According to IBM’s Global Chief Marketing Officers study, one of the TOP priority for CMOs “is to enhance customer loyalty and encourage satisfied customers to advocate for their brands.” Most marketers also agree that fostering loyalty among current customers and motivating advocacy behaviors is, more often than not, currently an untapped opportunity to improve profitability.
Certainly there’s plenty of evidence to suggest there’s something to that line of thinking.
The American Customer Satisfaction Index, for example, reported that the cross-industry satisfaction average hovers around 76%—a “C” grade—and hasn’t budged for two years. The lower the level of satisfaction, the higher the likelihood the customer won’t purchase the brand again. Not surprisingly, a Bain Consulting study found the average company loses 20%-40% of its customers every year.
Unfortunately, many marketers aren’t sure what to do about the problem. The same IBM CMO study reported that most CMOs feel under-prepared to deal with decreasing brand loyalty.
We asked Kevin Clancy, chairman of Copernicus, for a strategic perspective on what marketers can do to foster loyalty to their brands. Here’s what he had to say….
Mzine: Many companies seem to have ongoing struggles with maintaining and growing loyalty to their brands. Obviously there are many potential contributing factors, but to your way of thinking, what are some of the major ones?
Kevin: In our work with B2B and B2C brands in a variety of industries, we’ve discovered that poor targeting and lack of a consistent, compelling positioning are major reasons why many companies struggle to connect customers to their brand.
There are some people who–no matter what a marketer says or does–are just not interested in a particular brand. They wouldn’t take it for free. It’s going to be an expensive and maybe even impossible proposition to try to convert them from a completely disinterested buyer to a loyal customer.
Still, it’s not an infrequent occurrence to hear a company declare plans to target non-users of their brand without any indication that they know how many non-users are even open to switching or giving some share of their requirements to the company’s brand.
Just like if you’re on the wrong train, every stop is the wrong stop, if you start with the wrong target, it’s going to be a challenge to get where you want to go as far as growing loyalty.
Mzine: What’s the connection between a strong positioning and growing loyalty?
Kevin: Establishing an emotional connection between their brand and target consumers is something marketers talk about a lot.
Interestingly, when Copernicus asked consumers about the “personal or emotional connection with their preferred brand” across a variety of product and service categories, less than 10% on average claimed a “strong” connection. Just 20%-25% of consumers on average reported even a moderate emotional connection to a brand.
While it did appear an emotional connection was more readily formed in certain product categories–likely due in large part to the innate characteristics of the category–generally speaking, it’s up to marketers to encourage and help forge those higher-order bonds between their brands and the people who use them. One of the best ways marketers can do that is by solving customer problems with products or services.
A criteria we suggest marketers consider when assessing the potential profitability of different market segments is the size of the problems buyers in the group have that brands in the category or industry can solve with products and services. We have found time and time again that the bigger the problem a marketer can solve, the bigger the market response.
Carrying that thinking forward one more step, the bigger the problem on which marketers base the positioning strategy for their brands, the bigger the market and emotional response.
Mzine: Do you think companies are currently focused on the right things when it comes to growing loyalty to their brands?
Kevin: We have sometimes observed a tendency among senior management to get preoccupied with a metric—more often than not the Net Promoter Score—and improving it rather than focusing on what the barriers to loyalty are among current customers…and doing something about those barriers.
A brand’s Net Promoter Score, of course, is calculated by asking people on an 11-point “recommend” scale the “ultimate question:” how likely are they to recommend the brand to a friend or colleague? The scale runs from zero (“definitely would not recommend this brand”) to 10 (“definitely would recommend”).
People who score 9 or 10 are labeled “promoters”; people who score 0-6 are, in turn, labeled “detractors”; the 7’s and 8’s are ignored. Subtract the percent of detractors from the percent of promoters and you have the “net promoter score.”
While it’s not a bad metric, it’s only one behavioral measure of the far more complex concept of “brand loyalty.” Same can be said for fans on Facebook, followers on Twitter, and so on—they are but one measure and don’t offer much in the way of prescriptive guidance on the most profitable ways companies can improve that measure.
We’ve also sometimes found a tendency to hone in on a program that will encourage loyalty. I have no less than eight different “rewards” cards from different stores I go to on my key chain, for instance. How well those programs work in terms of achieving increasing levels of loyalty, however, is more a reflection of the strategy on which they are based.
And that’s the real ultimate question marketers should be asking: how do you integrate growing loyalty into your marketing strategy to take advantage of this untapped opportunity?
Marketers that have focused on taking a more comprehensive view of growing loyalty—that it’s about targeting the right people, with the right message, with the right kinds of campaigns, programs, and experiences with the brand—have seen the greatest success in this area.
Mzine: Can you give some examples of companies that have done that?
Kevin: Everyone seems to cite Apple and certainly it’s a ready-case to point to in order to demonstrate the effect of developing and maintaining a strong, loyalty-inducing positioning.
It did it by solving a pretty major problem consumers were having with PCs—they were frustrating and sometimes incomprehensible to use—by offering a product that was the exact opposite—user-friendly and easy to use. One of Steve Jobs’ many claims to fame was his religious focus on making Apple’s products “plug and play.”
The more the company stayed razor-focused on that positioning and consistently delivering on it, the better it did generating strong, positive feelings among customers. It was/is easy for customers to love Apple and have those feelings develop into heightened levels of loyalty that are the envy of the business community.
In recent years, McDonald’s by all appearances has very effectively targeted parents and families by positioning itself as the brand with something every member of the family can love. The chain has expanded and upgraded menu offerings to include something fun and tasty for the kids—with the promise of more reasonable, calorie-conscious portions—and more sophisticated fare for the folks.
In the opposite extreme—more of an anti-case—Avis Rental Car recently switched its long-standing positioning of “the brand that tries harder for its customers” to the brand that helps corporate travelers feel less stress and be more productive.
Sure, lots of stress and lack of productivity are two big problems business travelers have, yet it’s pretty unclear how the Avis brand does much to chip away at the problem with its services—it’s still just renting out the same kinds of cars offered by its competitors.
It’s not providing an actual solution to that big problem, and it’s the solution where the lovin’ feeling customers have for the brands they buy and use comes from.
Mzine: If you had the ear of every CEO and CMO for five minutes, what would you say to them about growing loyalty to their brands?
Kevin: When you chart out a model of how sales occur, it usually looks something like this: first a marketer approaches a target market, they build awareness, achieve distribution, stimulate trial, encourage repeat, foster loyalty, etc. Loyalty may come toward the end of the sales process, but marketers need to start taking the steps to build brand loyalty from the very beginning.
If marketers want to grow loyalty, there’s no better place to start than with the most important strategic decision there is: who to target. It makes little economic sense to invest marketing dollars in fostering loyalty among customers who are not profitable to a brand or all that likely to remain loyal in the first place.
Once you have a target group, you need to figure out how you’re going to motivate them to consider your brand and do it in a way that fosters the kind of strong, positive feelings that enhance loyalty. Remember that an emotional connection is something that you have to work hard at building over time. It’s not something that comes from having a hip new logo or clever, funny ads…. It comes from providing products and services that consistently deliver something of meaningful value to a customer.
Marketers who take the time to learn more about problems target customers have that products and services in the category can feasibly and profitably solve and build their brand’s positioning around delivering that solution will have an infinitely easier time earning the long-term devotion and allegiance of target customers.
Again, loyalty isn’t something marketers only need to start worrying about after a customer has made his or her first purchase. Growing loyalty isn’t just a matter of finding the right reward program or return-visit incentive. A large part of success in this area comes from making strategic decisions that prime the pump, so to speak, for loyalty.
To watch Kevin’s recent webcast on this topic for the American Marketing Association visit: goo.gl/AsyAx