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72 Managing Customers Through Economic Cycles

Functional loyalty is often the first loyalty strategy of
businesses to create differentiation. To the degree that
you can offer customers product features that are tangi-
ble and relevant to the category purchase, you can
secure that portion of the market that prioritizes your
advantaged product feature.
4. Emotional loyalty. This is the human side or the
“feeling” part of loyalty, in which a customer develops
preferences for products or services based on their
appeal to the individual’s higher order emotions, e.g.
values, ego, sensibilities. Customers identify with the
brand, like the traveler searching for a Starbucks,
because they seek some higher order benefit that
represents little or no functional value to them by
association. It is more about the high order experi-
ence. Emotional loyalty is the Holy Grail for most
businesses – most seek this type of loyalty but few
achieve it.

One of the primary pluses of emotional loyalty is its
ability to withstand challenge during changes in eco-
nomic cycles or service relationships: Emotionally loyal
customers will forgive minor errors in their experience
and maintain their loyalty. Also, emotional loyalty is
often associated with price premiums in household
brands that have no noticeable differences in form, func-
tion, value, or convenience.*

As Figure 4.1 depicts, behavioral and transactional loyalty
are the most prevalent types of loyalty. These two types are
adequate for strong economies. Once the economy has
started deteriorating, they have little or no lasting value. The
more sustainable types of loyalty, e.g. functional, cognitive,

* Source: Stuart Ayling.