There has been a great deal of interest in the psychology of customer loyalty and its implications on market strategy. Across industries, loyal customers are seen as a metaphorical “gold mine” and are an essential component of long-term success.
Customer loyalty, or consumer retention, is built into some industries (Service Based Industries), but is terribly illusive in others. Unfortunately for most companies, the public is fickle; and their preferences change with the blowing winds. This creates one of the primary barriers to customer loyalty, and is an ongoing challenge. A deeper look may reveal the reasons behind this.
The three primary factors that influence customer loyalty are:
* Customer Satisfaction: prior expectations of quality vs. actual performance received.
* Perceived Alternatives: the difficulty and cost of switching.
* Strength of Business Relationship: the level of satisfaction with recent experience, overall perception of quality, customer commitment to the relationship and bonds between parties.
Once established, it can be a very difficult task for a company to influence these factors without changing their business model. However, the development of social networks and online communities has opened the door for companies to strengthen the bond between customer and company by developing personal investment.
Case Study: Sports Fanatics

Sports fans are among the most loyal “customers” in existence. They often refer to their team as “we”… “I can’t believe we lost that game”, “We should have never drafted Ryan Leaf.” To a large degree, their loyalty arises from a large personal investment of time and energy.

The psychology of sports fanatics gives insight into the relationship between company and customer. The more the customer is “personally invested” (time and energy) in the company or product, the more loyal they will be. This theory has applications across the board, and can be used to cultivate “personal” relationships with consumers.
A look into customer loyalty development in Product based industries
In many product dominated industries, consumers are fundamentally separated from companies. This is especially true in the wine industry. With little to no interaction between consumer and winery, it is difficult to cultivate bonds between the two. In most cases, the wine itself is the only point of interaction between winery and consumer.
For a select few, this is enough to convert casual consumers into life-long customers. But for the majority of wineries, their wine is just not enough. Ideally, wineries would like a “sports fanatic” following to their winery. But because casual consumers are not personally invested (time and energy) in their product, this is highly unlikely.
However, there is hope. Web applications like [Flickr](http://www.flickr.com), [YouTube](http://www.youtube.com), [MySpace](http://www.myspace.com) and [Calwineries](http://www.calwineries.com) (specifically for wineries) allow large scale personal interaction that was once impossible. They allow consumers to ask questions, make comments, form communities and become generally involved.
Through this process, the casual consumer forms associations with the winery. In developing this relationship, the casual consumer has devoted a great deal of time and energy, thus becoming personally invested. This strengthens the bond between the two parties and fosters customer loyalty.
Because every business is different, there is no silver bullet for customer loyalty. However, seeing your customers as individuals and creating a product that encourages them to personally invest in it, strengthens the bond between your company and your customers.