The simplest form of customer loyalty is behavioral loyalty. It usually leads to a weak competitive value as it is mainly determined by switching-costs. The following equations illustrate the situation:
(1)Value supplier > Value competitor – Switching Costs
(2)Value supplier < Value competitor – Switching Costs
In equation (1) we can see the situation of behavioral loyalty. The supplied value proposition is higher than the competing value proposition minus switching costs. A good example might be the expensive supermarket just around the corner. You only prefer it, because going to the cheaper supermarket, which is further away, would cost you more time and effort. If the cheap supermarket chain opened a new store right beside ‘your’ expensive supermarket, you would definitely switch suppliers, if you don’t perceive the value propositions to be too different from each other (look up equation 2).
Relying on behavioral loyalty is risky! Especially in mature markets with low differentiation among competitive products behavioral loyalty is likely to occur. The only way to achieve a more sustainable competitive advantage is to evolve behavioral loyalty to the next quality-level: cognitive loyalty.
Cognitive loyalty is a form of loyalty that is not related to switching costs as its wellspring resides in the relationship between company and customer. When cognitive loyalty is achieved, the supplied value proposition, which in turn is closely related to customer satisfaction, is superior to that of the competition. On the one hand, a high customer satisfaction index might reflect superior product-features (tangible and intangible) that increase the value perceived by the customers. On the other hand, repeated satisfaction normally leads to trust. Trust can be considered as a substitute for information. Every time we reach the point where we lack information in a decision-making process, we rely on something we actually do not know: trust. When trust is a vital part of the customer relationship, economies of trust can be achieved. These again have a tremendous effect on the relationship quality, because they add intangible value that resides in the relationship itself. As a consequence, the competitive advantage created by cognitive loyalty is more sustainable than the one gained by behavioral loyalty, but the question is: ‘How do I push customer loyalty to the next level?’
To be able to create superior value for your customer, you have to listen to the “voice of your customer”. This circumscription might sound a bit hackneyed as it is used in so many marketing contexts. Anyway, it is important to point out what constitutes the “voice of your customer” and what enables you to listen to it.
The customer interacts with your company across various channels: face-to-face, mail or email, and over the telephone. Within each interaction you can listen to the “voice of your customer” providing you with useful insights on how the customer perceives your value-proposition. The interaction process can become a gold-mine for your business, if you are able to extract, track and evaluate quantitative and qualitative information on an on-going basis. An integrated customer surveying system across various interaction channels might be the key to achieve this, thereby attaining cognitive loyalty among your customers. By interpreting quantitative data (ratings, evaluations etc.) as well as qualitative data (recorded conversations, interview protocols etc.) you can find out what drives value among your customers and you are enabled to anticipate future value additives. Accessing valuable information provided by insights in the interaction between company and customer shows you, what determines the essence of your customer relationships and puts you in the position to do constant improvements to your products and your service.
The integrated and automated customer survey program should operate on a permanent basis by enriching your daily business (avoid common pitfalls of one-shot customer survey programs read related article). All interaction channels have to be connected with customized survey questions to assure a high standard of survey validity. The gathered information should be collected by a central knowledge management system accessible by different players in the organization. As the data is tracked and collected over time, certain dynamics can be followed allowing sophisticated forecasting and a constant evolution of your value proposition, which puts you ahead of the competition by establishing cognitive loyalty.
Find in TeleFaction a partner with the necessary empiric know-how and the adequate technology to help you achieving excellent customer satisfaction by enabling you to reach cognitive loyalty among your customers.