The Four Tiers of Loyalty: Where Do Your Customers Fit In?

Posted on by Patty Odell

Much like beauty, true loyalty lies beneath the surface. Surprisingly, many companies continue to only subscribe to the skin-deep definition, simply thinking of loyalty as a customer’s repeated purchase of a product or service. When marketers look deeper, they’ll find distinctly different types of loyalty. Using the scale below (from poorest to best), which level of loyalty is your program currently achieving?

Inertia Loyalty: If a brand’s loyalty strategy involves terms like “barrier to exit,” it most likely falls under the “Inertia Loyalty” category—making it hard to leave the program, rather than irresistible to stay. Customers in this tier stick around because it’s too inconvenient to escape. Classic examples include airline loyalty programs (where a lack of alternate flights produces loyalty) or banks and grocery stores (where loyalty is often proximity-based). With “Inertia Loyalty,” customers have no incentive to stay once a competitor makes it easy to switch.

Mercenary Loyalty: Just as a mercenary will swear allegiance for a price, marketers can pay customers for their loyalty. Most traditional points and discounts-based loyalty programs operate in this tier because of past effectiveness, but the industry now sees a leveling-off of participation rates for this type of program. Yes, the tactic may work, but its major weakness is that the loyalty generated is emotionally shallow, and there’s little to stop your competitor from taking customers simply by paying more.

True Loyalty: Brands reach this tier when a customer has a compelling reason—ideally, an emotional stake in the brand—to resist competitive offers. If a new store opens across the street or a competitor slashes prices, a brand with “true loyalty” won’t lose customers because the relationship is based on a deeper connection of trust and shared value. Good examples include Starbucks (people go out of their way to spend more for it) or Chipotle (which appeals to consumers’ values around sustainability and humanely treated animals). All brands can attain “True Loyalty” if they’re committed to a win-win relationship with their customers.

Cult Loyalty: Ever see someone who proudly sports a brand logo as a tattoo? Or maybe just a friend who consistently refers to himself as a “____ guy” (fill in his favorite brand name). At the “Cult Loyalty” tier, the customer and the brand begin to merge, so that rejecting the brand would be like rejecting your own values. Customer commitment becomes a virtual lock at that level (congrats to Harley Davidson, Apple and Coke). Unfortunately for marketers, “Cult Loyalty” is next to impossible to artificially manufacture. It only emerges organically—but once it does, it can be cultivated, particularly through an effective social-media strategy.

Whatever your business goal, every brand should aim for “True Loyalty” because it provides the best competitive advantage and marketers can directly influence its growth through sound strategy and tactics, including:

Engaging Multiple Motivators: Customers’ values are complex and maximizing their economic return isn’t always the most important one (i.e., sometimes status or social impact receives higher priority). If you understand your customers value, it’s easier to develop a program that transcends price. Listen to them, what is the value in the relationship? Make that core to your program.

Designing for Win-Win: Too many program design conversations revolve around manipulating cost equations and trying to convince the customer they’re getting more value than they’re really receiving. Not only is today’s consumer too smart for this approach, it is no recipe for “True Loyalty.” Instead, focus on creating mutual benefit, where the customer and the brand shared a stake in success.

Moving up the loyalty scale can be accomplished with a focused strategy and a sincere desire to connect with customers. Although your customers may never shave your logo into the side of their heads, you will cultivate a deeper brand following that will endure both challenging times and competitive threats.

Barry Kirk is solution vice president, consumer loyalty, Maritz Loyalty & Motivation. He can be reached at Barry.kirk@maritz.com.

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