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Exploring Loyalty by Customer Demographic

Guest blogger Judy Wang is a researcher at the Customer Contact Council, a sister program of the Market Research Executive Board. 

I moved to DC a little more than a month ago, and I can’t even tell you how many different bars, restaurants, and salons I’ve tried. And who’s to blame me? With dozens of Groupon-like deals flooding my inbox every morning, my attention and loyalty are at an all-time low. But what happened to the idea of being a “regular” at an establishment? Has that gone out the door in this era of large data and choice, or am I alone in my unfaithfulness to stores and brands?

Interestingly, research conducted on customer loyalty shows that my behavior is a part of a larger trend: loyalty varies widely by demographic, and a person’s age and occupation can be a strong predictor of their purchasing behavior. Knowing this relationship—and more importantly, understanding its causes—can have important implications on how you engage with customers.

So here’s what the research said:

More mature age groups are significantly more loyal than younger counterparts. When behavioral loyalty (as measured by the number of other like-service providers the customer visited in the past two years) and repurchase intention are considered among a diverse age group, those who are more mature (ages 35-54 and 55+) exhibit significantly more loyal behavior than those who are younger (18-24 and 25-34). This finding can be attributed to three age-dependent reasons.

  • Mature consumers have different social constructs and social needs. Whereas younger cohorts have large social circles, mature consumers tend to have fewer, but deeper, more meaningful social relationships. As a result, this “older” cohort relies more on social support—the recognition, familiarity, and sense of belonging that being a “regular” service customer offers.
  • Older consumers experiment less with new brands. Of those in the older age brackets (65+), 65% maintain loyalty to familiar brands. Meanwhile, only 47% of the younger brackets (20-24) do so. This is due to differing levels of confidence in service and quality. With age, people become more skeptical of providers, and therefore older customers tend to stick with tried and true brands.
  • Customers differ in their optimum stimulation level (OSL). This concept explains an individual’s level of affinity for environmental stimuli. High OSL individuals engage in exploratory and switching behavior, while low OSL individuals seek constancy and familiarity. Here’s where it gets cool: OSL has been shown to negatively correlate with age, and as a result, the younger customer is more likely to seek new brand experiences and sample new service providers.

Customer loyalty differs according to occupations. The same metrics of loyalty were analyzed along occupation, and retirees and home makers were found to be significantly more loyal than students. While occupations don’t perfectly capture income and situation, they have strong implications for the two.

  • Low-income groups are less loyal than high-income groups. Perhaps not surprisingly, customers who have low income (and, thereby, high price-consciousness) tend to seek the next big deal. As my colleague noted, daily deals draw bargain-hunters, and bargain-hunters are disloyal customers. In fact, one study found that only about one in five daily-deal-buyers returns to the business as a full-price customer. It makes sense, then, that students (who typically have the least income and highest price-sensitivity) would be significantly less loyal than retirees (who tend to have larger budgets).
  • Occupations affect socialization. Similar to age, occupation is a strong determinant of social context. Those who are exposed to larger social circles, like students and professionals, require less additional social support than those who have relatively smaller circles, like retirees and home makers. Therefore, students and professionals are likely to be less loyal than retirees and home makers.

What are your thoughts? Have you noticed a relationship between customer loyalty and demographic? Has your company changed its strategy in response to this relationship?

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