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Predicting Customer and Brand Loyalty with Brand Keys


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Inside predictive brand loyalty metrics and the case of Starbucks coffee

Inside predictive brand loyalty metrics and the case of Starbucks coffee

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  • 1. September 16, 2010 Predicting Customer Loyalty
  • 2. Do brands really need predictive metrics? © Brand Keys, Inc. 2010
  • 3. Just ask GM… © Brand Keys, Inc. 2010
  • 4. Was GM…
    • making faulty cars?
    A gorgeous, fun-to-drive, well-equipped sedan (Regal) built with the quality of its German competitors… -- Jalopnik GM will increase its ad spending by 3% to 5% this year. Kantar Media, an ad tracker owned by WPP PLC, says GM spent $2.2 billion on advertising in the U.S. in 2009. GM disputes that amount but declined to provide figures. – Wall Street Journal GM was highest in owner loyalty for the ninth straight year in the R.L. Polk & Co. Automotive Loyalty Award - the only award in the industry based on consumer loyalty. – GM Website © Brand Keys, Inc. 2010
    • not spending enough money on marketing?
    • failing to ask consumers about loyalty?
  • 5. GM forgot the consumer doesn’t only shop, she dreams . . . © Brand Keys, Inc. 2010
  • 6. © Brand Keys, Inc. 2010 Brands success is the degree to which the brand meets or exceeds what consumers want, need and expect in the category—both emotionally and rationally. Brands that do that, have equity. Brands that don’t, have problems.
  • 7. Evaluate Brands = what already exists (present) Against Ideal = what consumers wish existed (future) © Brand Keys, Inc. 2010 How do you create brand success?
  • 8. And implement . . . Where should we take the brand? How should we do it? Category Ideal and Brand Performance Hierarchy of Attributes, Benefits and Values © Brand Keys, Inc. 2010
  • 9. The Ideal A consumer-centric view of the category in which the brand competes, letting it understand how consumers view, compare, and choose among category options. © Brand Keys, Inc. 2010
  • 10. Brands are evaluated against the consumer’s Ideal of what matters most! What’s most important to me is . . . I expect . . . © Brand Keys, Inc. 2010
  • 11.
    • The leader in predictive brand equity, loyalty, and engagement metrics since 1984; an independent global boutique.
    Who Is Brand Keys
  • 12.
    • Brand Keys specializes in brand equity and engagement metrics that serve as the most accurate benchmark available for brand architecture, tracking and strategic communications studies.
    • Our metrics are predictive of future in-market behavior and correlate highly with positive behavior, sales, and profitability.
    • We use metrics grounded in psychology, allowing us to understand both the emotional and rational factors which bond consumers to brands.
    • We can accurately measure the impact that any media/marketing initiatives will have on future in-market behavior.
    Who Is Brand Keys? © Brand Keys, Inc. 2010
  • 13. And we’ve got the numbers to prove it… © Brand Keys, Inc. 2009
  • 14. Correlation of Brand Keys Loyalty Metrics to Brand Imagery: Ralph Lauren © Brand Keys, Inc. 2010
  • 15. Correlation of Brand Keys Loyalty Metrics to Actual Purchases: Dove Soap © Brand Keys, Inc. 2010
  • 16. Correlation of Brand Keys Loyalty Metrics to Actual Purchases: Kate Spade Holiday Shopping 2008 © Brand Keys, Inc. 2010
  • 17.
    • Dr. Robert Passikoff
    • Named a
    • “ 2007 ARF Research Innovator”
    Published and Recognized Brand Loyalty Engagement Experts Amy Shea, EVP, Recipient of 2008 ARF “Great Mind” Award in Innovation © Brand Keys, Inc. 2010 Leigh Benatar, EVP, Recipient of 2010 ARF “Great Mind” Award in Innovation
  • 18. Independent Validation: Read The ARF’s First Opinion Research Review on the Brand Keys Engagement Method at © Brand Keys, Inc. 2010
  • 19. Some of Brand Keys Clients © Brand Keys, Inc. 2010
  • 20. Independent Validation: Brand Keys Metrics Correlate with Sales/Profitability
    • An independent business equity valuation firm examined the correlation between Brand Keys brand equity metrics and company value. They selected 10 categories from the Brand Keys Customer Loyalty & Engagement
    • Index and conducted correlations against our rankings.
    • The company value metrics used were Total Enterprise Value (TEV= market
    • capitalization + outstanding debt), EBITDA (free cash flow) and Revenue. These
    • three metrics were converted to two ratios: TEV/EBITDA and TEV/Rev for
    • comparison to the Brand Keys equity metrics.
    • The correlations ranged from a low of .830 to a high of .901 between company
    • value and Brand Keys equity rankings which, further confirms the ability of
    • Brand Keys assessments to predict impact on future purchase behavior with
    • extraordinary accuracy, as well as operating on a cross-category basis.
    © Brand Keys, Inc. 2010
  • 21.
    • 18-65 years old
    • 60% phone interviews; 20% in-person for cell phone only, 20% online
    • Self-classify for category and brand
    • Male/Female
    • Annual survey (2010 is 14 th year)
    • 71 categories (518 brands)
    • 33,500 consumer interviews
    • Drawn from the 9 US Census regions
    Brand Keys Customer Loyalty Engagement Index © Brand Keys, Inc. 2010
  • 22. Syndicated
    • Brand Keys Customer Loyalty Engagement* Index (CLEI)
    • Brandweek Loyalty Leaders List
    • Sports Fan Loyalty Index
    • Women’s Wear Daily Fashion Brand Index
    * A Brand Keys behavior-based definition: The consequence of any marketing or communication effort that results in an increased level of brand equity for the product or service. © Brand Keys, Inc. 2010
  • 23. FUSING Indirect Emotional Inquiry Psychological Jungian-based Personification Questionnaire Direct Inquiry Category Attributes, Benefits & Values Customer Expectation Levels 70% 30% Factor Analysis + Regression Analysis + Causal Path Modeling
  • 24. Customized Applications Ideal 2. Predictive Category Dynamics 3. Brand Health and Brand Planning 4. Media Optimization 5. Communication Testing 6. Research Optimization 1. Brand and Brand Equity © Brand Keys, Inc. 2010 vs.
  • 25. The Starbucks Loyalty Story © Brand Keys, Inc. 2010
  • 26. Loyalty Drivers – Order of Importance Customer Expectation Levels Highest Lowest 1 1. Loyalty Drivers in order of importance. 2. Percent contribution to future purchase/loyalty. 3. Customer Expectation level for each Driver. High = Differentiator 2 Percent of Contribution #1: How do consumers view the category? #2: What is the hierarchy of contribution to loyalty? #3: Where’s the opportunity for greatest differentiation? STRATEGY How Do They Buy in the Category? 2006 Ideal Coffee Provider © Brand Keys, Inc. 2010 3 Low = Table Stakes
  • 27. TACTICS Percent-Contribution of Individual ABVs Driver #2: Service & Surroundings (28%) © Brand Keys, Inc. 2010
  • 28. Customer Expectation Levels 2006 Customer Loyalty Engagement Index: Coffee Starbucks dominates in the driver with strongest customer expectations. © Brand Keys, Inc. 2010 Loyalty Drivers – Order of Importance Highest Lowest
  • 29. Customer Expectation Levels As customers articulate the increasing importance of Service and Surroundings at the start of ‘07, Starbucks loses it strength to Dunkin’ Donuts. 2007 Customer Loyalty Engagement Index: Coffee © Brand Keys, Inc. 2010 Loyalty Drivers – Order of Importance Highest Lowest
  • 30. What Happened? © Brand Keys, Inc. 2010
  • 31.
    • Text of Starbucks Memo
    • From: Howard Schultz Sent: Wednesday, February 14, 2007 10:39 AM PST
    • Subject: The commoditization of the Starbucks Experience as you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.
    • Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in the commoditization of our brand .
    • Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience ; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. . . .
    March 3, 2007 TALKING BUSINESS Give Me a Double Shot of Starbucks Nostalgia By JOE NOCERA Last week, this Mr. Schultz was on vivid display when an internal memo he wrote to his top executives was leaked to . . . . He pointed, for instance, to the company’s decision some years ago to install automatic espresso machines, which, he wrote, “solved a major problem in terms of speed and service,” but also made buying a cup of Starbucks coffee a more antiseptic experience. . . . Robert Passikoff, president of the brand consultant Brand Keys, said that Starbucks had taken its eye off the brand . “In trying to migrate from a coffee brand to a lifestyle brand, there has been a certain brand dilution.” He agreed that the “whole European coffeehouse experience” was no longer how people thought about Starbucks, to the company’s detriment. © Brand Keys, Inc. 2010
  • 32. Customer Expectation Levels Service and Surroundings are most important to customers at the start of ’08; Starbucks continues to struggle in the category they largely shaped. 2008 Customer Loyalty Engagement Index: Coffee © Brand Keys, Inc. 2010 Loyalty Drivers – Order of Importance Highest Lowest
  • 33. © Brand Keys, Inc. 2010 In-Market Validation Year Brand Equity Index Brand Keys Rankings In-Market Realities 2006 109 Dunkin’ # 2 Dunkin’ institutes new strategy 113 Starbucks # 1 Starbucks is a thriving brand 2007 115 Dunkin’ # 1 Dunkin’ 11% system wide sales. 5.2% same-store sales 109 Starbucks # 2 Starbucks share price 43% 2008 115 Dunkin’ # 1 Dunkin’ Restaurant Marketer of the year. Same-store sales 7% 107 Starbucks # 3 Starbucks closes 1,000 stores 2009 118 Dunkin’ # 1 Dunkin’ opens 1,500 th store 106 Starbucks # 3 Starbucks to close 600 stores. Same-store sales 5%
  • 34. What is Starbucks Doing? © Brand Keys, Inc. 2010
  • 35. Introducing New Varieties … © Brand Keys, Inc. 2010
  • 36. Offering Coupons … © Brand Keys, Inc. 2010
  • 37. Advertising … © Brand Keys, Inc. 2010
  • 38. And Finally… © Brand Keys, Inc. 2010
  • 39. To create loyalty, first find out what makes it happen . . . © Brand Keys, Inc. 2010 then implement the right strategy, using the right tactics!
  • 40. Thank You! A blind pig may find truffles, but it helps to know that they grow under oak trees. — David Ogilvy (1911–1992)
  • 41. Thank you for your attention. Robert Passikoff President, Brand Keys, Inc. 212-532-6028 x12 [email_address] Amy Shea EVP, Brand Keys, Inc. 212-532-6028 x14 [email_address]