Loyalty & Defection

Definition

Loyalty (in a behavioural sense) is the restricting of one’s buying to a personal repertoire of brands, which is relatively stable over time. This is an on-going propensity to buy one’s habitual brand or brands and it results in buying some brands much more often than others.

Defection is the opposite of loyalty and retention. It is those people whom the brand has lost. Defection is the proportion of the total customer base (all those who used to buy the brand in the past) who have stopped buying the brand.

Defection metrics are most commonly analysed within subscription markets, such as financial services, insurance or in expensive product categories such as durables.

Key Findings

Loyalty is a strong, innate natural tendency of human behaviour, and is very prevalent.
There are many different loyalty-related measures, and they all vary together.
In repertoire markets, where consumers continuously shuffle their purchases between brands, it is much more difficult to separate real change (defection or decreasing loyalty) from random variation in purchasing.
Consumers are rarely 100% loyal, but instead purchase from their own repertoire of brands.
For the majority of brand buying and store choice, habit and convenience overwhelmingly drives consumers’ behaviours and choices. Consumers form a stable repertoire of brands, or stores, and repeatedly buy from them; giving rise to ‘polygamous loyalty’, that is, ’loyal switchers’.
Consumer loyalty is more to do with consumers themselves than with specific features of the brand. Consumers seldom ever buy randomly, but instead show biased, non-random repeat purchasing, tendencies to favour some brands over others.
Loyalty measures for different brands with the same market share differ little — loyalty doesn’t vary much. The extent to which they do is entirely predictable from the ‘Law of Double Jeopardy’, which shows that brands with large and small market shares differ substantially in how many people buy them but far less in terms of how loyal their buyers are to them.
Loyalty-related measures follow regular patterns.
100%-loyal buyers are few, and most are light buyers.
In buying brands, consumers are seldom monogamous (near-100%- loyal) nor are they promiscuous. They exhibit polygamous loyalty, with steady ongoing relationships with several serious brands, one usually consumed more often than the others. And occasionally they will try out a new brand or drop an established one.
Competing brands’ sales differ mainly by how many customers a brand has, and hardly by how “loyal” they are (e.g. their repeat buying). This has been found near-universally.
Loyalty to the a brand is near-instant: the new brands’ average purchase frequency at launch is already normal, i.e. at the same level as a year or two later and also as for competitive established brands. This is counter to the widely-held belief that loyalty to successful new brands or line-extensions evolves slowly.
Customer defection rates follow a Double Jeopardy pattern — large brands have lower defection rates and vice versa.
A brand’s defection rate is essentially a function of its market share, and the category it’s in.
There is no empirical support for the claim that it costs 5 times as much to win a new customer as it does to stop one leaving.
Customer loyalty and defection are largely outside of marketer control; at least in being able to alter it through marketing activity.

Best Practice

100%-loyal and near-100%-loyal buyers are NOT especially important to one’s sales; they are always found to be few. Nor are they particularly heavy buyers of the brand or of the product. This is predictable and can therefore hardly be changed.
Marketing activities should not focus on trying to alter the stable, law-like loyalty metrics like purchase frequency and defection rate.
Marketing activity should not over-invest in already highly loyal consumers, while neglecting to reach new and light buyers.
Marketing activity should be focused on customer acquisition. It is essential to acquire customers even to just maintain your brand.

Reports (22)

Reports

Showing 22 results

Net Promoter is not a leading indicator of growth

Report 120
July 2023

This report examines whether the famous ‘Net Promoter Score’ can predict revenue growth. Our evidence and a review of 20 past studies suggests NPS is not a leading indicator of growth, and managers should be cautious about spending on lifting NPS scores, and avoid over-reacting to changes in NPS scores.

Report 109
May 2022

We find that many consumers give a different satisfaction score when re-interviewed, even though the overall satisfaction score for the brand stays the same. And, this effect is seen among people who did not make a purchase from the service provider between surveys, so it is not due to an intervening service experience changing their satisfaction level. The overall proportions of people in our study who said they were satisfied, neither satisfied nor dissatisfied, or dissatisfied stayed the same between two surveys, so the overall brand score was stable. But the proportion of people within each group that gave the same score in both surveys was not 100%: 83%, 56%, and 43% for satisfied, neither satisfied nor dissatisfied, or dissatisfied respectively. There is more stability for the more popular response of ‘satisfied’, and less stability for the less popular initial response of ‘dissatisfied’. We conclude satisfaction scores behave quite like brand attributes: stable in aggregate but unstable at an individual level. Moreover, there is more over-time stability for satisfaction survey responses that received higher initial agreement to begin with, just like brand attributes.

This report gives three marketing implications that arise from the findings: one on the evaluation of intervention efforts, the second relating to customer word of mouth, and thirdly, a more general out-take on marketing metrics.

REPORT 104
August 2021

Net Promoter Scores bounce up and down from survey to survey. This spurious variation is likely to force managers to come up with spurious explanations.
We advise against NPS tracking, but if you must do it, use the mean average willingness to recommend scores instead of ‘Net’ scores.

REPORT 97
APRIL 2020

Sometimes brands exhibit unusually high loyalty, with no apparent explanation. This is referred to as “excess loyalty”. In this report we show that it is likely to be an artefact of the brand being popular only in certain regions, channels, or stores. The phrase “excess loyalty” sounds good, but it often turns out to be better described as “deficit penetration”.

REPORT 93
FEBRUARY 2019

Small brands have not received the study they are due considering that, in aggregate, they are a major competitor to category leaders. We therefore benchmarked small brands’ main buying measures (penetration and purchase frequency) in 36 packed goods categories. We make 3 big discoveries:

1) The commonly sought “niche” performance, i.e. relatively higher loyalty, is neither common (one in ten), nor a driver of growth.
A surprisingly large number, over half, of all small-share brands show a persistent loyalty deficit and yet they still survive.

2) The evidence shows that when small share brands grow, a Double Jeopardy model always predicts their performance metrics. Therefore for every small-share brand, buyer attraction must be the managerial priority.

3) This evidence strongly suggests that managers of small brands who want them to grow need to be wary of inadvertently or intentionally niching their brand.

This evidence strongly suggests that managers of small brands who want them to grow need to be wary of inadvertently or intentionally niching their brand.

REPORT 89
June 2018

This report shows the Law of Double Jeopardy for brand loyalty holds for different service categories, such as banking, insurance and hotels, for different loyalty metrics and across different countries.

REPORT 65
March 2014

'Super Consumers...Golden Households...your very best customers...but why do they buy you so much? This report investigates what makes a heavy customer heavy, as well as their growth potential.

REPORT 62
February 2013

It’s hard enough to get lots of people to buy our brand, so why do marketing consultants insist on telling us we need to go further and get people to love our brand as well. Do they think we are an insecure bunch?

REPORT 60
October 2012

For marketers, the idea of 'free' access to brand fans is alluring, with organisations continuing to invest money in recruiting their Facebook fan bases. What quality of reach, however, can this sort of "earned media" deliver?