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In a meeting with a long-time client, I learned how pleased they were with their repeat business, which they saw as loyal customers coming back for more. However, when they showed me the repeat business stats, what I saw wasn't loyalty; it was inertia. I knew these customers would leave my client when the competition had a good enough offer.
Now, some of you might be scratching your heads, wondering what I am talking about. After all, don't loyal customers bring you repeat business? They do; that’s not the problem. The problem lies in the assumption that ALL repeat business is motivated by loyalty. It isn't always. Sometimes, it is inertia, and recognizing the difference is what we will talk about today.
Let's begin by defining customer loyalty and inertia. Loyal customers buy from you on purpose because they have an emotional relationship with you. They know exactly why they buy from you. By contrast, inertia is automatic and habitual. In other words, it was a decision made on autopilot, and people might be unable to tell you why they bought from you.
Take a moment to consider to whom in your life you feel loyalty. Usually, people will say family and friends. These are emotional relationships that form attachments. Surprisingly, it's these same emotions that you have with brands to whom you feel loyalty.
Most organizations don't have a way of measuring loyalty, but they do have a way of measuring repeat business. The problem is that they see both inertial and habitual buying in the same way they see loyalty without distinguishing between them.
If you want to distinguish, it is essential to measure additional behavior in addition to repeat business. Then, you can separate the loyal from the habitual customers.
I realized recently that I sometimes fall into this lot as well. I thought I was a loyal Delta customer. I have flown them for years, and I have millions of miles in rewards with a Diamond status. Most times, I don't check other airlines when I need to go somewhere—that is, until my friend mentioned how he flies JetBlue business class for a lot less than Delta.
So, I checked the prices and agreed that it was less expensive. What's more, I decided I would have to try them out. And then, I wondered if I really was loyal to Delta. Perhaps all this time, I hadn't distinguished between loyalty and inertia, either.
Loyalty Programs Rarely Build Loyalty
Regarding distinguishing between loyalty, inertia, and Delta, many organizations do not realize that their rewards programs do not build loyalty. The rewards program becomes part of the offer.
For example, Delta recently changed its rewards program. Now, customers have to spend more money to get rewards, which makes financial sense for Delta. Customers felt like they had lost something that made flying Delta valuable to them, that, in effect, they had lost their rewards. After announcing the changes, the backlash was significant, which led Delta to walk back some of the changes.
The confusion is understandable at one level. The airline sees it as a loyalty program for frequent flyers. By contrast, frequent flyers see it as an exchange, meaning "I give you business, and you give me free flights." When that exchange changes, it changes the offer's value and makes it less attractive. People that are not loyal will look for a better deal.
How to Tell if Its Loyalty or Inertia
Loyalty isn't financial; it's emotional. Loyalty means the customer is willing to sacrifice something to stay. Moreover, that goes both ways; the company should also sacrifice something to keep you.