Page 78 -

68 Managing Customers Through Economic Cycles

friendly service. He also carries one of Staples’ Business
Rewards cards. Can we assume he’s loyal?
● Nike has strong repurchase rates among amateur athletes
who find Nike shoes a better fit for wide feet. Are these
buyers loyal to the Nike brand?

Each of these scenarios describes a loyal customer. “Loyalty”
comes in many forms. Should it be defined as a feeling?
An attitude? A set of buying behaviors? It is all of this and
more.

At the highest level, there are two umbrella loyalty
categories:

● Behavioral loyalty
● Cognitive loyalty.

Behavioral loyalty is the simplest form of customer loyalty.
This is where we see routine and inertia. It also typically
reflects a weak competitive value due to the impact switch-
ing costs.

The following equations illustrate the situation:

Value “supplier” > Value “competitor” − Switching Costs (1)
Value “supplier” < Value “competitor” − Switching Costs (2)

In equation (1), the supplied value proposition is higher
than the competing value proposition minus switching costs.
An example would be an expensive food store close by.
You may only prefer it because the less expensive food store
is further away and thus would require more time and effort
on your part. If the less expensive food store chain opened
a new store close by your expensive supermarket, you
would likely switch stores as in equation (2) because the
switching costs are reduced such that the value propositions
have changed comparative positions.