At the same time that more brands are jumping on the bandwagon in pursuing the Holy Grail,customer loyalty is eroding across most industry sectors.
Critics argue that many of these points or miles programmes only encourage loyalty to the currency rather than to the brand. We all have different kinds of relationships with brands. These range from dislike at times, indifference, to some form of preference and peak in truly bonded relationships - the most sacred to the loyalty marketer. The reason for this is the value that is created through purchases from these bonded relationships.
The trick in navigating this loyalty relationship hierarchy is understanding the very top tier - the bonded customers. They are an intense lot who are fiercely proud of their brand, happily displaying its badge value and discussing its various merits with anyone listening.
Typically, there are only few of these bonded customers per brand, compared with the total number of customers it serves. Not only is the imperative to identify them, but also recognise they represent a disproportionate amount of value to the brand owner. Research by OgilvyOne has identified an 89 per cent correlation between market share and bonded customers: the more loyal the customers, the greater a brand's market share. But how do you get to these customers? Start by understanding that loyalty is earned; it is not something for sale with tempting financial incentives alone. There are three ways to connect to customers. Financial bonds are clearly very important. It's really the price a brand pays for customer data however, not where programmes should start and finish. The more aspirational rewards tend to work best in motivating longer term relationships.
Social bonds are the friendships that so many programmes neglect. These appeal to the softer, emotional needs of customers, such as the desire to belong to different communities or simply receiving a surprise within their relationship. When brands play such an important role in our lives, it's surprising that so much loyalty marketing ignores this. Often forgotten, structural bonds are designed as mechanisms to save time for customers and in doing so lock in relationships. If you have invested time and provided data that ensures your relationship runs more smoothly, you will be loathe to re-invest that time and effort if your relationship changes. These bonds make leaving difficult.
The different loyalty bonds should not be viewed in isolation, but together.
Working in combination they help to ensure a successful loyalty proposition and more effective outcomes. The preparation is worth it, as the dividends from market share gains are guaranteed.
Sources: BrandZ, the Loyalty Dividend, OgilvyOne.
