its customers, the better it performs. And, even a small improvement in a company’s CQ score can translate into millions – even billions – in revenue. Take Walmart as an example. If it increased its CQ score by one point, that could mean a 0.3% to 0.5% increase in return on assets (ROA). When you do the math, that’s no small potatoes; it’s between $1.81B and $3.27B in revenue and between $599M and $998M in net income.

So, next time you think about loyalty think about what your company does for customers to earn it. Like other good relationship behaviors – trust, empathy, open dialogue – loyalty is reciprocal, not unilateral. It’s emotional, not transactional. Brands need to recognize that customers have a lot of options, and that loyalty is more than “buy 10 get the 11th free.” It’s a feeling, a bond with a brand that’s rooted in the brand’s DNA.

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