Brands need to bridge the 'loyalty chasm'

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By: Wise Marketer Staff |

Posted on December 20, 2012

Brands need to bridge the 'loyalty chasm'

The tough economic climate of recent years has proved that customer loyalty has become more important than ever. But brands in the UK are failing to deliver what their loyal customers want - including instant and flexible rewards - according to global research conducted by Forrester Consulting on behalf of the global loyalty agency ICLP.

The research surveyed over 1,500 consumers across the UK, US, China, India and Brazil, and identified a 'loyalty chasm' - a gap between what is important to consumers in driving their loyalty and what companies are delivering.

The largest gap identified in the UK is a failure of brands to instantly reward customers with discounts and savings. 75% of consumers indicated this was important to them but only 50% think that brands perform well on providing instant rewards revealing a gap or 'loyalty chasm' of 25%. This is followed by a lack of customisable rewards (21% chasm) and rewards / vouchers that consumers can use whenever they want (20% chasm).

The report, entitled 'Crossing the Loyalty Chasm', also highlights that brands need to review the ways in which they engage with their consumers; for example more brands should make loyalty and reward information available in real-time, with a chasm of 17% identified in the UK.

Surprisingly the research also revealed there are areas in which brands are over-delivering, mostly relating to social media interaction. The ability to interact with a brand via social media has a negative gap of -9%, meaning brands in the UK are providing more in this area than customers currently expect. Similarly, sharing brand news and offers via social media has a loyalty chasm of -5%, however it is worth noting that UK respondents under 35 still wanted far more digital interaction than brands currently provide.

Looking at brand loyalty across the globe, the report reveals that it is the emerging countries that are leading the way in mobile and social engagement. The biggest chasm in China and Brazil is the ability to redeem rewards in different ways, such as via mobile, with over three quarters of consumers saying this was important to them and only around half of consumers agreeing that brands were meeting their expectations.

Interestingly, demand for engagement with brands via social media, SMS and mobile apps is far higher in emerging markets than in the UK and US. People in China, India and Brazil are over three times more likely to visit the websites of their favourite brands than here in the UK.

"These results show that in the mature UK loyalty market, informed consumers want more control and more choice over the way they are rewarded by brands. What is even clearer is that brands need to work harder to create more immediate value for their customers - the collect and save mechanic of rewards is no longer enough for modern consumers," explained Stuart Evans, general manager for ICLP UK. "Also, brands cannot afford to ignore social media, especially when it comes to engaging Generation Y consumers. But at the same time they need to ensure they are concentrating their efforts in the areas which matter most to all consumers in order to drive their loyalty, both now and in the future."

So what exactly is the loyalty chasm? ICLP defines the 'loyalty chasm' as the difference between what is important to consumers when thinking about brands they are loyal to, and how well they think brands are delivering in those areas. It is represented by the percentage point gap between the qualities of 'importance' and 'brand delivery'. A positive number indicates that brands are under-delivering, while a negative figure indicates that brands are over-delivering. For example, the loyalty chasm for rewarding instantly with discounts and savings is 25% (based on a score of 75% for importance, minus a score of 50% for delivery).

In the UK, there were several factors for which brands are under-delivering, including:

  1. Rewarding instantly with discounts and savings: 25% (75% importance - 50% delivery);  
  2. Allowing consumers to customise their rewards: 21% (59% importance - 38% delivery);  
  3. Having coupons or rewards that consumers can use when they want: 20% (82% importance - 62% delivery);  
  4. Brands being available when consumers need them: 20% (74% importance - 54% delivery);  
  5. Brands respecting consumers communication and messaging preferences: 19% (71% importance - 52% delivery).

On the other hand, there are two aspects in which UK brands are over-delivering:

  1. Engaging with a brand via social media: -9% (17% importance - 26% delivery);  
  2. Sharing brand content via social media: -5% (19% importance - 24% delivery).

The global results showed up the key weakness in each region - for example:

  • Brazil: allowing consumer to redeem coupons/rewards with a mobile phone: 35% (83% importance - 43% delivery);  
  • China: allowing consumer to redeem coupons/rewards with a mobile phone: 27% (77% importance - 50% delivery);  
  • US: allowing consumer to customise their rewards: 26% (62% importance - 36% delivery);  
  • India: allowing consumer to customise their rewards: 17% (70% importance - 53% delivery).

According to Mignon Buckingham, managing director for ICLP Worldwide, "While the emerging markets may be leading the way in new channels, the research highlights that it's vital for marketers in these regions to understand and deliver against the local needs of consumers rather than following the more mature models of loyalty and engagement seen in the UK and US. Given the increasing use of new technologies, consumers are clear on what they want and brands need to challenge themselves on how they can find more innovative ways of meeting these fast evolving needs. Regardless of geographic region, there is no doubt that the future of loyalty will be increasingly digital, interactive and data-driven as consumers continue to evaluate the way in which the emotional 'love' and rational 'commitment' they show to brands is recognised and reciprocated."

The full research report has been made available for free download from ICLP's web site - click here (free registration required).

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