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70 Managing Customers Through Economic Cycles

tainable competitive advantage. Thus, cognitive loyalty is the
most sustainable form of loyalty. Businesses entering a re-
cession or economic downturn with cognitive loyalty will
have a better chance of retaining their customers than those
businesses with simply behavioral loyalty.*

Four central types of loyalty

Within the two categories of loyalty, there are four essential
types of loyalty. Each of these has its own benefits, risks,
and measurement needs.

1. Contractual loyalty. When a customer buys through
an official agreement, you have contractual loyalty. This
is typical for B2B transactions. The DuPont example
represents contractual loyalty. Contractual loyalty also
applies to consumer situations like subscriptions for
newspapers and magazines, or for cable, telephone, or
web services.
Contractual loyalty can be highly profitable when
looked at from a net present value perspective. But it
is less profitable as contracts are renegotiated and com-
petitors can use aggressive tactics to steal your custom-
ers during these times. Contractual loyalty can also
create dissatisfaction. Customers may feel trapped in a
business contract. Dell uses its key account program,
Premier.Dell.com, to add value to the traditional con-
tracts by allowing business buyers to place their orders
online 24/7.

2. Transactional loyalty. Repeat purchasing without any
contractual responsibility is termed transactional loyalty:

* Source: Peter Niemeyer.