Magazine article Marketing

Seeking the Truth about Real Loyalty

Magazine article Marketing

Seeking the Truth about Real Loyalty

Article excerpt

Identifying the secret of brand loyalty requires true skill, writes Robert McLuhan

It's a statistic, but one that won't go away: recruiting a new customer can be five times more costly than selling to an existing one. Tesco understood this well when it launched its successful Clubcard five years ago, boosting profitability by up to 14% and spawning a host of imitators.

Tesco's initiative put loyalty on the map, but many saw the concept as going well beyond offering cash incentives to hold on to customers. Brand owners increasingly rely on a variety of data to identify what it is that consumers like about a product or service, in order to eliminate its weaknesses and build on strengths.

This is where market research can provide useful insights into loyalty patterns. Does loyalty imply consistent and substantial brand purchase, or rather, as some market research agencies prefer to think, customers' emotional affinity for a brand?

"Other companies define loyalty in terms of success in the market, but we argue that this doesn't get to the heart of what branding is about," says Rory Morgan, research and development director of Research International.

"Brands like Harrods and Ferrari are very powerful yet have a very small share, so that would not be a good indicator of their strength."

The company has just launched a new tool called Loyalty Driver. It aims to consolidate research on the elements which make up loyalty.

"In the past, we have measured aspects such as customer service, brand imagery and price, but finding the relationship between them will help brand managers predict the probability of a customer switching to a competitor," says Morgan.

But how easy is it to identify what goes into an emotional attachment?

Morgan concedes that talking to people about why they like a brand is a developing science."You never ask them directly because they often find it difficult to articulate their feelings. There might be other distortions; for instance, when people say they never buy own-label products because they feel it's not socially acceptable.

"With BA you might ask if they think flights arrive on time, but if you ask whether they find the experience enjoyable they will look at you as if you are crazy." To overcome this, the company has recently begun to use picture systems, which more successfully elicit this kind of information.

An indirect approach works best, agrees Ian Robinson, planning director of Tullo Marshall Warren: "You can only ask straight questions about products that people feel strongly about, like cars. Otherwise, you measure a person's intention to buy that brand next time round and the alternatives they might consider."

Robinson is critical of other approaches which sometimes come under the heading of loyalty research. Major lifestyle questionnaires are used by some companies as an indicator of loyalty but can't be relied on, he says, while all-singing-and-dancing category studies favoured by drinks manufacturers address loyalty issues, but only superficially.

Nor, in Robinson's view, is the customer satisfaction survey a useful indicator of loyalty.

Completely satisfied defectors

Robinson was amused by a recent financial services study - it revealed that a large proportion of people who defected from a company had previously stated they were completely satisfied. "Satisfaction surveys can't take account of the possibility that someone may come along with a better offer," he says.

Measuring service in areas such as complaint management can be an effective way to gauge customer loyalty. According to customer service consultancy MSB, customers most likely to be loyal are those who have had difficulties but feel that their complaints were handled well.

"Feedback from that can be a vital tool in measuring loyalty," says director of market research Andy Booth. …

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