The loyalty ripple effect: Appreciating the full value of customers

The influence of loyal customers can reach far beyond their proximate impact on the company. This impact is analogous to the ripple caused by a pebble tossed into a still pond. In this article we introduce the loyalty ripple effect construct and define it as the influence, both direct and indirect, customers have on a firm through (1) generating interest in the firm by encouraging new customer patronage or (2) other actions or behaviours that create value for the organization. That is, in addition to their revenue stream, we suggest loyal customers may engage in several behaviours, including word‐of‐mouth communication, that add value to or reduce costs for the firm. In our discussion, we provide some examples to illustrate our point and conduct an exploratory study related to arguably the most salient ripple generator, word‐of‐mouth communication. The paper concludes with managerial implications and provides some suggestions for future research.