Customer Loyalty and CX

The surprising reason customer loyalty (sometimes) won’t follow CX

New research has uncovered that customer experience is not always a determining factor in increasing customer loyalty. The way you segment your market has a big impact on how much CX determines loyalty.

Customer Experience is quickly moving from a trendy buzz word to a business must-have. 76% of executives now consider improved CX a critical priority. And an ever-expanding body of research is proving the indisputably positive impact CX transformations have on growth. In fact, CX-savvy business can expect to see revenue grow 1.4x faster than normal.

CX has high value placed on it by industry

Great news for the CX sycophant; the business world is finally starting to see the light. And the mantra is being heard – customers always reward high quality experience with customer loyalty.

Or do they?

New research from Germany has found that it might not actually be this simple. In some cases, it actually is the economic factors like price that have the biggest influence on customer loyalty. Whilst customer loyalty is driven by positive emotions and experiences for certain customer segments, there are other segments who seem to care less about these things. These customers are more likely to be loyal to a brand purely because they are the cheapest or best quality.

Satisfaction, Trust, commitment lead to Customer loyalty.

Intangible factors traditionally understood as leading to customer loyalty

What determines Customer Loyalty?

Highly educated graduate

But what’s interesting about this research is the deciding factor in what determines the customer loyalty of different segments. It turns out that the importance of intangible factors in shaping customer loyalty is determined by one surprising factor:

Level of education.

The more educated you are, the more likely you are to care about the emotional, experiential side of your brand experience. In contrast, the less educated you are, the less likely these things are to impact your loyalty to a brand. People with a lower level of education are more concerned with economic factors: they are more likely to remain loyal to a product if it is consistently cheaper or higher quality than the competition.

Disrupting the Industry

This is huge news for the customer experience industry. It rips apart the CX mantra that improved customer experience leads to increased customer loyalty.

Well, partly.

This rule still rings true for highly educated customers. But we can no longer trust that it applies to lower educated customers. Regardless of the quality of the experience, if the price is not right, they’re much more likely to jump ship and find a cheaper alternative than their more educated counterparts.

“Highly educated customers… find a personal relationship important, which established an emotional bond based on trust and value appreciation with the particular outlet.” Ringle et al.

 

Segment Your Market Right

But all is not lost. Believe it or not, this is actually good news. What this new research has done is to expose an extremely useful guideline for how to segment your customers. Think about the potential this has for targeted marketing. No longer are you restricted to targeting your product only at those most likely to buy it.

Now, you can successfully market the same product to two completely different demographics by appealing to their needs. By promoting the emotional, experiential elements of your brand to highly educated customers, you are appealing to their need for gratification, trust and human connection. And by promoting the tangible benefits (i.e. price, quality) to lower educated customers, you are appealing to their rational, logical way of thinking. By tailoring your marketing to the emotional or rational expectations of you customer you significantly increase your chances of retaining their loyalty.

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