Loyalty is the ultimate goal in battle for consumers’ hearts

Brand relationships are not what they used to be, but our Top 1000 survey reveals the factors that keep customers faithful to their favourite names.

Every year in our Top 1000 brands survey, we highlight the shifts in rankings among brands in different categories. Some of the more notable changes are outlined below.

Far less sexy is the consistency we see from year to year — how consumers across Asian markets continue to approve of some brands year in and year out.

But brand loyalty is being challenged on many levels. The rise of social media and review sites like Epinions and TripAdvisor are putting more information about brands into the hands of consumers. More than that, they challenge brand promises unrelentingly, while actively pointing out new alternatives.

“There’s not less loyalty because people are less loyal,” says Hari Ramanathan, Y&R chief strategy officer for Asia based in Singapore. “There’s less loyalty because there is more information available and there is a lot more innovation encouraging people to switch.”

He points to the multiple varieties of Oreos in China (19 by one count) as an example: “Extraordinary innovation has resulted in more and more people experimenting and therefore not having the time to settle down with one product.”

Younger consumers who have grown up with social media epitomise this fickle relationship with brands, backed up numerous research reports.

“Millenials are very much about being educated,” says Mary English, general manager at International Customer Loyalty Programmes (ICLP) in Hong Kong. She says younger consumers need a lot of content to first compare and contrast brands before getting engaged.

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Don’t expect any loyalty in return

“They’re still playing around,” English says. “They want to have a romantic relationship, but you know what, they’re also cheating on that brand with others.” Her consultancy very much views brand loyalty in romantic stages, from one-off passionate encounters such as a flashy fast-fashion purchase, to the intimacy of data-sharing that fuels customer engagement, to the true commitment of consumer brand advocates and KOLs.

To Ramanathan, only this latter group is truly brand loyal.

“Loyalty comes at a cost,” he says, using the example of a twelve-year-old boy lined up outside a bookstore 24 hours ahead of a Harry Potter release ready to pay full price. “That’s loyalty.” He notes that few brands — such as Apple — have earned it.

By that measure, Ramanathan says brands really must deliver exceptional products and service experiences consistently. High-end hotels like Four Seasons don’t rely on loyalty programmes, he observes, but service excellence that people are prepared to pay for.

“That’s the only thing that will gain you loyalty,” he says. “There are many other things that will lead to repeat transactions, misleading one into thinking there’s brand loyalty but there isn’t.”

However, not everyone views brand loyalty quite so strictly. In our survey, where brands range from tyres to toothpaste and banking to baby food, consumers ranked customer service in the middle of the pack when choosing the top factors that kept them loyal to a brand. So what were the bigger factors?

Quality and reliability

Quality was the number one factor cited by Asian consumers when it comes to gaining their brand loyalty, ranking highly in the biggest consumer markets of China, India and Japan and ever more so in places like the Philippines and Indonesia.

Reliability is closely related to quality, factoring most highly in Japan, and fourth overall across Asia.

The findings are a good reminder for marketers who love to dwell on the importance of values, and experiences. But consumers care about products first. When they buy, the basics need to be met first — milk powder must be safe, bank accounts must be secure, phones must not break down — before enjoying further brand benefits and experiences.

But Pooja Dixit, strategy director at DIA Brand Consultants, Singapore, says brands should be more than their products. “It can’t be mutually exclusive. Product and experience must go together.”

Money, money, money

Value for money was the second most important loyalty factor, followed by price. Discounts factored sixth overall. The distinctions are important.

Value encompasses everything a brand delivers for money spent. So value may be derived from exclusive offers, superior design aesthetic or customer service. Australians and Singaporeans in our survey appreciate value for money most.

Price is the more straightforward factor, based on what customers want to pay for a product. Interestingly, it factored the lowest in the fast-growing developing markets of India and China, but much higher in Hong Kong and South Korea.

Discounts, most brand experts agree, may encourage repeat transactions but actually do very little to instil loyalty. Ramanathan argues that it moves people away from loyalty as it lets them know that they can get the products for cheaper.

Ads and CSR factor less

Advertising and marketing campaigns ranked as the least important factor in encouraging brand loyalty. Our readers may be chagrined, but this is understandable. A campaign’s purpose, after all, is to convince consumers how great brands are in all the above categories like quality, reliability, value for money and customer service.

Perhaps more disappointing for some is the ineffectiveness of CSR in winning consumer loyalty. It ranked second last overall and hardly registered at all with Singaporeans and Malaysians, faring better with Thais and Chinese.

Given the demands of social media, however, more brands appear compelled to lay out what they believe in. English, at ICLP, says CSR is important to millenials who generally won’t relate with a brand unless it resonates with their values.

Loyalty programmes under scrutiny

Loyalty programmes were the third lowest factor, registering lowest in emerging SEA markets like Thailand and Vietnam, while doing slightly better in Singapore and Australia. High costs and questionable effectiveness have taken the shine off.

“Organisations globally spend billions of dollars each year on customer loyalty programmes that don’t work like they used to,” says Alison Kennedy, managing director at Accenture Strategy, who surveyed more than 25,000 consumers across 33 countries on the topic. “One of the telltale signs is the sheer number of loyalty points sitting dormant, unused, in consumer accounts.”

Kennedy says a common problem is a failure to offer the right rewards, but programmes fare better when they take time to understand the customer.

“Loyalty programmes are as effective as how they are managed, agrees Dixit. “Highly effective loyalty programmes are built around the changing needs of the customer.”

English agrees, noting loyalty programmes can still have a real impact if they can shift transactional arrangements, such as point-collecting into more emotional plays, like special experiences targeted to a customer’s values. She also reminds retail clients who balk at the cost of loyalty programmes that it can be six to 10 times harder to bring in a new customer than retain a regular one.

Loyalty still has rewards; it’s just harder to earn.