Marketing Study: Companies Benefit Most From Examining Where Customer Loyalty Lies

The study was conducted by Robert W. Palmatier, Evert McCabe faculty fellow and assistant professor of marketing in the Michael G. Foster School of Business at the University of Washington; Lisa K. Scheer, the Emma S. Hibbs Distinguished Professor and associate professor of marketing in the MU College of Business; and Jan-Benedict E.M. Steenkamp, the C. Knox Massey Distinguished Professor of Marketing and marketing area chair of the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.

Based on their findings, they strongly recommend that businesses develop strategies that encourage not only salesperson loyalty, but also enhance the company’s products and value. Doing so, Scheer said, results in loyalty to both the company and salesperson; in the long run, it is good for sales and revenues.

“Companies that believe they understand loyalty among their customers may be fooling themselves,” Scheer said. “They may not really understand precisely where that loyalty is directed. Is it to specific individuals who service them and work with them, or is it with the company and its products or brands?”

The study focused on business-to-business relationships between 362 industrial buyers and the manufacturers' representative salespeople who market products to buyers in a wide-range of industrial markets. Three sources of data were analyzed: the buyer provided information about his/her relationship with the selling company and salesperson; the salesperson provided information about the same relationships with the buyer; and sales managers shared objective information about buyers’ purchases. Scheer said despite having multiple sources to purchase from and numerous resources to compare prices, the bond between buyer and salesperson greatly influenced the transaction.

She said the consumer industry operates much the same, with personal relationships often determining which company a consumer patronizes.

“Relationships play a big role – whether customers are loyal to buying from one source or another,” Scheer said. “In the study, three-fourths of the buyers had other sources they could go to for exactly the same product; but they stayed loyal to a particular company. Even in a business-to-business context, the personal relationships are important. Companies need to understand the drivers behind customer loyalty. Is it vested in elements the company really controls and owns – like the brand, trademarks and products? Or, is it vested more in things that are not under the company’s control? What happens if a salesperson leaves to join a competitor? To ignore where loyalty is truly directed puts a company at risk.”
Scheer and her colleagues suggest that companies utilize more in-depth surveys to better understand factors that result in loyalty. Current approaches, she said, are often too vague – only asking “how likely are you to buy these products again or patronize us again? They don’t get into why’s.”

The study, “Customer Loyalty to Whom? Managing the Benefits and Risks of Salesperson-Owned Loyalty,” has been published in the Journal of Marketing Research.