Study identifies the key drivers of brand loyalty
Many UK consumers feel a strong sense of loyalty toward their favourite brands, with one-quarter of these rating their loyalty level at 10 out of 10, according to a research report into consumers' feelings of loyalty toward their favourite brands, and the factors that inspire that loyalty, from Arvato Loyalty Services.
Ever since the early 1990s when loyalty schemes became a mainstream business technique, some industry commentators have expressed their doubts about whether or not these programmes can really work.
Sceptics proved wrong Do loyalty programmes create a genuine commercial uplift, or simply subsidise customers who were not going to defect anyway? Are they just sales promotions in another form, and do consumers actually experience true loyalty?
The 'Inspiring Loyalty' study found that all that scepticism has in no way dampened the enthusiasm of British businesses in their keenness to set up more and more loyalty schemes. According to one piece of research, the number of loyalty schemes in the UK has doubled in the past decade.
Key findings Among the study's key findings:
- UK consumers feel a strong sense of loyalty toward their favourite brands;
- 85% of adults say that they are loyal to their chosen brands, with a quarter rating that feeling of loyalty as 10 out of 10;
- The top five loyalty inspiring factors were: 1. Consistently high quality products; 2. Helpful, knowledgeable staff; 3. Easy to contact the company; 4. Every aspect of the brand experience being enjoyable; 5. Customers are recognised and valued when making enquiries.
- Fewer than 10% of consumers consider "brand coolness" or peer pressure to have a substantial effect on their brand loyalty;
- Most people's favourite brands are in the retail category (30% of favourite brands are in this sector). In particular, supermarkets account for 4 out of every 5 favourite retail brands.
- Another 20% of favourite brands are in the food & drink category, with 12.5% being financial services brands (predominantly banks).
Key criticisms Delving deeper into the study's body of critical commentary on loyalty initiatives, a number of common strands emerged. For example:
- Lack of dialogue Developing a customer relationship requires dialogue, where feedback from the customer is encouraged and acted upon. Most schemes only communicate one way.
- Poor data usage Loyalty schemes gather data (transactional and descriptive) on customers but then do not use it either to make the dialogue with customers more relevant, or to identify additional products or affinity partners in which the customer is likely to be interested.
- Channel schizophrenia Loyalty initiatives are not properly joined up across all channels. Channels encompass not only post, phone, e-mail and the web, but also face-to-face in-store - the point of contact most highly prized by customers but most often neglected by businesses.
- Lack of measurement Loyalty initiatives need to produce commercial outcomes, but few schemes actively measure results adequately. This is true both in terms of tracking the 'customer journey' (from one value level to another - preferably higher) and in terms of using mystery shoppers to regularly test and audit the customer experience.
- Commoditised rewards Points-based schemes are often criticised for reducing rewards to some monetary equivalent and therefore taking away from the perceived value. A number of leading programme operators are now using customer insight to target special offers appropriately to each customer segment, often in collaboration with affinity partners that create exclusive discounts in exchange for the ability to reach the programme's member base.
In large part, these criticisms are often found to be valid for some loyalty initiatives but not all. But they are important considerations, and provide a useful checklist for any organisation running or contemplating a loyalty initiative.
The full report is available on request from Arvato Loyalty Services - click here.