Customer Loyalty from a relationship lens
For any given business there is a greater likelihood of getting customers from the closer proximity of the store. The likelihood decreases as we go further from the store. It also varies from business to business.
For example, all being equal you are likely to buy groceries from a shop next door than the one which is miles away provided prices, availability and other elements are comparable.
Secondly the preferences to travel a distance varies from product to product given all the rest is same.
For example, you are likely to travel a shorter distance to buy a cup of coffee than to buy a piece of furniture. There is correlated to materiality of transaction and impulse required for purchase.
Research done by a charity organisation indicated that materiality plays a significant part in distance travelled with an exception of tourism (or where discretion is involved)
Similar scenario applies when shopping, the spending goes up only then people like to travel greater distances.
The other interesting observation we had on our projects is that the distance traveled also depends on the time it takes to the destination. The price the driver has to pay to deal with congestion also impacts purchase decision.
Type of location determines where it gets its customers from. Low value and large number of transactions represent impulsive purchase. The impact of impulse will vary based on disposable income of people in that area. It is essential that one measures the number of passersby who are impulsive buyers and fall in the target market category.
We cannot discount the agglomeration effect here. When a person who may be flying in from interstate of another continent to visit a destination engages in impulsive purchase.
These impulsive transactions usually come in a bundle or an impulsive disposable bundle that exhibits its trait multiple times within a day or in the duration of a visit as any given visitor has allocated.
Getting a good idea on this topic helps in levelling up a business. You would have seen that many hotels or resorts are built far away from the habitation to keep the construction costs lower and also to keep the guests in to take advantage of their discretionary budget. The distance they may be required to travel for other purchases is huge. Same can be observed why minibar prices are generally high.
However, you will observe that the restaurant and hotels that are within the vicinity of other shops tend to keep their prices marginally higher and run pricing models so that maximum value flows to them.
Given the above scenario we have four different type of customers
Let us look at the above example, it is very interestingly portraying how customers like or prefer to shop at different shops. In the diagram, the X axis can be taken as conformity and the y-axis be taken as consistency. Think of it as it as a tap, that tap can have water coming out had a very ambient temperature it is conformity. The tap can have water flowing at a steady stream of the flow.
If the temperature conforms to be ambient all the time and in the consistency is there the flow will be steady all the time. It is like a happy marriage everything is predictable. In a shopping scenario customer lifetime value is great.
The second scenario can be treated similar to a dating relationship the temperature may be hot or the flow is steady. The customers in this kind of far relationship to shop might still love to buy and the shop when the need arises but a steady pattern not yet emerged it's like when trying to eat out sometimes you try Chinese I sometimes Indian.
The third scenario can be treated analogous to promiscuous relationship. There is no warmth, and the flow erratically changes. People are shopping around then experimenting they're looking for a cheapest bargain, sometimes they're not sure what they want. You go to window shopping you check things out ask for prices. You may end up buying the stuff online. More on these customers later.
The fourth scenario can be very similar to a paramour relationship, the temperature is it ambient, but the flow is not steady customers love the brand or the shop, but then they fall back to the preferred brand. Sometimes paramour gets upgraded to a partner. An example here is the users moving from Ford car to Lexus car to a Ferrari. The relationship with brand changes with change in wealth and disposable income.
Based on the research by A C Karunaratna at University of Ruhuna (Karunaratna, A C. (2015). PROPENSITY TO CUSTOMER SWITCHING: A REVIEW ON APPAREL STORES. European Journal of Business and Economics. 10. 10.12955/ejbe.v10i2.695. ) The key factors that cause customers to switch can be caused by
1. Inferior Quality
2. Stock Unavailability
3. Service Failure
4. Stressful Atmosphere
5. High Price
Disclaimer: The article provides an insight into customer loyalty from a relationship lens. It is merely illustrative in nature. Author does not assume any liability from the above content, both incidental and consequential. If you do not agree with what is stated here you do not have to read it.