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Beware the loyalty prophets of doom

Interesting article and comments. Quite right Mark, it's the Pareto principle at work isn't it? A few thoughts although I haven't read these reports... Firstly, the economic conditions would encourage people to flirt with other brands as price promotions increase in number and intensity. So this could be a factor in the apparent decline in loyalty (which I am sure is happening to a degree). Second, I am sure people would be more disloyal to more brands were they not locked in e.g. your bank, utility. It's a lot of hassle despite those goddamn meerkats' encouragement. Have these reports taken this into consideration? If not then actual loyalty levels might be even lower! Third, I do think brands fail in rewarding loyal customers. I can't be alone in resenting brands I stay loyal to giving people massive incentives to join whilst not rewarding me once in a while e.g. BT, Sky, or insurance at renewal time (the disloyalty in the insurance market must be the worst!). But imagine if insurers gave you an automatic 10% discount for being loyal? They'd keep more customers wouldn't they and as we know it costs 3x more to acquire than retain (doesn't it?). So in general, I suggest most loyal customers get the same benefits as those who shop around and aren't always loyal! This is a major 'crime' of brands who have forgotten the basic rules of loyalty. The number of true loyalty schemes have definitely declined since the 90s, and the money has gone to promotions. I end with two examples of loyalty schemes, one very expensive to run but effective, one cheap and simple yet just as effective. Tesco's Clubcard works - they send me vouchers with genuine money off (or double points). That's cash in hand. Sainsbury's on the other hand don't seem to do this anymore - they use their Nectar data to give money off vouchers at the till on crappy paper with no true personalisation, and the discounts are less. Result is I will always go to Tesco if I have a choice even if I prefer Sainsburys as a brand and shopping environment. Tesco's have bought my loyalty by giving me a bigger and more obvious discount and in return they get my continued loyalty (and money, horsemeat or not). The cheapo loyalty scheme that works for me is Cafe Nero. A simple card that get's stamped every time you buy a drink. When you get a full house, you get a free drink. That's why I go to Nero instead of Starbucks and Costa whenever I can, despite their products tasting the same. Shimples! Academics tell us to build the brand to get differentiation and added value in an increasingly crowded market. These reports are suggesting we shouldn't bother. Like Mark, I'm with the brands on this one.

Fri, 25 Jan 2013

3:31 pm