Abstract
Customer loyalty has increased substantially to the brands customers opt to engage with over the years. Interestingly, contrary to warnings by many businesspeople, we find that Millennials are among the most loyal customers across generational cohorts, behind only the dwindling Silent Generation. Striving for loyalty across generational cohorts is also powerful. We drive home this point, started in the complaint chapter, by focusing on the “service recovery paradox”—customers who experience a problem with a product or service but receive effective complaint management end up with stronger-than-average loyalty, even stronger than customers with a problem-free experience. As a caution, we also highlight why many popularized alternative measures of customer loyalty, like the Net Promoter Score™, are scientifically flawed.
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Notes
- 1.
For examples of the business community worrying about the loyalty of these generational cohorts, see: Glasheen, J. “Millennial Brand Loyalty Comes into Question,” RetailWire.com, November 26, 2018; Sharma, V. “Marketing to Gen Z: Death of Brand Loyalty,” February 5, 2019.
- 2.
See: Fry, R. “Millennials Projected to Overtake Baby Boomers as America’s Largest Generation,” Pew Research Center, March 1, 2018. Accessed online at: https://www.pewresearch.org/fact-tank/2018/03/01/millennials-overtake-baby-boomers/
- 3.
See: Gherini, A. “Gen-Z is About to Outnumber Millennials. Here’s How That Will Affect the Business World,” INC.com, August 22, 2018. Accessed online at: https://www.inc.com/anne-gherini/gen-z-is-about-to-outnumber-millennials-heres-how-that-will-affect-business-world.html.
- 4.
For a review of the importance of customer loyalty, see: Anderson, E. W., C. Fornell and D. R. Lehmann (1994). “Customer Satisfaction, Market Share, and Profitability: Findings from Sweden,” Journal of Marketing, 58(3), 53–66.
- 5.
The ACSI customer retention variable is derived from a 1–10 scaled question asking the consumer their “likelihood to purchase from the same company in the future.” The resulting 1–10 scaled variable is transformed to an estimate of customer retention, with those scoring very low on the scale (1–4) given a “0%” probability of being retained, and most of the rest of the responses divided by 10 to create a probability equal to their response (e.g., 5 = 0.5, 6 = 0.6). As no consumer is certain to remain loyal in the future, those replying with a “10” are given only a 90% probability of being retained.
- 6.
Like almost all studies of its kind, the ACSI only interviews consumers 18 years of age or older.
- 7.
For a recent study on this topic using ACSI data, see: Morgeson, F. V., III, Hult, T., Mithas, S., Keiningham, T., Fornell, C., & Duan, Q. (2020). Customer Loyalty Payoffs from Complaint Management: A Comprehensive Examination, Working Paper, Ann Arbor, MI: American Customer Satisfaction Index.
- 8.
See: Morgeson, F. V., III, Hult, T., Mithas, S., Keiningham, T., Fornell, C., & Duan, Q. (2020). Customer Loyalty Payoffs from Complaint Management: A Comprehensive Examination, Working Paper, Ann Arbor, MI: American Customer Satisfaction Index.
- 9.
For a discussion of this trend, see: Kennedy, C. and H. Hartig. “Response Rates in Surveys Have Resumed Their Decline,” PewResearch.org, February 27, 2019. Accessed online at: https://www.pewresearch.org/fact-tank/2019/02/27/response-rates-in-telephone-surveys-have-resumed-their-decline/.
- 10.
For this argument, see: Gitomer, J. (1998). Customer Satisfaction is Worthless, Customer Loyalty is Priceless: How to Make Customers Love You, Keep Them Coming Back and Tell Everyone They Know, Bard Press: Austin, TX.
- 11.
For the original article, see: Reichheld, F. F. “The One Number You Need to Grow,” Harvard Business Review, December 2003. For the larger book on the topic, see: Reichheld, F. F. (2006). The Ultimate Question: Driving Good Profits and True Growth, Cambridge, MA: Harvard Business School Press.
- 12.
For an excellent review of the many problems of Net Promoter Score, see: Zaki, M., D. Kandeil, A. Neely and J. R. McColl-Kennedy (2016). The Fallacy of the Net Promoter Score: Customer Loyalty Predictive Model. University of Cambridge: Cambridge Service Alliance. Accessed online at: https://pdfs.semanticscholar.org/6b43/8d668d66ce8a3bdd569758c4f6368b316d87.pdf
- 13.
See: Keiningham, T. L., B. Cooil, T. W. Andreassen and L. Aksoy (2007). “A Longitudinal Examination of Net Promoter and Firm Revenue Growth,” Journal of Marketing, 71(3), 39–51.
References and Further Reading
Anderson, E. W., Fornell, C., & Lehmann, D. R. (1994). Customer Satisfaction, Market Share, and Profitability: Findings from Sweden. Journal of Marketing, 58(3), 53–66.
DeWitt, T., Nguyen, D. T., & Marshall, R. (2008). Exploring Customer Loyalty Following Service Recovery: The Mediating Effects of Trust and Emotions. Journal of Service Research, 10(3), 269–281.
Fornell, C. (2007). The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference. New York: Palgrave Macmillan.
Fornell, C., & Bookstein, F. L. (1982). Two Structural Equation Models: LISREL and PLS Applied to Consumer Exit-Voice Theory. Journal of Marketing Research, 19(4), 440–452.
Fry, R. (2018, March 1). Millennials Projected to Overtake Baby Boomers as America’s Largest Generation. Pew Research Center. Retrieved from https://www.pewresearch.org/fact-tank/2018/03/01/millennials-overtake-baby-boomers/
Gherini, A. (2018, August 22). Gen-Z is About to Outnumber Millennials. Here’s How That Will Affect the Business World. INC.com. Retrieved from https://www.inc.com/anne-gherini/gen-z-is-about-to-outnumber-millennials-heres-how-that-will-affect-business-world.html
Gitomer, J. (1998). Customer Satisfaction Is Worthless, Customer Loyalty Is Priceless: How to Make Customers Love You, Keep Them Coming Back and Tell Everyone They Know. Austin, TX: Bard Press.
Glasheen, J. (2018, November 26). Millennial Brand Loyalty Comes into Question. RetailWire.com. Retrieved from https://www.retailwire.com/discussion/millennials-brand-loyalty-comes-into-question/
Gupta, S., & Lehmann, D. (2005). Managing Customers as Investments: The Strategic Value of Customers in the Long Run. Upper Saddle River, NJ: Pearson Education.
Hart, C. W., Heskett, J. L., & Earl Sasser, W., Jr. (1990). The Profitable Art of Service Recovery. Harvard Business Review, 68(4), 148–156.
Hirschman, A. O. (1970). Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge: Harvard University Press.
Hult, G. T. M., Morgeson, F. V., Morgan, N. A., Mithas, S., & Fornell, C. (2017). Do Managers Know What Their Customers Think and Why? Journal of the Academy of Marketing Science, 45(1), 37–54.
Keiningham, T. L., Cooil, B., Andreassen, T. W., & Aksoy, L. (2007). A Longitudinal Examination of Net Promoter and Firm Revenue Growth. Journal of Marketing, 71(3), 39–51.
Kennedy, C., & Hartig, H. (2019, February 27). Response Rates in Surveys Have Resumed Their Decline. PewResearch.org. Retrieved from https://www.pewresearch.org/fact-tank/2019/02/27/response-rates-in-telephone-surveys-have-resumed-their-decline/
Morgan, N. A., & Rego, L. L. (2006). The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance. Marketing Science, 25(5), 426–439.
Morgeson, F. V., III, Hult, T., Mithas, S., Keiningham, T., Fornell, C., & Duan, Q. (2020). Customer Loyalty Payoffs from Complaint Management: A Comprehensive Examination, Working Paper, Ann Arbor, MI: American Customer Satisfaction Index.
Reichheld, F. F. (2003). The One Number You Need to Grow. Harvard Business Review, 81(12), 46–55.
Reichheld, F. F. (2006). The Ultimate Question: Driving Good Profits and True Growth. Cambridge, MA: Harvard Business School Press.
Sharma, V. (2019, February 5). Marketing to Gen Z: Death of Brand Loyalty. MediaPost.com. Retrieved from https://www.mediapost.com/publications/article/331541/marketing-to-gen-z-death-of-brand-loyalty.html
Zaki, M., Kandeil, D., Neely, A., & McColl-Kennedy, J. R. (2016). The Fallacy of the Net Promoter Score: Customer Loyalty Predictive Model. Cambridge: University of Cambridge. Retrieved from https://pdfs.semanticscholar.org/6b43/8d668d66ce8a3bdd569758c4f6368b316d87.pdf
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Fornell, C., Morgeson, F.V., Hult, G.T.M., VanAmburg, D. (2020). Customer Loyalty: Hey, Stick Around for a While!. In: The Reign of the Customer. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-13562-1_7
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