Monday, 27 April 2009

Brand loyalty: can it be bought?

Writing in today's BrandChannel, Barry Silverstein (co-author of The Breakaway Brand) asks a question to which most of us assume the answer is yes: "Can Brand Loyalty Be Bought?". After summarising the heavy use of brand loyalty programmes, particularly in the airline, hotel and financial sectors, he cites industry figures that claim high levels of membership and participation and then writes, in relevant part:

"... For retailers, buying brand loyalty may be more of a challenge. The research conducted by COLLOQUY “suggests that typical two-tier pricing and discount-based rewards—the model that dominates high-frequency retail environments—simply don’t engage consumers,” the company says. “The retail discount reward is now a commodity.”

... a significant percentage of consumers do not participate in loyalty programs. As reasons for their lack of participation, they cite such economic factors as the need to spend too much and not wanting to pay a program fee, according to COLLOQUY’s research.

There are other non-financial demotivators that brand marketers need to understand. Consumers cited “boring rewards” and the feeling that “all loyalty programs look alike” as reasons for not belonging to a loyalty program. Additionally, there was a high percentage of what COLLOQUY refers to as “category churners—people who had previously played the game and dropped out.” According to the company, “While dropping out of a program is a common consumer experience, the number of consumers churning from the entire category of loyalty programs should raise alarms for loyalty marketers. Clearly, we’re not doing enough to keep customers engaged.”

All audience segments offered as a primary reason for non-participation the “lack of compelling rewards.” Almost half of non-belongers said loyalty programs look too similar. A third issue is the amount of churn: it appears that, regardless of audience segment, people join and then drop out of loyalty programs in relatively high numbers.

Those disappearing high numbers represent lost brand engagement opportunities—a high price for brands to pay in such challenging economic times".
There was once a time when, within the retail sector, brand loyalty was achieved by the creation and establishment of a good reputation for quality, reliability or value for money which would encourage consumers to make repeat purchases. Perhaps one reason why loyalty schemes don't work particularly well in this sector is that they tend to play on the mind of the consumer by offering something other than the branded product to which they wish the consumer to adhere.

1 comment:

Mark Anderson said...

Are we discussing loyalty to a brand or loyalty to a company? Or even loyalty to a loyalty scheme? I am not sure how much of a "brands" issue this is.

Traditionally, the best known loyalty scheme was Green Shield Stamps, offered by Tesco among others. Tesco abandoned it many years ago in favour of a discounting policy. GSS was not owned by Tesco.

In more recent years, Air Miles has been popular, but again has had a distinct brand, separate from that of the organisations that sponsored it, eg British Airways.

If I build up loyalty "points" with British Airways rather than British Midland (or, to use its brand, bmi), in what sense is this loyalty to a brand, rather than a company?

I am not convinced that this is a brand issue.