Jul 11th, 2019. Posted in: Blog, Loyalty Programs
There are four types of customer loyalty:
Inertia Loyalty optimizes the brand’s barrier to exist making customers hard to leave for the competitors. It sounds appealing on the theory surface; however when digging deeper into the term, the reason behind lies in the fact that it’s too much work to leave. Examples could be complicated contracts, service policies or lack of better loyalty options. Customers belonging to the “Inertia Loyalty” tier are less likely to switch to others unless they find another cheaper, easier version. This type of loyalty focuses on acquiring new customers rather than building relationships with existing ones.
Mercenary Loyalty concentrates on optimizing the incentive and grows around transactional relationships. It can be defined merely as “paying” customers for their loyalty. This can be done through traditional punch cards, membership discounts or pay-to-join loyalty programs. Most traditional programs operate in this tier since they motivate customers to stay by helping them save money. However, this type of program has been experiencing falloff in the participation rate as the connection with customers remains shallow. The engagement in Mercenary Loyalty tier is low, and there’s little to stop your competitors from taking customers simply by paying more.
Brands reach this tier when their customers choose to stay with them no matter how attracting others’ offer sounds. True loyalty is built on reciprocal relationships. It represents a two-way exchange between the brand and its customers. With True Loyalty, you won’t lose your customers despite your competitors’ promotions because their connection to your brand is based on trust. Customers in this tier feel your company’s value which is often a combination of transactional and experiential benefits.
Have you ever seen someone who has a brand logo as a tattoo or proudly say they are addicted to … (a brand name)? At the Cult Loyalty tier, the customer’ value and brand blend to each other to the point that rejecting the brand feels like rejecting their own value. It seems extremely powerful but the weak point is it is virtually impossible to generate strategically. No matter how efficient your marketing campaigns are, Cult Loyalty can only emerge organically over time. Without clear strategies, it becomes elusive and impossible to predict.
Each type of these above loyalty programs shows different relationships customers have with the brand, and knowing where your customers fall on the loyalty spectrum is incredibly significant. But more importantly, understanding your business and acknowledging where on the spectrum you need to be is key to developing effective campaigns; and True Loyalty is definitely the one to aim at.