Customer Loyalty As A Stabilizer During COVID-19
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As the world sits in apprehension for what may result from COVID-19, LeagueSide thought it’d be valuable to take a lens to pandemics past to not only understand how businesses were impacted, but also why certain businesses fared better than others. We were particularly interested in understanding how customer loyalty played a role in stabilizing business volatility, and consequently, we examined how airline stock prices varied over the course of the H1N1 pandemic of 2009.
Given that every industry is being impacted in some way by COVID-19, we find it important to communicate that even in times of uncertainty, there are still things in your control that you can do to help mitigate the long-standing consequences that your business may face as a result of this current pandemic. As such, we encourage companies to take a deep look at how they can proactively provide new value to their customers, as those that make short-term economic sacrifices to build long-term loyalty may find themselves a few steps ahead of their competitors when the world returns to its normal operating state.
TL; DR: the airlines with higher Net Promoter Scores (NPS) experienced less severe fluctuations in their stock prices than those with lower NPS.
We chose airlines for three reasons: (1) their businesses are sensitive to pandemics such as COVID-19 and H1N1, (2) we were able to find a reasonable NPS benchmark from a 2014 US Consumer Airlines study that surveyed over 2,300 US consumers, and (3) we could access the stock prices for five of the airlines included in that US Consumer Airlines study.
We chose NPS because it is arguably the closest standardized measure of customer loyalty. Medallia, a leader in customer experience management, defines NPS as, “a proxy for gauging the customer’s overall satisfaction with a company’s product or service and the customer’s loyalty to the brand.” In short, a higher NPS reflects a deeper sense of customer loyalty to a given brand.
THE NPS SCORES
In an ideal world, we would have obtained the NPS of these airlines from 2009-10, but we had to make do with the scores from 2014. Although the scores have likely changed from year-to-year, we’re making the assumption that these scores relative to one another were the same (Southwest & JetBlue had the highest, American & United had the lowest). Of the airlines included in the US Consumer Airlines study, five were also publicly traded on the stock exchange at the time of the H1N1 outbreak.