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Brand loyalty management
 

Brand loyalty management

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Brand loyalty management is important given the enormous investments and impact on the bottom line taking into account the fact that generating new brand users costs 6-10 more than keeping existing ...

Brand loyalty management is important given the enormous investments and impact on the bottom line taking into account the fact that generating new brand users costs 6-10 more than keeping existing brand users. In contexts where brands need to be supported heavily by employees / people (service, B2B, ...), big negative impact of employee turnover on customer brand loyalty. Short-term oriented vision hampers development of customer brand loyalty (e.g. focus on sales figures of current quarter).

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Brand loyalty management Brand loyalty management Presentation Transcript

  • Brand loyalty management: an introduction Prof. dr. Kristof De Wulf Managing partner, InSites Consulting Associate marketing professor, Vlerick Leuven Gent Management School March 20, 2008
  • Content 1. How big is the challenge? 2. What have we learned? 3. Generating and keeping brand loyalty 4. Measuring brand loyalty
  • How big is the challenge? 5 4 1 In years, 50% of customers leave In years, 50% of employees leave In year, 50% of investors leave Source: The Loyalty Effect, Frederick Reichheld CUSTOMER BRAND LOYALTY INTERNAL BRAND LOYALTY INVESTOR BRAND LOYALTY
  • How big is the challenge? Source: Carlson Marketing Group / Vlerick Leuven Gent Management School Belgian brand net promoter scores are not looking great ...
    • % of detractors substracted from the % of promoters
      • Recommendation to a friend or colleague can be seen as an ultimate act of loyalty
      • Displays results of “Would recommend” answers in a clear manner
      • Ten-point scale
        • Ten means “extremely likely” to recommend
        • Five means “neutral”
        • Zero means “not at all likely” to recommend
    1 2 3 4 5 6 7 8 9 10 Detractors Neutral Promoters
    • Mobile operators: -34.8%
    • Banking/insurance: -34.1%
    • Supermarkets: -12.7%
    • Fixed phone/TV/internet: -42.3%
    • Utilities: -70.8%
    • Automotive: -5%
    Belgian findings
  • How big is the challenge? Source: Ogilvy Loyalty Index, 2000-2003 % loyal % price-driven % repertoire Globally Belgium Consumers don’t think of themselves as loyal ... “ Consumers mostly have habitual on-going or polygamous split-loyalties to a ‘repertoire’ of several brands.” – Ehrenberg & Scriven
  • What have we learned? Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative vs Positive Word of Mouth,” International Journal of Market Research Brand loyalty is connected with revenues and profits
  • What have we learned? Spurious loyal True loyal Not loyal Latent loyal Loyal to the brand is MORE than satisfied with the brand ! Source: Adapted from Heskett et al. (Service Profit Chain) Non-competitive zone : regulated monopoly, few substitutes, dominant brand equity, high switching costs, powerful loyalty program, proprietary technology Highly competitive zone: many substitutes, fierce competition, low switching costs, commodization of low differentiation, consumer indifference Satisfaction low high Behaviour high low NMBS Airlines Hospitals PC’s Cars
  • What have we learned? Smaller brands are punished twice for being small, following the well-known “Double Jeopardy” pattern (Ehrenberg) Source: Ehrenberg Buying volume Buying frequency Weak Strong Weak Strong Small brands Large brands
  • What have we learned? Source: Henley Institute Why are customer disloyal? Indifference
  • What have we learned? Building brand loyalty is less and less in your hands ... EVERYONE IS A CRITIC NOW POWERFUL HUMAN TO HUMAN CONVERSATIONS MAKE BREAK
  • Generating and keeping brand loyalty Brand image Product experience Service experience Personal bonding
  • Measuring brand loyalty “ The good news is that all the different loyalty-related measures tend to vary together. Crucially, they therefore measure something , which conveniently may be labeled ‘loyalty’.” – Ehrenberg & Scriven
  • Measuring brand loyalty “ Retention is for wimps. We measure the percent of customers who have our name tattooed on one of their body parts.” (Harley Davidson Annual report)
    • Morgan (1999/2000)
      • Authority - trust and respect commanded by the brand and perceived by the customer
      • Identification - convergence of brand's values with that of the person, and the degree to which the brand is regarded as having personal relevance
      • Approval - perception that the use/purchase of the brand will achieve a result that is likely to meet a person's perceived needs in a social sense
    • Belen del Rio, Vazquez and Iglesias (2001b)
      • Willingness to recommend the brand
      • Pay a price premium for it
      • Accept brand extensions
    Measuring brand loyalty Customer-based measures
  • Measuring brand loyalty Customer churn Customers retained after x years (as a % of first year customers) 77% 67% 43% 35% 29% 25% 17% 11% 0-1 2 3 4 5 6-7 10-11 20-40 53% 21% 8-9 12-14 15-19 67% 62% 57% 53% 46% 41% 37% 32% 28% All types of defection Controllable defection only 9% 27% Tenure (years)
    • A negative experience with a brand decreases loyalty to a greater degree than a positive experience increases loyalty
    • The double whammy:
      • Consumers find NWOM more useful in making purchase decisions than PWOM or positive word-of-mouth ( advocacy , acquisition)
      • NWOM captures better true loyalty than PWOM ( loyalty , retention)
        • High commitment and low competition (less alternatives) will lower the threshold for engaging in PWOM
          • E.g. When you buy a car that just meets expectations but does not exceed expectations, you will rationalise your poor choice (‘cognitive dissonance reduction’) and engage in PWOM out of necessity (you are stuck with your car, so you might as well consider it a good buy…)
        • In contrast to PWOM, NWOM is more strongly correlated with both satisfaction and recommendation likelihood
    Measuring brand loyalty Negative word-of-mouth Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative vs Positive Word of Mouth,” International Journal of Market Research
    • The best of both worlds:
      • NPS: measures intention to promote: ‘would-be promoters’
      • NWOM: measures reported negative word-of-mouth
    • LSE Net Advocacy Score = NPS promoters - NWOM
      • NPS Promoters = % responding 9-10 on NPS scale
      • NWOM = % responding having done very negative WOM about the brand in the last 12 months
    • A 2-point increase in this ‘LSE Net Advocacy Score’ roughly corresponds to a 1% increase in revenue growth
    Measuring brand loyalty Net advocacy score Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative vs Positive Word of Mouth,” International Journal of Market Research
  • Measuring brand loyalty Loyal / at risk profiling Source: Etter, B. (2005), “Loyalty Leverage: Measure and Increase Customer Retention,” Marketing Research
    • If customer scores 9 or 10 on all three questions: LOYAL
    • If customer scores 0 to 6 on at least one question: AT RISK
    • If not Loyal nor At Risk: NEUTRAL
    Measuring brand loyalty Loyal / at risk profiling Source: Etter, B. (2005), “Loyalty Leverage: Measure and Increase Customer Retention,” Marketing Research
  • Measuring brand loyalty Financial measures Source: InterBrand
  • Measuring brand loyalty Financial measures Source: InterBrand
  • Concluding remarks
    • Brand loyalty drives revenues and profits, but ...
      • Generating and keeping brand loyalty is increasingly difficult
    • Brand loyalty is a matter of behaviour AND attitude
    • Indifference is the biggest explanatory factor behind attrition
      • Connect with your customers
      • Create great brand experiences (image, product, service, relationship)
      • Understand the new reality: everyone can be a critic or a fan
    • Brand size matters
      • Smaller brands have a lower buying frequency and volume
    • Select a relevant brand loyalty KPI
      • Benchmark performance over time
      • Develop an action plan for brand loyalty enhancement
    • Kristof De Wulf
      • Managing Partner
      • [email_address]
      • Tel. +32 9 269.15.03
      • Mobile +32 496 23.29.20
    • InSites Consulting
      • Evergemsesteenweg 195
      • B-9032 Gent
      • Belgium
      • Tel. +32 9 269 15 00
      • Fax. +32 9 269 16 00
      • [email_address]
      • www.insites.eu
    Contact details