Brand Management

Brand Management

Brand Loyalty

• ”The combination of a consumer’s thoughts and feelings about a brand that are often expressed as an action”

Worthington et al 2010

Brand Loyalty

• “The many ways companies relate to customers is akin to looking for a needle in a haystack, finding it, and then throwing it back to look for it again” (Rozenberg & Czepiel 1984)

• “Our mission is to earn and grow the lifetime loyalty of our customers” (Terry Leahy, CE of Tesco)

Loyalty

• Increasing customer retention rates by just 5% increases profits by 25% to 95%. (Bain & Co).

• Attracting a new customer costs five times as much as keeping an existing one. (Lee Resources 2010)

• Globally, the average value of a lost customer is $243.(KISSmetrics) • 71% of consumers have ended their relationship with a company due

to poor customer service. (KISSMetrics)

• The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20% (Marketing Metrics)

• According to our Cross-Channel Marketing Report 2014, 82% of companies agree that retention is in fact cheaper than acquisition.

• The Cross-Channel Marketing Report also found that marketers are more focused on acquisition than retention.

Why Loyalty?

• Acquiring customers 5-30x more costly than retaining

• 2% retention increase is worth 10% cut in costs • Only 1 in 25 unhappy customers complains

(but each unhappy customer will tell 8-16 others)

• 91% of unhappy customers will never return (but resolve their problem fast and 85% will buy again!)

Source: IDM industry estimates

Benefits: some stats

• Winning new customers is expensive • Loyal customers are more profitable • Happy customers repurchase • Handling complaints well increases loyalty

(few customers defect due to poor product)

• Unhappy customers tell other people (but not you!)

• Increasing retention boosts profitability

Why Loyalty?

Why are customers more profitable over time?

F. Reichheld ‘The Loyalty Effect’

What matters to customers when dealing with organisations

• What Matters to you?

Why customers leave

• Why do you leave?

Planning retention: the basics

• These are your customers: show them you care! • Acknowledge the relationship and be consistent • Customer service • Maintain an accurate database – enhance with

lifestyle data and customer insights

• Analysis - know why and when customers leave

Retention policies

• Develop a retention policy • Make sure acquisition and retention teams talk! • Ensure what a customer expects is delivered • Agree how to treat each customer before they

get in touch

• Tailor your approach; use everything you know about that customer

Acknowledge the relationship

• Be consistent in wording • Customers expect you to

remember them

• Use data intelligently – Amazon/Google??

Customer service

• Crucially important to customer satisfaction • Make the most of every customer contact • Initial sale, online/off line contact

(email/phone call), complaint, everything

• Up-sell/cross sell/pre-empt churn • Put customer service at the core of your

business

• View this as a profit centre – not as a cost.

Customers are…smart

• They’re not stupid (they chose you!) and they have high expectations • They expect to be treated as your only customer –

they don’t care about the other 100 or 100,000 • They know you have competitors • They know if they have done business with you

before • They remember how they were treated • They expect to do business with you in their way

(payment, communication channels) • It’s worth looking after them!

Markets are like a bucket …

It is estimated:

• Increasing customer spend by 5% increases profit by between 40% and 100%

• Losing 5% less customers in a year will increase profitability by 25% to 125%

Reichheld 1996

Markets are like a bucket

• Reichheld (1996) found: • 50% of customers are lost over five years • 50% of employees are lost in four years • 50% of investors are lost in one year • So anything that encourages loyalty is important

• Gupta et al (2004) showed that: • A 1% improvement in customer retention leads to a 5%

increase in company value • A 1% reduction in customer acquisition costs leads to a 1%

increase in company value • Therefore retention is five times more valuable than cost

cutting.

Segmenting on Value

Low

High

High

Current value

Potential value

Maintain Retain and Grow

Reduce Costs

Grow these customers

Three generic types of loyalty

Worthington et al (2009)

Cognitive loyalty

Behavioural loyalty

Emotional loyalty

Cognitive Commitment (Allen and Meyer 1990) Price and Features (Oliver 1999) Hartel et al (2008): ‘preference… consisting of positive beliefs and thoughts about…the next purchase occasion’.

Hartel et al (2008): ‘Affective commitment to a brand consisting of positive feelings about and attachment to purchasing a brand on the next occasion’.

Hammond and Ehrenberg (1996): tendency to repurchase a brand, revealed through behaviour that can be measured and impacts directly on sales.

Brand loyalty audit Worthington et al (2009)

Low emotional loyalty

Stable loyals

Hot potentials

Passionate

Hopefuls

Functional loyals

Cold potentials

High cognitive

loyalty

High cognitive

loyalty

Vulnerables

Disloyals

Low cognitive

loyalty

Low cognitive

loyalty

High emotional loyalty

High behavioural

loyalty Low

behavioural loyalty

• Repeat Purchases (Copeland 1923; Tucker 1964) • Thoughts and Attitudes that drive consumption

(Day, 1969; Jacoby, 1971).

• Behavioural and Attitudinal approaches prevail • Typically positivist • Easier to measure

Brand Loyalty Progresses

• “The experientially loyal consumer is defined as one who is sufficiently invested in a brand to find personal symbolic meanings in the act of consuming that brand and engage around these meanings, individually or within the context of communities of similarly engaged consumers in the pursuit of identity projects”

• “Viewed through the eyes of the consumer, approaching brand loyalty from the diverse social and cultural contexts within which they reside.” (Obiegbu et al 2020, p. 262)

Intepretivist

Experiential Brand Loyalty

More specific types of loyalty

• Emotional • I only buy Heinz ketchup

• Resented • Commuters on a train

• Active • Driving past Sainsbury’s to get to Tesco

• Momentum • Bank customers (We’re more likely to divorce than change banks!)

• Personal • The local pub, favourite restaurant etc

• Image • What’s the car to be seen in at the moment?

Perceptions and emotions drive loyalty • Positive and negative experiences of companies will

effect our loyalty levels

• We want to feel loved • Research by Millward Brown (2010) 2/3 defect because the

brand does not value their custom

• Ignored, bullied, or badly treated? 5x more likely to defect • Angry/disappointed? Likely to tell 2-5x more people than

their happy equivalents

• Word of mouth – from those with whom we have a personal relationship – is a BIG influencer

How attitudes affect behaviour

• Considerations when buying a car • What will people think? • Which car matches my image? • Can I see myself in that car? • What do you get for your money? (Functions etc) • Do I trust this brand? • How good will the after-sales service be? • What does it cost to buy/run/depreciate? • Can I afford it? • Will it protect me if I crash? • Is there a brand I want to help (eg buy British)

emotio nal?

emotional?

emotional?

cognitive?

cognitive?

cognitive?

emotional?

Free advertising from emotional loyalty

Net Promoter Score

Relationship marketing - definition

• “The cultivation of customers’ behaviours and attitudes which indicate brand or company performance, therefore maximising customer lifetime value”

The Institute of Direct and Digital Marketing.

Relationship marketing in practice

• Relationship marketing is not a programme or a scheme: it is an all pervading practice, a mindset

• Methodology for the creation and evolution of a relationship

• Must consider the customer relationship holistically - customers do

• Segmentation must be dynamic • Customers must be treated differentially • It may not be viable to include all customers.

What keeps customers loyal is the ‘perceived value’ they receive • “Even in a mass-market business, you don’t want to

attract and retain - everyone....

• “The key is to identify and attract those who will value your service and then retain them as customers and win the largest share of their lifetime business”

Sir Colin Marshall, former Chairman of British Airways

• With direct, data-based/driven marketing, you can decide – with great precision - who you want to target.

Relationship Marketing

Customer satisfaction, while a key first step towards gaining customer loyalty, does not on its own guarantee it. Customer commitment based on Trust is the next hurdle to cross in order to gain customer loyalty.’

Little & Marandi (2003, p. 55)

Satisfaction Trust Commitment Loyalty+ +

Example

Reward schemes - the problems

• Rewarding retention can form a ‘junkie’ habit - customers learn to be promiscuous and it may cost more to sustain their habit than it produces in the end

• Reward schemes are easy to copy and improve on • Rewards can divert attention of the company and its

customers from the real product/service

• Rewards may be seen as manipulative. Today’s customers are far less brand loyal and more aware of the role of advertising than at any time.

Reward schemes – the benefits

• The base product/service is (or should be) already good and differentiated, so that the scheme adds to the attraction of the purchase

• The reward is perceived as an extension of the product

• The reward is genuinely valued and perceived as taking some effort or cost to deliver (Virgin’s chauffeur-driven service to and from airports for Business and First Class passengers).

Example - Orange Wednesdays now Meerkat Movies • Mobile coupons to reward 13m

existing customers

• Virtual 2 for 1 offer on cinema tickets for Wednesdays

• Text ‘FILM’ to a unique code • Show coupon on handset to

box office to redeem • Portal also offers exclusive film

content, ringtones, listings

The loyalty ladder

Payne et al 1995

Partner

Advocate

Convert

Honeymooner

Customer

Prospect

Suspect

Hostile

Enemy

Influence Loop

Awareness Info Evaluate Purchase Repeat Up sell Renewal Digital touchpoint Physical touchpoint Customer wants Business needs

MOTs

Action Data required

PERSONA CUSTOMER JOURNEY

Planning your customer relationship

Communications planning for each target group

•Four types of activity • Individual, tailored communications • Event-triggered communications • Time-dependent communications • Behavioural dependent communications

Advertising influences

Social Listening Tools

• It’s noisy out there! • RSS feeds (Really Simple Syndication) • (Google Reader, Netvibes etc.) • Before we talk, we should listen

Retention: 4 golden rules

• Use all information – customer data, customer insight, listen to what they say

• Segment your data – focus on better customers • Invest in customer service – staff, training,

systems, opening hours

• Retention starts with acquisition

Brand Communities

• "A specialized, non-geographically bound community, based on a structured set of social relations among admirers of a brand."

(Muniz and O’Guinn 2001)

• Brand’s customers, fans and advocates.

• “The people out in the marketplace who embrace the values of the brand, as customers and/or purchase influencers, are the brand's true "owners.“

The Critique

• Growth is all about availability • Mental • Physical

• Segmentation; brand differentiation

• Distinct not Differentiated • Simple consistent brand assets

that trigger responses

1. Continuously reach all buyers of the category (communication and distribution) – avoid being silent

2. Ensure the brand is easy to buy (communicate how the brand fits with the users life)

3. Get noticed (grab attention and focus on brand salience to prime the users mind)

4. Refresh and build memory structures (respect existing associations that make the brand easy to notice and easy to buy)

5. Create and use distinctive brand assets (use sensory cues to get noticed and stay top of mind)

6. Be consistent (avoid unnecessary changes, whilst keeping the brands fresh and interesting)

7. Stay competitive (keep the brand easy to buy and avoid giving excuses not to buy (i.e. by targeting a particular group)

Sharp’s 7 Rules for Growth

Some References

Barnes, J.G. (1994) 'Close to the Customer: but is it Really a Relationship?’, Journal of Marketing Management, 10, pp. 561-570.

Bendapudi, Neeli and Leonard L. Berry (1997). ‘Customers' Motivations for Maintaining Relationships with Service Providers,’ Journal of Retailing.

Buttle F., ed. (1996). Relationship Marketing. London: Paul Chapman Publishing

Christopher M., Payne A. and Ballantyne D. (1991). Relationship Marketing, London: Butterworth- Heinemann.

Doyle P. (1998). Value-Based Marketing. Wiley, UK.

Fournier, S., Dobscha S. and Mick D. G. (1998). “Preventing the Premature Death of Relationship Marketing”, Harvard Business Review, January/February, pp. 42-51.

Jones and Sasser (1995) “Why Satisfied Customers Defect” Harvard Business Review, November/December, p 97

Some References (Cont’d)

Little, E & Marandi, E (2003) Relationship Marketing Management. London: Thomson Learning

McKenna R. (1991). Relationship Marketing. Reading: Addison-Wesley.

Morgan, R.M. and S.D. Hunt (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(3): p. 20-38.

Reichheld F. (1993). Loyalty-based Management. Harvard Business Review, March/April, 64-73.

Reichheld F. (1996). The Loyalty Effect. Boston: Harvard Business School Press.

Ribbink D., Van Riel, A.C.R, Liljander, V. and Streukens, S. (2004) “Comfort your customer online: quality, trust and loyalty on the internet”, Managing Service Quality, Vol 14 No. 6, pp. 446-456.

Some References (Cont’d)

McKenna R. (1991b). Relationship Marketing. Reading: Addison-Wesley.

Morgan, R.M. and S.D. Hunt (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(3): p. 20-38.

Reichheld F. (1993). Loyalty-based Management. Harvard Business Review, March/April, 64-73.

Reichheld F. (1996). The Loyalty Effect. Boston: Harvard Business School Press.

Ribbink D., Van Riel, A.C.R, Liljander, V. and Streukens, S. (2004) “Comfort your customer online: quality, trust and loyalty on the internet”, Managing Service Quality, Vol 14 No. 6, pp. 446-456.