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Marketing Definitions
Loyalty
Marketing
We instinctively understand that when customer
loyalty increases, so do profits. And in this case
our instincts are correct, with many studies conducted
over the past twenty years proving just this point,
which is why we see so many 'loyalty programs' being
developed. But what is loyalty and how do we harness
it?
Let's first look at a dictionary definition of
loyalty:
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"A
feeling or attitude of devoted attachment and
affection; or the act of binding oneself (intellectually
or emotionally) to a course of action." |
This seems good, an intuitively correct definition.
The problem for marketers arises when we ask: What
is it that customers are binding themselves too?
Many marketers measure the effectiveness of loyalty
programmes with a combination of behavioural
measures. In this case loyalty is seen as 'share
of wallet', 'retention rate' or 'purchase
frequency'.
But these measures of loyalty are too limited.
They are likely to lead the marketer towards tactical
initiatives that only create customer loyalty to
the program: its points, prizes, and promotions.
The danger is the customer is trained to expect
a reward every time they buy, cultivating an intellectual,
almost cynical commitment.
I saw another perspective in a marketing magazine
recently, where a commentator suggested that loyalty
marketing was about:
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"Creating
customers who don't need ongoing marketing investment
and therefore are more profitable". |
This type of perspective is a natural backlash
against the 'points and prizes' mentality, but unfortunately
it is not very realistic. It's a little like saying
we don't need to put any effort into our personal
relationships, because we've already secured a commitment.
But we all know what happens then.
Successful loyalty marketing programs go beyond
both of these approaches to create loyalty to the
brand. Performance is judged with a combination
of behavioural and attitudinal measures,
and the objective is to focus and deepen the existing
customer relationship, by offering relevant rewards
that reinforce the brand values.
Consider this quote, from 'Scoring Points: How
Tesco is winning customer loyalty':
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'…
loyalty marketing is a strategy, not a tactic.
The reward is no more a bribe than a birthday
present from your partner or a dividend to a
shareholder is a bribe.' |
The
Tesco Clubcard is one of the world's most successful
retail loyalty schemes, and has helped transform Tesco
into the UK's leading retailer. The book 'Scoring
Points' defines six ways that the loyalty programmes
can create value: from customers making more purchases
more often, through to tracking trends, providing
better service, and promoting trust.
Interestingly,
not all the benefits are directly related to the
customer relationship. Many benefits come from the
better information that management has about the
business, and how this can be applied to a range
of decision-making, including, for example, the
planning of new store locations.
For
more details about the book, click
here.
Ask
yourself:
Are
my initiatives creating loyalty to 'points and prizes'
or to the brand?
Am I really measuring what it is I want to achieve?
Have I really thought through the benefits that
loyalty marketing can deliver to my business?
Brand Manual
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