Evolving Consumer Loyalty

Brand Obsession 

Is there a brand you LOVE? A brand that you buy without thinking twice. Do you talk about this brand with friends and family, so they can gain the benefits you’ve appreciated from this brand?

Likely, several brands come to mind. Maybe a car company, beverage company, service company, food company, shoe or apparel company?

What specific brands come to mind?

Here is the latest list from several experts/studies:

Top Brands with Brand Loyalty That Always Stands Out, No Matter What*

None of these brands should come as a surprise. Whether you yourself have interacted with them or not, you have heard of these brands. They provide something above and beyond in their category. It usually is a combination of things: product/service quality, consumer experience, access to their brand across all channels, personal attention, etc

They ALL have had a strong consumer brand loyalty for quite some time and continue to maintain it. They don’t sit on their laurels. They constantly put their consumers first and update their messages.

Chasing Loyalty (What is it?)

Before we get into details on how to achieve this kind of Brand Love - let’s start with some definitions. What is Loyalty?

1. There are Loyalty PROGRAMS - systematic, programmatic efforts that drive loyalty through currency, points, tokens, packages and messages typically through a formal rewards program.
2. Then there is just Loyalty -  a state of mind, an emotion with a brand, an obsession for a brand, and a love for a brand

Over time, however, we've made the word ‘loyalty’ relate only to loyalty programs. It’s replaced and dominated how the industry talks about driving both acquisition and retention - only through programs

Several experts define loyalty as the following:

“With Loyalty, your customers are willing to pay more, resist other brands, maintain a relationship with, and be an evangelist for the brand” - Jill Griffin

Lou Ramery (Loyalty Expert, former CEO of East/West agency, Managing Director at Relationship Marketing Performance Group) defines loyalty as “the ultimate measure of customer’s relationship to a brand” and increasingly, the brand’s commitment to its customers”

Real loyalty drives both emotional and rational needs between a brand and a consumer. The emotion comes from a brand driving ongoing value exchanges or utility with a consumer through promotions, experiences, personalization, knowing them, entertaining them, education etc) Think about a friend and your ongoing relationship with them. A strong friendship is mutual. A consumer and brand have a similar relationship. A brand shows their love for the consumer by offering unique things (free shipping, free returns, surprise and delights) and a consumer shows their love by buying more, recommending their product, and advocating for the brand.

Loyalty is a behavior that can be gained  through a multitude of benefits while also driving a direct relationship with your consumers. This can be achieved independently or through a formal program with perks and rewards.

The ultimate ‘Loyalty’ is represented through advocacy and attitude toward a brand. This is usually achieved through an incredible experience which typically results in stronger sales and a longer term relationship that yields incremental lifetime value results.

From Loyalty Evolution to Loyalty Revolution

Loyalty has existed in many forms over hundreds of years.

In fact 90% of brands have some type of loyalty program* so why don’t most brands have amazing loyalty? It is clear that not all programs or loyalty efforts are created equally

Historically, many programs have driven transactions versus true affinity or love towards a brand.

Loyalty has historically existed in many forms. Going back to the days of green stamps, which started in the late 1800’s, as a form of a rewards program for grocery and gas stations and continued until they lost their cache and were eventually replaced by more innovative programs in the 1980’s. It wasn’t until the 80’s when brands figured out the advantages of having a loyalty program:  the data! It was a means to get the CONSUMER data. These programs  emerged in the 80s when airline, grocery, and hotel programs surged. At the time, it was usually free trips/stays and discounts. This was the era of points collectors and mixing and matching between credit card companies to maximize the purchases you made with a company. Over time ,the abundance loyalty programs drove program fatigue. Not only were loyalty programs over saturating the marketplace, but many became too complex for consumers to see their immediate value/benefits. Consumers spent more time managing points, interpreting the utility versus enjoying the benefits.

We ended up with program overload across so many industries: retailers, airlines, hotels, and grocery stores. They all had reward programs that started to look the same. These loyalty programs grew more transactional and with limited unique value specific to the product or brand. Consumers joined only for discounts and coupons.The few that did stand out became overly complex, making it exhausting for the consumer to extract any true value.

Today, we have redefined the potential of loyalty programs. Rewards, points, and tokens continue to drive these programs but consumer expectations have now changed. They have evolved into consumer experiences, personalized engagements, driving a value exchange, and while still capturing the coveted consumer data

Why Loyalty? 

Traditionally, many brands have focused on acquisition versus retention. This imbalance created an ongoing challenge. Most brands want to get to the ‘now and near sale’: immediate revenue gratification. This was driven by financial goals to hit quarterly sales numbers. In fact, most marketing dollars (80%)* are used for acquisition efforts. Part of this disconnect stemmed from retention challenges. It requires time, resources, money, expertise, and consumer data to be successful. Acquisition is basically a one time buyer without the guarantee of any repeat purchase.

Brands have finally recognized retention as a concept and frame of mind critical towards brand and revenue growth.

Why? Marketing dollars have become more difficult to secure with every dollar being justified. Marketing is typically a cost center at most companies; however, it should pivot into an INVESTMENT that drives lasting impact*. One effective way to do this is through Loyalty. It’s not enough to just get the sale but instead drive something that will last you for the long term and drive a consumer lifetime value

Key reasons brands need to lean in on retention:

• Consumer fickleness - The pandemic drove consumers to other brands (75% *) - consumers are fickle, demanding and are also in control. Any loyalty strategy will help put the brand in a more powerful position with the consumer. 
• Driving Marketing efficiency - As we enter a time of potential economic uncertainty, companies will squeeze more from their limited or reduced budgets. A strong loyalty strategy allows you to spend less but do more. You are using the data you already have about your consumers to drive incremental behavior. You have a direct to consumer measurement capability that informs attribution, results measurement, return on advertising/marketing investment - all key and critical when business pressures are present.
• Personalization - The new modern consumers want a ‘relationship’ with brands they buy from. They want to trust, believe and have a true partnership. Customers have high expectations from brands now. They expect personalized, seamless, ‘show me that you know me’ relationships. Now with the ability to develop more personalized experiences through the data we can customize each touchpoint and drive a deeper, more meaningful relationship. Why give a generic benefit when you can automate a more personal one? The technology and data finally exists to execute this in a scaled and automated way. Mass personalization is no longer a pipe dream but a reality
• Technology has finally caught up! We now have the ability to 1) get the data, 2) activate that data across every consumer touchpoint 3) drive scaled personalized experience
• Ability to build a customer database - Loyalty is and always will be the primary driver of consumer data capture and ongoing depth of insight from two-way dialogue with best customers. It will allow you to form a relationship with your consumers by capturing their name and contact information plus so much more over time
• Identify prospects - Leverage the power of predictive analytics to develop lookalike models driving new acquisition efforts
• Driving a consumer<>brand relationship vs transactional relationship – transactional relationships are one way and fleeting, requiring a treadmill mentality that chases after a sale - better to pull through than push every business day!

There are also many intangible benefits that can easily be forgotten or not considered

Why NOW?

Loyalty is a must-have for any brand. You can’t build a business entirely from  acquisitions. It might seem like a winning strategy initially but it will catch up with you. Natural consumer churn happens - 20-40% of customers each month*. While consumer churn is a natural process and should be expected, brands should do everything to keep their current users as engaged and active as possible. It’s a lot easier to keep a consumer than to obtain a new one. Brands will save money while also driving a lifetime of purchases vs ‘one and done's’.  

The research shows that a strong loyalty strategy will result in the following:

• Proof through the metrics: Loyalty has a longer term impact.  You not only get the initial sale but you get the LONG term sale Specific metrics that Loyalty drives*:

• It costs 5X more to acquire new customers than it does to retain current customers. Existing consumers are also 50% more likely to try a new product of yours as well as spend 31% more than new customers *
• Companies can boost profits 25% - 85% through increasing retention efforts*
• Loyalty leaders growth revenue 2X as fast as their industry peers and deliver 2-5X shareholder returns in the next 10 years*

Crawl, Walk, Run with Loyalty 

What are the various levels of loyalty and where are you? 

Identifying loyalty maturity can you help you get started or improve on your current efforts. Maturity is determined across these dimensions a) data maturity (gathering it, using it, activating it but also driving to full automation)  b) The Brand and Consumer relationship type:  transactional to emotional c) Technology driven - manual to automated practices (analogy to ML/AI allowing time savings but also scalability)

Value levels of Loyalty are defined below:

Level 1: promotion driven marketing where you are just driving an immediate sale 

Level 2: programmatic (typically a loyalty program) 

Level 3: remarkable experience across all consumer touch points. Your brand is driving a sale but at the same time potential for more ongoing sales. Thing includes something unique and distinctive for a consumer. It is also solving a consumer problem versus random perks

Different terms have been used to describe the various types of Loyalty: Big 'L' vs Little 'l'. 

Big 'L' is driving an affinity. Little 'l' is creating the parts in place to get and sustain it. Loyalty expert David Slavick, Co-founder and Partner of Ascendant Loyalty Marketing www.ascendantloyalty.com suggests the following

“Big L is what you build on over time to affect behavior and get a personal dialog established for a lifetime. Big 'L' is achieving a true emotional connection that creates strong affinity, advocacy and influencers. Big 'L' is the “x factor” that drives things like referrals, valuable voice of customer insight, and social sharing. 

“Little ‘l ‘is a one-way transactional relationship. Big ‘L’ is the total comprehensive way to realize true two-way dialog by leveraging the data at a personalized level, while little ‘l’ is basic and simplistic “

The main point is that one is systematic with a program wrapper around a bunch of benefits and the other is emotional and experience driven. Today, Loyalty Programs want to drive more emotional impact and Loyalty efforts outside of a program want to scale their individual efforts. Putting the two together is ideal, but retention efforts don’t necessarily require a programmatic wrapper to be successful. The nice thing about a formal program is that it can be published, shared with consumers, codified and scaled so consumers can see what they are joining. It has the dual benefit of driving both acquisitions (consumers want to join) and retention (consumers want to stay)

Whether you have a formal Loyalty program or are just driving retention efforts, brands need to think about driving loyalty across ALL points of the consumer touchpoints. Providing value with each and every consumer touchpoint. This goes beyond just marketing and can include website, customer service, packaging, store sales, etc. Each touchpoint should be seen as an opportunity to drive loyalty for a future relationship. If you start developing touch points in this way, you will fundamentally drive a different connection with your consumers. Developing a longer term relationship vs an immediate sale will change how you develop consumer facing assets. You will have profound and fundamental changes in the language, the value exchange, the creative, your CTA to consumers. Consider how a customer service representative would talk to a consumer if they were resolving a bad delivery problem while ALSO trying to develop a life long relationship

Many brands are shifting from straight up currency and programmatic efforts towards more experiences, partnerships and expanded engagements

Some notable Loyalty programs include: Sephora, Starbucks, Nike, Nordstrom and Amazon Prime (a subscription that actually drives loyalty)

An effective loyalty program drives INCREMENTAL behavior - otherwise it may not be worth the time, effort, and money to build. The investment must drive impact more than if you did nothing. This is critical because creating and executing a full loyalty program requires management tools, resources, a strong strategy, current/rewards knowledge and financial rigor to sustain and justify it

How to get started

So whether you are a brand that already has an amazing loyalty program or none, you need to always be evolving to continue to map and improve your consumer retention. Key areas to understand loyalty:

• Understanding consumer journeys - what is the consumer path - if you can dissect this and cut it even further by segment - even better. This will help drive personalization and ultimately incremental impact. 
• Pain points - what are your consumer's or prospect's issues, in your category, and how can you possibly solve them
• Determine your value exchange - what can you offer your consumers that they would be willing to engage with you more, provide a name/email, be a brand evangelist, etc. Brands like Vans, and others have figured this out. It can be done in a way that isn’t self-serving but feels natural and organic with a consumer. When done well - it not only works but you will hear about it in social posts, surveys, product reviews and more. Think about your own experiences. When was the last time you gave your name to a program or signed up for a loyalty program? what made you do it? the promotion/discount, a friendly associate asking you to join, or something else? What drove you to share your personal identifiable information? Break down audiences by what benefits are important to them
• Leverage the data - it’s not hard to get any data nowadays, it’s everywhere! Specially the ‘consumer’ data is critical here. If you aren’t using it, then you are wasting your efforts. The data can be used across your entire organization to drive less churn and more connection with your consumers.
• Determine a ‘Loyalty program’ or a ‘Best customer’ program - this is a fundamental question to ask. Do you need to drive incremental behavior or are you trying to ‘thank’ your best consumers? Your best consumers might be maxing on what they will spend with you limiting your impact. However, you want to show customer appreciation without breaking the bank or creating a program unnecessarily. They might be less valuable/loyal consumers today that a good loyalty program could convert into higher LTV consumers. This decision will help determine the cost structure and platform needed for your retention efforts.

Driving Happy Returning Consumers

If you have gotten this far, I would hope you are now a loyalty believer.

While loyalty isn’t easy,  a strong strategy is foundational to driving short and long term impact 

Key Takeaways:

1. Loyalty is a frame of mind - not a transaction. The goal is to drive EMOTIONAL loyalty. This can be done through a formal program or through key consumer touch points
2. Loyalty doesn’t have to be programmatic - As stated before it’s about driving a relationship with your consumers. Figure out what your consumers want and need to drive retention and then decide if you need a program to do this in a scaled way
3. Loyalty is critical for a business to be sustainable - You can't drive a business purely through acquisitions. Your current customer base is already buying from you. It's a lot easier to get more from them than paying to acquire a new consumer
4. Loyalty needs to be embedded in ALL parts of your business - Whether you have a program or not, it needs to be an enterprise wide effort. It encompasses all parts of the business to have a seamless experience and achieve the most significant impact on profit. This shows consistency across all consumer touch points form service, website, retail, media, packaging, etc
5. Loyalty requires financial rigor - Loyalty when addressed from “the bottom up” benefits from an in-depth financial model to determine its potential contribution to P&L over a predefined time frame. Invest in this upfront when building the business case from the start, or exploring a re-fresh to an existing program
6. Scaling loyalty requires data - As stated before, find ways to obtain more consumer names, enhance the data, and continue to leverage it. Quality data is critical for success along with strong data governance practices.
7. Ever evolving - Loyalty is not a ‘set and forget’ effort but instead it’s a dynamic ever evolving capability to drive engagement based on the needs and mutual benefits between the brand and the consumer. Expect to change and evolve as consumers always do, but also as new technology becomes available. Have an ongoing improvement mindset 
8. Short term vs Long term - Your brand loyalty efforts can be in grouped into the following 1) short term - get the data 2) long term - use the data. Use these as a guide when developing your retention efforts
9. Differentiation - if your product is NOT differentiated (eg. food, beverages, toothpaste, paper products, etc). loyalty is a way to differentiate by using the experience as the innovation. This is typically done through the data and using digital channels
10. Future of Loyalty - There is a lot that we can do with the data and only time will tell. Loyalty is moving beyond just currencies and more into gamification, experiences and partnerships. There are also new opportunities that are being created now through crypto currencies, NFTs, and Web3 as a means to drive exclusivity and scarcity. Leverage these exciting new opportunities as you follow the path toward Big L!

Resources:

Kantar Brand Index 2022

Customer Loyalty by Jill Griffin

Harvard Business Review - Customer Value

Accenture Loyalty

HBR - make your loyalty payout

What is Loyalty Shopify 

Why Loyalty is so important  - FORBES 

McKinsey: New generation of customer loyalty