No marketing plan in the 21st century is complete without a strategy to increase and maintain customer loyalty. There are now more tools than ever at our disposal to help us track, monitor, evaluate and even create loyalty, but if these methods aren’t generating results that deliver to your bottom line, there’s likely to be a wider issue with your approach to ensuring your customers return. In this article, we explore the top five mistakes brands make in securing loyalty – and how to avoid them.
#1: Failing to distinguish between emotional and functional loyalty
Emotional loyalty is about feelings and experiences; it cannot be measured by short term delivery to the bottom line, but it does create relationships and advocacy which will have a longer term effect on spend. Conversely, whilst functional loyalty does deliver to the bottom line, it could be argued that functional loyalty isn’t really loyalty at all, but cognitive ease and habit. Functional consumers buy from you because it’s easy or affordable or directly fulfils an immediate need.
Take Tesco, for instance; you could argue that Tesco has been authentic in the monetisation of its loyalty so has a very strong loyalty scheme. But because they have never sought love or a personal relationship with their customers, interlopers like Aldi and Lidl – who are offering a better monetised relationship to customers – have become a threat. Tesco has commoditised loyalty, so therefore have made it an entirely functional rather than emotional transaction.
Successful brands are those which can reach both emotional and functional consumers. It’s about recognising loyalty as a broad and diverse spectrum, and having a foot across all shades of the spectrum. Whilst you don’t have to be high spenders to be advocates, you still have to reward those advocates because they can influence the high spenders; look at the number of people who spend their life reading up about the latest Apple technology, but can’t afford to actually buy any of it? They can still influence those who can.
#2: Mistaking a loyalty scheme for brand loyalty
Marketing Managers may look at the number of ‘likes’ for their scheme on Facebook and think they’ve achieved loyalty, but in most cases, consumers will ‘unlike’ you when the deal or incentive is over, because they have never had an attachment to your brand. If a brand is trying to secure true loyalty, a scheme won’t achieve that if it only deliver functional rewards, not emotional.
But loyalty schemes do have a clear role to play, and that role is fundamentally about recognition and rewards. A busy young mum might save up her Tesco Clubcard points and take her kids to Legoland for the day; but as we’ve learned, that doesn’t mean she’s loyal to Tesco - she’s loyal to the Clubcard scheme, because it has delivered something of value to her personally – a reward - and this has created a pleasurable experience.
And that’s what a great loyalty scheme is about; recognition and reward. Consumers need to feel they’ve got the best deals, that they’re ‘savvy shoppers’, and most of all, that they’re recognised and valued as a customer.
#3: Failing to leverage reward schemes
Whatever method brands use to create rewards, many are repeatedly failing to leverage their reward schemes in order to forge a real bond with their consumers; instead, they are defaulting to a ‘transactional loyalty’.
Once they have the consumer’s attention, brands must think sufficiently far ahead to ascertain how they’re going to translate these short-term rewards into an overall experience, and build a trusting and lasting relationship.
Brands must also be constantly aware of the barriers to the success of their schemes; if a scheme is too complicated to use or understand, doesn’t have any perceived personal benefits to the consumer, neglects to acknowledge them as an individual, or takes too long to collect rewards, the scheme will fail. It takes real commitment over both the short and the long term to deliver something of value to both parties.
#4: Targeting by segment, not individuals
How many times have we experienced giving a company our information, only to be spammed with offers or products that are totally irrelevant? Marketing is still done in segments and trends rather than by individuals, and that seems a tremendous waste of personal information. What’s the point in collecting information about your customer if you’re not going to leverage it?
Even in 2015, few brands can say they’re truly customer-centric. They’re still focussed on product; pricing, delivery, range and sourcing, without considering what their customers want in terms of range, service and experience. Everything is still measured by volumes, rather than loyalty and advocacy. We so often hear people talk about personalisation and one-to-one marketing, but essentially there’s still a very real gap and brands aren’t closing that loop.
#5: Focussing on acquisition, not retention
One of the most basic mistakes brands can make is by focussing on acquisition measures rather than retention. Again, this comes back to brands being too product-centric, because when you only measure loyalty in terms of profit, performance and volume, then you’re only concentrating your efforts on the acquisition trail. It takes a brave company to really examine the difference between these two and understand where their efforts should be targeted in terms of retention versus acquisition.
Time and time again, we see companies paying lip service to retention and reactivation, but the mistake most brands make is by ignoring customers who have fallen to the bottom of their sales funnel because they haven’t opened an email four times in a row, rather than actually examining why they haven’t opened emails and what they’re doing wrong. Instead of trying to guess what people are trying to do, actually ask them. If your customers didn’t open an email four times or they only bought from you once, don’t assume they’ve lapsed – find out why.
There are customers swimming around in this ‘virtual business gutter’ who aren’t attended to at all, and the frightening thing is that in most cases, these people form the actual majority of your database. If brands worked out their messages and delivered on their promises all the way through their customers’ lifetime, and truly understood what it costs them to keep a customer versus what it costs to retain a customer, they could better address this issue.
By Pamela Bath, Managing Director of The Blueberry Wave.
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