Article by Chris Hall, commercial director, Motif
So many of our life choices are driven by loyalty. You only have to look at brands such as Nike, Apple or even a car such as the Volkswagen Beetle to see that the devotion and loyalty to these brands and products is what drives consumers’ behaviour.
It’s quite understandable that customers should build a strong bond with the brands they like. This reflects a deep emotional desire that goes beyond the rational thought or the lure of economic incentives – being loyal to a brand resonates with the human need for belonging. This need is often referred to as fandom or advocacy. Many studies have looked at this in more detail and concluded there is an emotional ‘stickiness’ inherent in loyalty. Simply put, the emotional elements of loyalty are incredibly powerful.
Some six months ago, we re-branded our business based on the belief that loyalty matters – it really matters. We believe loyalty should be at the top of every business’ agendaand every business plan for growth. Having spent 25 years analysing and understanding customer experience, we know only too well the importance of measuring loyalty to understand how it drives commercial outcomes.
It has been a natural evolution to use our expertise to work with our clients to determine what drives loyalty for their brand and customer base and how to apply this insight for maximum business benefit.
We began our journey by researching a range of industry sectors. The business case for measuring loyalty became clearer and clearer as we went along. Loyalty is not a whisper. We hear it in the way customers talk about the brands they like and repeatedly use. And as we’ve already mentioned, we see it in the emotional connections people make to the products or services and brands that matter to them.
Using the data and experience we’ve collected in our research (which ran over six months and included 10,000 interviews), we’re now helping brands to harness the power of loyalty. We’ve developed a loyalty formula that brings together what we consider to be the five key elements of loyalty – Quality + Value + Sharing + Closeness + Brand Magnetism.
Our formula blends the more rational decision-making elements (Quality, Value, Sharing) with the more emotionally based pull factors (Closeness and Brand Magnetism).
Quality is a fundamental and basic requirement of any brand wanting loyal customers. The quality of a product or service or how easy or convenient it is to use has to pass the litmus test. For many, value for money plays a key role as well. And we all know that recommendation (sharing) is a major influencer in brand, product or service choice.
So far, it seems quite obvious. Where our take on loyalty becomes more powerful is when you look at the interaction of these rational drivers with the more emotionally charged elements of Closeness & Brand Magnetism.
In our formula, Closeness reflects the degree to which customers feel they are treated as individuals. Closeness, though, can be complex as there can be several different factors in play. For example, is a consumer’s loyalty being rewarded or recognized in some way? Does the brand use its knowledge of a customer to tailor its product or service to suit their need? Does the customer feel as though they matter to the brand? Does the brand communicate using language the consumer can relate to?
We have seen how Closeness, for example, can be influenced by how personalised the brand experience is. So, it becomes essential for brands to understand how to communicate with consumers and their customers against what matters to them.
Brands now have a real opportunity to build tighter customer relationships by creating the right environment for loyalty-driven behaviours. A finely tuned, relevant and timely communication can generate more warmth between a brand and its customer rather than a mass-market, colder, more uniform communication, and which makes consumers feel they are just in a process and not a part of it.
With our last element, Brand Magnetism, we look at the strength of the brand itself, about how much the brand matters. How much does the brand stand out from the crowd? Do I identify with that brand? What about the brands values – is it responsible, innovative and so on? We’ve identified that brands that score strongly on Brand Magnetism are those which also inspire passion and love. They stand out (positively) from the crowd because their values are relevant, evidenced and ethical.
Havas reported earlier this year that 77% of brands could disappear and people wouldn’t care. So, what makes the remaining 23% of these ‘vital’ brands stand apart? Maybe it’s how these brands can bowl you over, be wholly disruptive and also drive seismic change across any industry. Think Amazon or Skype and you have two great examples of businesses that have challenged the status quo and their brands endure.
Using our formula, we can navigate the undeniable but fascinating complexity of what drives and sustains loyalty. We know, from our own insight, that Loyalty has an intrinsic connection with business performance. When properly understood and the right actions are taken, loyalty becomes a critical driver of real competitive advantage.
That said, all businesses today are operating in a volatile market. Everything is changing. For many brands, change offers the opportunity and headroom to do things better, to rip up the rule book and learn new things. To be a disruptive force even. And for many consumers, that is incredibly attractive.
Powerful but untapped
This leads us to conclude that loyalty is as powerful as much as it is untapped. Brands will not flourish if they continue to believe they live in a world of rational decision making and action. Given the general trend of sharing information through social media as well as posting reviews, brands have no choice but to embrace transparency. The smart ones will actively encourage it and in fact, many of the challenger brands already are.
Consequently, we believe the future of loyalty will come down, at least in part, to how brands decide to invest in understanding what encourages Closeness and equally, what amplifies their Brand Magnetism…alongside the important maintenance of excellent product or service quality and recognised customer value.
Loyalty, unlike NPS, is not a passive measure. It expresses deeper emotions and piecing together what drives loyalty will enable brands to understand properly what’s keeping their customers happy, what’s making them spend more (repeatedly) and what’s encouraging them to proactively recommend the brand they are using. Measuring and understanding loyalty tells us what makes customers brand advocates and what makes them stay that way.
So, what next?
The very first step is being confident that you are measuring Loyalty accurately. Our loyalty formula gives brands a consistent and rigorous loyalty score closely aligned with business performance outcomes. Loyalty is fundamental to retaining customers. But it’s also vital in growing market share by winning the hearts and minds of new customers and loyal customers who will spend more.
Through our work, brands now have opportunity to look at how they can improve performance across the key business metrics of customer retention, customer acquisition and increasing customer spend.
What keeps brands awake at night is how they can see off increasing competition for customer loyalty as well as manage the disruptive market forces they often have no control over. Loyalty matters, more than ever before. Our journey to understanding its potential has only just begun and a fascinating panorama awaits us.