Why some customers chase price, some stay for convenience, and a rare few become part of something much bigger.I have spent much of my life thinking about loyalty, and here’s a question for you:
Are you a loyal person?
I imagine that you would very quickly ask in return: Loyal to what? And that’s the right question.
You might be intensely loyal to your sports team, moderately loyal to the closest supermarket and not loyal at all to your cell service provider. You might be the sort of person who would never buy any other truck but a Ford F-150, or any car except a Honda. Maybe you always stay at a Marriott hotel, or you favor one brand of peanut butter or toothpaste even though you think they’re all pretty much the same.
That’s because loyalty is more than one thing.
Billions of dollars are spent every year by every imaginable company and cause — political parties, churches, dog food manufacturers, cosmetic companies, movie studios, on and on — to build loyalty.
But the larger question is: What kind of loyalty do they want?
And, in the end, how deep will that loyalty go?
I’ve spent decades analyzing questions of loyalty, and I’ve come up with what I think is a useful way to look at this. I call it “The Five Levels of Loyalty.”
#1. LOYALTY OF COST
This one’s easy — the consumer’s loyalty is to the store, website and brand that offers the lowest price. Period. Saving money is the highest priority.
Do you feel a loyalty to a specific gas station or will you, given the option, choose the one that is five cents less per gallon?
Kirkland, Costco’s in-house brand, is a remarkable example of loyalty driven by cost. Kirkland signature products are generally 10-25% cheaper than national brand equivalents per unit. And over the last 30 years, Kirkland has experienced such explosive growth that if it were a stand-alone business, it would be bigger than Nike, Proctor & Gamble, or Coca-Cola. Costco also sells more clothing than the Gap or Ralph Lauren.
#2. LOYALTY OF CONVENIENCE
Here what matters most is saving time and avoiding hassles. Cost and other factors may be relevant, but only to a degree.
We can go back to the gas station example — let’s say there are two gas stations across the street from each other. One is 5 cents per gallon cheaper. But the other one is on your side of the street, so you don’t have to cross traffic to get there. Do you fight the traffic or settle for convenience? And do you sometimes change your mind?
A prime example of this in my own life is the CVS Pharmacy in my neighborhood. There are probably a dozen pharmacies within two miles of my house, but we do 100% of our business with this one store that’s closest and easiest to access. They may think we like the store, but that’s an incidental factor in our decision to shop there.
But convenience means more than just accessibility. My wife has remained loyal to the same car brand and model from the same dealer for twenty-five years. Why? Convenience. The car always works, the dealer service department experience is always easy, she never has to think for one extra minute about her car.
#3. LOYALTY OF COERCION
That word “coercion” sounds ominous but in this case it isn’t: This is about incentivized, strategic loyalty.
Back to the gas station: Is there a gas station in your life where you get loyalty points? Those points let you take a few pennies off your gas bill. Maybe they give you a free car wash. Maybe they give you discounts on in-store purchases.
So, maybe you will drive past the cheaper and more convenient gas stations to go there.
I mentioned Marriott above — there are millions of people out there who would never think of staying anywhere but a Marriott because of the points. Same goes with specific airlines and frequent flyer miles. There are people who will choose their airline, even if it means an extra connection, because of the bonus miles.
The loyalty of coercion goes deeper than cost and convenience — I purposely put the list in order of loyalty strength — but it’s still not bulletproof. It protects brands against indifference, fatigue or mild disappointment. But that only goes so far.
Loyalty of Coercion is really just a more sophisticated form of Loyalty of Cost. We get better value, but we have to pledge our loyalty on a sustained basis to reap the benefits.
#4. LOYALTY OF COMMITMENT
Now, here we have an entirely different level of loyalty. These are companies, products, services and institutions that offer consumers a sense of ownership.
Think: Trader Joe’s. People don’t just shop at Trader Joe’s; they make it an integral part of their lives. They talk about Trader Joe’s with their friends. They rave about the new Danish Oat Cookies or Dark Chocolate Bark. They will argue with you if you say anything bad about the Trader Joe’s experience.
The Ford F-150 is another Loyalty of Commitment Brand — the Ford F Series has been the best-selling truck for 49 consecutive years. It was the best-selling vehicle period for more than four decades. There are people all across America who would never even consider buying any other truck.
Apple is an interesting case. Warren Buffett said he realized that he missed the boat on Apple in the early days only when he learned that consumers would rather give up their cars than their iPhone. When you look inside any Apple Store in the world, you will see people who would never even think about buying anything but an Apple.
I say it’s interesting, though, because there’s also a Loyalty of Coercion quality to Apple’s success. Once you’re in the Apple world, it’s hard to get out.
#5. LOYALTY OF COMMUNITY
For a long time, I thought commitment was the highest form of loyalty. I was wrong. Commitments can be deep and long lasting — and lucrative — but it’s still not permanent.
For years, marketing gurus loved to hold up Harley Davidson as the ultimate example of committed loyalty. They always boasted that the way to tell if a brand is untouchable is if customers want it tattooed on their bodies. True, but what if the customers die out? And new ones don’t emerge. Harley sales are down 60% in 20 years.
No, there is one more level of loyalty that goes well beyond a rational calculation of a brand’s aesthetics, quality, value or coolness factor.
That’s the Loyalty of Community. That is when intellectual and emotional ties become inextricably interwoven. That’s a lifetime bond.
This is easiest to see in sports.
A Green Bay Packers fan isn’t about to become a Chicago Bears fan, no matter how much more convenient it might be.
A Texas A&M Aggie would never wear the burnt orange of the University of Texas, even if they were given thousands of dollars of free merch.
A Boston Red Sox fan isn’t about to become a New York Yankees fan, even if they move to New York and are given free season tickets.
No, you also don’t grow out of these ties. They are for life. And they are passed down to your children and grandchildren.
The Marine Corps is another prime example of the Loyalty of Community. There is no such thing as a “former Marine.” Once a Marine, you’re always a Marine. That bond is forever, and it is always a central in everything they do. For decades, the Grateful Dead had a legendary Loyalty of Community. Thousands of “Dead Heads” boasted about the hundreds of concerts they had attended.
This is the holy grail of loyalty. Endless billions have been spent chasing this kind of consumer devotion, but it almost never materializes. Taylor Swift is approaching this level of trust and support. Tesla had elements of a community in the early days, though much of that has faded.
A Final Thought And A Question
Much of my career has been spent helping enterprises deal with lost or fading loyalty. Gaining loyalty is hard. Winning it back after a breach of faith or a loss of interest (by either party) is infinitely harder.
Achieving a Loyalty of Community is the ultimate dream of every enterprise, cause and interest. I find loyalty to be an endlessly fascinating topic. I think it’s dangerous to think of it as one thing. And I know it’s foolish to ever take it for granted.
In your own life, think about where you practice the Five Levels of Loyalty? Do you have a Loyalty of Community? And have you ever had a Loyalty of Community that you lost? If so, every marketer in the country would like to know why.
Editor’s Note
Not everyone understands all that is entailed in the business of customer loyalty, but a friend of the Editor certainly does and forwarded this article penned by Dan Macginn. The article was originally published on Macginn’s Substack feed titled “The Future We Already Know”. If you want to read more of Dan’s articles, you can find him here.