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How Customer Loyalty Differs Online
Multichannel Merchant,
September 04, 2009
by Michael Greenberg
Customer loyalty in the online world is not the same as offline. Substitutes are just a click away vs. down the street offline. Customers expect you to know everything that's ever happened between you online, while they accept anonymity offline.
Understanding how these differences impact marketing is crucial to the right approach to developing more customer loyalty in an online world.
Customer loyalty is a reflection of preference and choice. Rational loyalty reflects the rational decisions to choose one provider over another for a given purchase. This is best observed in share of wallet, which reflects the choices a consumer makes between options.
Emotional loyalty reflects the attachment a consumer has to a brand, regardless of their spending on that brand. This is expressed via word of mouth, referrals, and participation in engagement programs and activities.
Looking at value and loyalty separately shows why spending magnitude is a poor measure of loyalty: It is easy to conceive of a high-value, low-loyalty customer, and just as easy to visualize a low value, high loyalty customer.
In today's socially turbocharged world, high-loyalty customers may have low direct financial value, but high indirect value. But fundamentally, marketers understand that loyal customers are predisposed to become high-value customers, and generally are higher value than similar customers who are not loyal.
The major difference online is the ability to track nearly all customer behavior and transactions. In the multichannel world, this can be difficult. Without this limitation, online sellers can focus entirely on the driving customer value and loyalty directly.
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