Customer Loyalty Outcomes Characteristic Features of Behavioral Loyalty, Attitudinal Loyalty and Cognitive Loyalty, Role of Customer Loyalty outcomes in business decisions, Significance of Customer Loyalty for Marketers, Relationship Influencers of Customer Loyalty including factors mediating customer loyalty relationship with other relationship influencers, Customer Affinity, Customer Engagement.

1. UNIT IV
Customer Loyalty Outcomes
Characteristic Features of Behavioral Loyalty, Attitudinal Loyalty and
Cognitive Loyalty, Role of Customer Loyalty outcomes in business
decisions, Significance of Customer Loyalty for Marketers, Relationship
Influencers of Customer Loyalty including factors mediating customer
loyalty relationship with other relationship influencers, Customer
Affinity, Customer Engagement.

2. Customer Loyalty Outcomes
• Customer loyalty is a psychological state that companies try to
create in the mind of their customers.
• There are two popular prospectives- attitudinal and behavioral.
• In terms of practical accuracy, including both dimensions are
important.
• Researchers insisted that focusing on only the behaviour (repeat
purchase) would lead to an incomplete understanding of the
reasons behind it.
• Similarly observing customer attitude alone cannot help.
• The purpose of business organization is to create customers who
need to be satisfied. The emergence of competition has redefined
the bargaining power of the customers and make them demanding
as well as strategic.

3. • Loyalty is principally valued for its outcomes since it is the
outcome behaviour of loyal customers that exercise a huge
impact over the revenues and growth of the firm.
• Jones and Taylor (2007) affirmed that advanced literature
has proposed loyalty to be a three dimensional construct –
behavioural, attitudinal and cognitive loyalty.
Cognitive:
relating to the mental processes of perception, memory,
judgment, and reasoning, as contrasted with emotional and
volitional processes.

4. 1. Behavioural Loyalty
• The behavioural dimension refers to a customer’s behaviour in
respect of repeat purchase, indicating a consistent preference for a
brand or service over time.
• The behavioural definition of loyalty focuses on a customer’s
demeanour, irrespective of attitudes or preference that lie beneath
the conduct.
• A loyal customer is one who purchases from the company and then
continues to do so. Here repurchase activity is the only measure of
loyalty and any internally held attitudes or preferences are
completely ignored.
• In order to achieve customer loyalty a company should initiate the
necessary tactics that increase the frequency and scale of
repurchase.
• These tactics include improving product quality, customer
satisfaction and brand preference.

5. • Behavioural Variables
– Proportion of a given visit. Measures the frequency of purchase as
compared to other brands in the same product category.
– Time spent.
– Cooperation and word-of-mouth recommendations.
• We need to understand the difference between repeat purchase
and intention to do so. Intention may or may not lead to repeat
purchase.
• A truly loyal customer exhibits actual repeat buying behaviour and
not simply an intention to do so.
• Behavioural outcomes of loyalty include:
– Repurchasing from the same service provider.
– Lower switching intentions.
– Making all purchases in a particular category from a single service
provider.

6. 2. Attitudinal Loyalty
• Attitudinal dimension of customer loyalty refers to
favorable customer intention to repurchase and
recommend.
• Attitudinal definition of loyalty suggests loyalty to be a state
of mind. Where the customer is considered loyal to a brand
or a company if he/she exhibits a positive and preferential
attitude towards it.
• In economic terms, it implies that anyone who is ready to
pay a premium for Brand A and select it over other brands.
NOKIA, Pulsar, VW, Amul etc are some brands which can
fetch premium.
• Increasing customer loyalty in terms of attitude is about
enhancing customer preference for the brand. It can be
increased by improving product quality, corporate image
and other customer experience elements of a company’s
performance.

7. • Attitudinal Variables: the attitudinal measures of customer loyalty
include trust, emotional connection and switching cost.
– Emotional connection: involves liking the partner, experiencing a sense
of belongingness to the company.
– Trust: involves elements like honesty, competence, reliability and
customer orientation.
– Switching cost: time, effort and experience involved in switching from
one company to another.
• Apart from repetitive purchase, true customer loyalty is
accompanied by a favourable attitude towards a product or a
service.
• A truly loyal customer will not only repeat his/her purchase, but
exhibit strong preference and a relative commitment.
• Some authors argued that attitudinal dimension can adequately
measure customer loyalty because a customer who is deeply
committed has strong intentions to repurchase and stick to the
brand/store/company.

8. Attitude Vs. Behaviour
• There have been discussions about the superiority of behavioural
definition over attitudinal explanation of customer loyalty.
• Viewing loyalty solely as an attitude is of no use as a customer’s
attitude can persist without having any connection with the
ongoing relationship.
• Customer A, who has never consumed a particular product before,
and customer B, who is regularly using it, might have equally
favourable attitude towards the product. But both of them cannot
be considered as loyal. Customer A is showing ‘preference’ not
loyalty.
• Customer loyalty should display a clear and direct impact on a
company’s financial results.
• The standpoint of loyalty being a pure attitudinal concept denies
the possibility of any immediate monetary benefit.
• Unexpressed internally held attitudes are no good for the revenue.
In order to achieve a positive impact on the financial results,
attitudes need to be manifested in some form of behaviour.

9. 3. Cognitive Loyalty
• It is the third dimension of customer loyalty that explains loyalty as
the conscious evaluation of the various aspects of a brand or the
rewards and benefits of re-patronage intentions.
• This dimension of customer loyalty can rake following forms:
– Top of mind
– First choice
– Price tolerance
– Exclusive consideration
– Identification with the service provider
• Such loyalty leads to increased repurchase tendency among
customers and also keeps them with the company, which in turn
leads to increased financial performance.
Customer Loyalty
Repurchase
Customer Retention
Financial
Performance
Affective
Drivers
Cognitive
Drivers

10. Customer Loyalty Outcomes
• Companies make several attempts to build loyalty among their
customers through a variety of initiatives that are extremely
engaging and costly.
• It is therefore beneficial for companies to understand the variety
and quality of outcomes that customer loyalty may result in.
• Attitudinal
– Strength of Preference
– Advocacy/Willingness to refer
– Altruism
• Behavioural
– Re-patronage
– Resistance to change
– Share of wallet/exclusive purchasing/ share of category
• Cognitive
– Price indifference/ Price Insensitivity
– Exclusivity/ Top of mind
– Identification

11. Attitudinal Outcome
• Strength of Preference
– Customer’s degree of predilection for a service based upon its affective evaluation.
– Strength of preference reflects the vigour of a customer’s inclination towards a particular
product or service.
– Customer loyalty requires exhibition of a strong preference towards a product. This strength of
preference is affected by relative attitude, preference loyalty and affection towards a brand.
• Advocacy/ Willingness to Refer
– Customer’s willingness to commend and advocate a service into his social group at the risk of
his own reputation.
– Willingness to recommend the product is an extremely important measure of customer
loyalty.
– Customers who act as ambassadors of the product and advocate it among other are also
known as ‘customer evangelists’.
– These customers are not only loyal but also ready to back the company/product with positive
word of mouth.
• Altruism
– Customer’s readiness to support the service provider by providing feedback or helping co-
customers in order to ensure successful service delivery.
– Altruism is another outcome of a strong and positive attitude of customers that encourages
them to assist the company in providing better products and services by giving inputs through
genuine feedback or helping co-customers in having a delightful consumption experience.

12. Behavioural Outcome
• Patronage Intentions
– Customer’s willingness to sustain a relationship with his service provider and
repurchase from the same provider in a particular category.
– It refers to a customer’s willingness to emotionally connect with the company
and there us greater likelihood to purchase from the same company in future
as well.
• Resistance to Change
– Customer’s imperviousness against substitutes available in the market.
– It can be described as a customer’s readiness to continue with an organization
regardless of pleasant or unpleasant service encounters and consumption
experience. Eg. Bank branch near to your locality.
• Share of Wallet/Exclusive Purchasing/Share of Category
– Customer’s relative willingness to allocate all his purchases in a category to a
particular service provider.
– it is deciphered by referring to the portion of a customer’s total expenditure
in a particular category that he/she commits to the company he is supposed
to be loyal to.

13. Cognitive Outcome
• Price Indifference/Price Insensitivity
– Customer’s apathy towards the disparity between the price charged by his
service provider and that of others charging in the same category.
– Indian customers are extremely price sensitive. The level of indifference a
customer shows towards price changes also reflect his/her level of loyalty.
– It implies that customer values the relationship more than the changes in
serviceability.
• Exclusivity/ Top of Mind
– Customer’s set of consideration comprising a single service provider
exclusively while procuring a particular service.
• Identification
– Customer’s feeling of ownership over the service, his/her belongingness with
the service provider or the analogy of his values with that of the service
provider.
– It is a primary psychological state for deep, committed and meaningful
relationships that marketers increasingly seek to build with their customers.
– Customers who identify with a company, experience a feeling of
connectedness, consequently making them define themselves somewhat in
sync with the company.

14. Significance of Customer Loyalty for Marketers
• Customers are the lifeblood of any business. Meeting their needs and ensuring
their satisfaction is imperative. Unless an organization cares about its customers,
customers won’t reciprocate in a similar manner.
• Fierce market competition necessitates that organizations constantly improve
their relationship with customers. This can translate into efficient customer
lifecycle management by evoking a positive experience across the customer
journey.
• While acquiring new customers is essential, organizations must lay emphasis on
retaining existing ones and creating loyal customers who will ensure stable
business operations. The better the relationship customers share with an
organization, the greater their potential to generate revenue for the business.
• Some of the key reasons why customer loyalty is so important are listed below.
1. Encouraging Referrals:
– The customer lifecycle has become more complex because the customer’s buying
journey begins even before he/she directly engages with a particular brand.
Therefore, customer relationship management should begin at the very first contact.
– Unless an organization sets up a system to reach out to prospects with the right
information, it is easy to lose potential customers. The best way to ensure that
‘potential’ converts into ‘actual’ sales is to ensure that prospects engage with the
existing customers who will endorse the value of a particular brand. After all, current
customers act as net promoters and form strong voices in the market.

15. 2. Reduced Costs:
– By cultivating customer loyalty, businesses are creating an army of strong promoters that
can outshine their best marketing efforts. These net promoters can help save huge
advertising and marketing costs for enterprises as word-of-mouth is a powerful and cost-
effective marketing tool.
– Moreover, customer retention efforts are cheaper than acquiring new customers. Building
loyalty forms a solid customer base helping the business to grow exponentially.
3. Repeat Business:
– Since organizations have already won the trust of loyal customers, it is easier to cross-sell
and up-sell to these customers as compared to new ones.
– Organizations have an open line of communication with loyal customers. These customers
generally provide honest feedback to help improve the brand. Since they openly voice their
complaints, organizations can make a concerted effort to address issues raised promptly,
increasing customer satisfaction.
– Thus, loyal customers are likely to ensure repeated business, which is critical for
organizations to survive in the long run.
4. Insulate your Business from Competitors:
– Loyal customers will stick to a brand because they trust the brand. Organizations with a loyal
customer base are immune to both competition and economic changes. This helps to
protect bottom lines.
• Customer are the biggest assets of a business.
• Source: http://www.firstsource.com/blog/building-customer-loyalty-matters-
business/

16. 5 Reasons Why Customer Loyalty Is So
Important in Our Digitized Marketplace
• For businesses, the current trend to attracting customers now in the consumer market is participating in
group buying sites by selling their products and services at deeply discounted prices. On the surface, this
customer acquisition method of increasing sales seemed to work. However, group buying does more
harm than good to your business and its brand. You make plenty of sales, but hardly any of these dollars
translate to profits. Businesses are starting to be wary of group buying.
• Consider another channel of increasing sales- through customer retention and loyalty activities. Not only
does instilling customer loyalty increase sales, it also creates profits and builds your brand. According to
The Gartner Group, 20% of your existing customers generate 80% of your profits. The key for any
businesses to survive and grow is beyond just acquiring new customers, but to build sustainable sales
stream of existing customers.
• It’s about time businesses pay more attention to building and instilling customer loyalty which has a
long-term impact on their brands and not getting completely sucked into the group buying craze. It is
more than just increasing sales.
• Here are 5 reasons why customer loyalty matters.
1. It’s easier to up-sell and cross-sell to loyal customers
• Loyal customers are familiar with their favourite brands and more willing to try out and explore
recommendations and new products. Marketing Metrics found out that the probability of selling
something to new prospects is only about 5-20%, whilst the probability of selling something to an
existing customer is 60-70%. For the same amount of effort to sell something, expected sales as such is
higher from selling to your loyal customers.
2. Loyal customers are your free marketing agent, brand ‘ambassador’ to help build your brand
• Loyal customers are more inclined to share their positive experience and making recommendation of a
business to their friends. They love your brand, they speak about your brand and humans are generally
more influenced by people they are familiar with. Word-of-mouth marketing is one of the most
powerful channel of marketing, if not the most. They reinforce your brand in the mind of consumers that
are unfamiliar and new to your brand.

17. Contd..
3. Lower costs to acquire new customers
• It is 6 to 7 times more expensive to acquire new customers than servicing your
regulars. Businesses have to advertise to attract their attention, incentivize them with
discounts, educate them about their brand and product, provide personalized services which
all amounts to costs. By focusing on customer loyalty and building your brand, your loyal
customers will be a strong influencer to get new prospects to try out your brand, substantially
reducing the associated costs in acquiring new customers. Cultivate loyalty, and get an army
of free, sales people to spread the love of your brand.
4. Customer loyalty insulates your business from price competition.
• Competition is heating up! Let’s slash prices! But through loyalty, it reduces the effect of price
sensitivity on your customers and in the words of Warren Buffett, it gives you an ‘economic
moat’ from losing customers to competitors. It takes more than reducing prices to lure your
loyal customers away. Loyalty also helps in the opposite direction when prices have to go up.
In times of rising costs and inflation, the stickiness and commitment towards your brand
makes it easier to pass on additional costs to customers without them defecting in mass,
eventually helping to protect your bottom line.
5. Loyal customers provide honest, quality feedback
• Feedback is crucial to know where and how to improve. Loyal customers, they love your
brand. They wouldn’t hesitate or be shy to provide their honest feedback, especially negative
ones as they want to see your brand thrive and serve them better. In many instances, new
customers visit your brand, try it out, have some dislikes or unpleasant experience and they
tend not to voice it out and telling themselves that they will not return again. You hardly get
feedback loop from new customers and this is detrimental to your product and service
quality.
Source: http://www.nextupasia.com/5-reasons-why-customer-loyalty-is-so-important-in-our-digitized-marketplace/

18. Customer Loyalty: The Relationship
Influencers
• With ever increasing focus on customer relationships and the
profound impact that customer’s evaluative judgment exercise on
customer loyalty, it has become more important to uncover the
factors that direct customer loyalty formation.
• There is a need to identify factors that affect customer loyalty in its
relationship with other factors that constitute its formation.
• According to Morgan and Hunt (1994), customer relationship
gained significance first in B2B relationships and it is only in later
stage they received importance in B2C context as well.
• Rai (2013) defined Customer Relationship Management as “a
continuously updated process of identifying relative value of
customers and designing customized company interaction to delight
them so that they do not just remain with company profitably but
also be the companies ambassador.”
• Emphasis is on long term, sustainable and mutually beneficial
business relations.

19. Mediating Influencer in Customer
Loyalty Relationship
Mediation- the conceptual framework
• A variable may be considered as a mediator in a relationship if it is able to
explicate the relationship between predictor (Independent Variable) and
criterion (Dependent Variable).
• Mediator is the variable that serves as an explicatory link in the relationship
between two other variables, one dependent and other independent
• A variable function acts as a mediator when:
– Variations in independent variable significantly account for variation in
presumed mediator (a)
– Variations in mediator significantly account for variations in the dependent
variable (b)
– When path a and b are controlled, previously significant relation b/w
independent and dependent variable becomes insignificant and sometimes zero
(for strong mediation)
predictor
Mediator
criterion
c
ba

20. Predictor (X)
Mediator (M)
Criterion (Y)
c’
ba
Predictor (X) Criterion (Y)
c
a X b = indirect effect of X on Y
c = direct effect of X on Y
c = c’ + ab
ab = c – c’
The very nature of meditational model is causal.
Typically mediator mechanisms are proposed only after a predictor-criterion effect
have been fairly established.

21. • Establishing Mediation
– Following conditions are requisite for establishing mediation:
• The independent variable must affect the mediator in the first equation.
• The independent variable must be shown to affect the dependent variable on the second
equation.
• The mediator must affect the dependent variable in the third equation.
• Types of Mediation
• Full mediation (presence of indirect effect but no direct effect)
• Partial mediation (presence of both indirect and direct effects)
• No mediation (absence of indirect effect).
– Zhao et al. (2010) found this classification as misleading and coarse since
mediation cannot be conceptualize as single dimension concept.
– Mediation
• Complementary: Existence of both mediating effect (axb) and direct effect (c), same
direction.
• Competitive: Existence of both mediating effect (axb) and direct effect (c), opposite
direction
• Indirect-only: Existence of both mediating effect (axb) and no direct effect.
– Non-Mediation
• Direct Only: Existence of direct effect only (c) with zero or insignificant indirect effect.
• No-Effect: Existence of neither direct nor indirect effect.

22. Service Quality – Customer
Satisfaction
• Customer’s level of satisfaction with an organization or a
service provider is determined by the evaluation of service
quality along with other factors (Hurley and Estelami,
1998).
• Researchers also held arguments to determine whether
satisfaction is antecedent or an outcome of service quality.
• Studies established that service quality to be the most
influential precursor of customer satisfaction.
• There were conflicting views on the satisfaction – service
quality relationship. Despite conflicting opinions, literature
available heavily advocates that service quality is precursor
to satisfaction.

23. Customer Satisfaction- Customer
Loyalty
• Customer satisfaction- repeat sales, positive WOM and
customer loyalty.
• High customer satisfaction leads to increase customer
loyalty?
• Customer satisfaction also determines customer loyalty
to a great extent.
• Ping (1993, 1999) stated that decrease in relationship
satisfaction leads to a drop in loyal behaviour with
increased likelihood of relationship termination.
• Studies demonstrated a positive association between
satisfied customers and repurchase intentions. This is
the indirect influence on customer loyalty.

24. Service Quality – Customer Loyalty
• Service quality is positively related to loyalty that is
identified as a buyer’s readiness to recommend the
company.
• Wang and Sohal (2003) attempted to assess the impact of
service quality at two levels of retail relationships,
interpersonal (person to person) and store level (person to
firm).
• They suggested that there is a positive association b/w
service quality and customer loyalty and this association is
stronger at company level than at interpersonal level.
• Ishak et al. (2006) discovered that the construct of client
satisfaction mediates the relationship b/w service quality
and customer loyalty.

25. Service Quality
Customer Satisfaction
Customer Loyalty
c’
ba

26. Relationship Influencers Moderating
The Customer Loyalty Relationship
• Moderator variable is the one that influences the relationship
between predictor variable and criterion variable by systematically
altering its form and strength.
• The analysis of moderating effects helps in understanding “when”
and “for whom” a particular variable acts as a strong predictor of an
outcome variable.
• The moderating effect merely represents an interaction whereby
the effect of a variable is dependent upon another variable.
• The concept of moderating variables was bought by Saunders
(1956) in psychology research.
• The concept of moderating variables helps in understanding and
forecasting buyer behaviour:
– The possibility of existence of independent variables that essentially
share no relationship and start working at distinct point of time.
– The possibility of existence if independent variables that relate to each
other at specific points in time but not always.

27. Moderating Variables in the Service
Quality – Customer Loyalty Link

28. Customer Affinity
• It stands for an emotional connection that a customer feels
for a brand.
• It is largely based upon feelings and therefore, contains
little element of rationality.
• Emotional association can be very stong. For eg. Apple,
Harley Davidson hugely bank upon the affinity of their
customers towards them due to specific attributes of the
product.
• Innovative product design, sense of identification, and
expression of oneself as most of the customers see these
brands as an extension of their identity.
• These brands have successfully positioned themselves as an
enriching consumption experience that enhances one’s
personality by adding value and desirable social image.

29. Customer Engagement
• Engagement is turning on a prospect to a brand idea enhanced by the surrounding
context.
• Customer engagement cycle generally involves five different stages: awareness,
deliberation, inquisition, purchase and retention.
• Marked with different needs and interests, each of these stages requires distinct
focus while interacting with the customers.
• To facilitate customer going through customer engagement cycle, marketers resort
to search engine marketing, optimization and advt. with keywords and phrases.
• The concept endorses to give the customers liberty to decide the ways they want
company to interact with them by using product, services and other consumption
related experiences.
• With declining effectiveness of traditional advertising media and growing power of
customers in terms of referrals and WOM, customer engagement has emerged as
the need of the hour.
• Researches revealed that an average customer in the age group 18-26 spends
more time online than watching TV.
• Elevated levels of competition, greater access to product and price, increased no
of channels and lesser cost of switching have collectively made achieving customer
loyalty a tough game for marketers.
• Customer engagement is a strategic orientation of marketing which can align a
company’s effort with social and technological developments in the market.