Co-creating the future

True loyalty is not the same as repeat purchase

We have been thinking about ‘loyalty’ and what it means for brands, long and hard over the past few years.  Recently we have published a thought piece on the issue. Read the full article here:

Below is an excerpt from the piece:

In our personal lives we generally use the word ‘loyalty’ when we talk about deep relationships that we have with only a few people. These are people we stick with even when things go wrong – we give them the benefit of the doubt and maintain our relationship with them, even if something happens to ‘rock the boat’.

Many marketers are really only interested in repeat purchase. For them, ‘customer loyalty’ means customers coming back for more, and they are not too fussy about the reasons why. A programme that does it successfully is often called a loyalty programme with little real examination of whether people are being loyal or simply exhibiting short term self interest.

So what should brands aim to achieve? Is it enough to be content with repeat purchase? Or is it worth going for the bigger prize, true loyalty? And where does ‘habit’ fit within this? Can we amplify our efforts to build loyalty by making it into a habit rather than a series of one-off conscious choices?

We think that the canny brand owner will focus on both. Repeat purchase is clearly a good thing and there are many ways customers can be encouraged to come back for more – discounts, BOGOFs and vouchers, to name a few.

But true loyalty has value beyond these.

It can protect brands against a new competitor with an attractive offer, or against a short term production problem that leads to faulty goods, or against a high profile court case from an unlucky or disgruntled customer.

This combination has to be an attractive prospect, leading to a whole range of potential benefits…

> Customers come back, the brand becomes the preferred brand (retention)

> Customers come back for more, more often (repeat purchases)

> The brand creates a habit (customers come unconsciously)

> Customers stay through bad times, are willing to forgive mistakes (when they happen and they are addressed) and find a reason to stay

> Customers advocate the brand (helping the brand retain existing business as well as win more customers).

And one thing that most business observers agree on, is that it pays!

“ Retailers who take meaningful steps to drive consumer loyalty are 88% more profitable than their competitors who do not.”

Deloitte research study – “Serving the Networked Consumer”

“It costs at least five times more to acquire a new customer as it does to retain an existing client.”

The Loyalty Effect, Frederick F. Reichheld

“The probability of selling something to a prospect is only about 5-20%, while the probability of selling something to an existing customer is 60-70%.”

Marketing Metrics

Loyalty programmes can help in different ways

The ingredient that turns repeat purchase into true loyalty is the consumer’s relationship with the brand.If they feel that the brand is truly on their side, and is looking out for their long term interests, repeat purchase and loyalty will become synonymous.

If, on the other hand, they feel that the brand is only interested in the next sale, it will be impossible to build true loyalty. So it is clear that brand loyalty is contingent on the brand itself.

Consumers cannot, and will not, be loyal in a vacuum. They will only be truly loyal if they believe in your intentions as well as your actions.  How do you go about building true loyalty?

Want to know more? Read here:

Tags: Branding, Loyalty

This entry was posted on Thursday, 26 Nov 2009 at 3:53 pm and is filed under Branding, Loyalty.
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