Marketers are making a big mistake. Read the trade press. Listen to marketers and insights professionals talk. You will hear a lot about brand engagement, social media, SEO, and mobile marketing but you just do not hear much about brand loyalty anymore.
If so, Marketers are missing powerful insights into brand health and growth strategies, especially in a digital marketing age.
Brand health. Brand equity is your biggest asset. So it follows that brand health is your most important analysis because it is about understanding if that equity is poised to grow or decline over time and what you can do about it. Like the beautiful symmetry of a baseball diamond, there is a certain geometry to a brand. If that geometry is intact, the brand is healthy. If the geometry is broken, it looks just as wrong as having different distances between the bases. The geometry includes relationships such as the following. The market leader must have the highest repeat rate, and the greatest number of buyers. The geometry encompasses attitudinal patterns, where attribute ratings for a leading brand are always higher across the board, referred to as the “halo effect”. Brand geometry relationships can be modeled with a high degree of statistical accuracy. When that geometry is broken, your brand’s market share is going to move back to an equilibrium point. For example, if a leading brand’s repeat rate is not commensurately higher, or if it does NOT have commensurately higher attribute ratings its share will almost certainly decline over time.
Segmenting your buyers based on loyalty. To direct optimal strategies in digital, the most targetable of all media, we need to first extend these “macro” relationships between loyalty and market share to the micro or individual level because different loyalty groups require different marketing approaches. Let’s segment your buyers by loyalty level into, say, 4 groups based on their probability of purchase towards your brand. Let’s make the top group those consumers who buy your brand 75% of the time. The next group buys you 50-75% of the time. The third group buys you 25-50% of the time and the fourth group buys you a small percent of the time probably because they are loyal to some other brand. Where does a higher repeat rate for a market leader come from? It comes from having disproportionately more of its buyers being in the top two loyalty groups vs. a smaller brand. Again, if this is not the case, a leader will decline.
Brand loyalty and digital brand growth strategies. Now, let’s apply loyalty segmentation to digital behaviors. With this loyalty segmentation in mind, what do you think the distribution of fans to your brand’s Facebook page is proportionately distributed? Probably not; it is unlikely that someone who rarely buys your brand will friend or follow you. How about the middle two groups? Are they more likely to be visiting the coupon-related shopping sites? What do people search for that leads them to visit your brand microsite? Are the referring search terms different for loyal vs. marginal buyers? Probably there is more trademark search for loyal buyers and more discounts, comparison, and issue-related searches for less loyal buyers. Have you optimized search with this in mind? What does each loyalty segment say about you in social media conversation? Is it the same pool of comments or are they saying very different things? (I bet they are.)
Some marketers, in the era of engagement thinking might believe that you don’t have to care so much about the less loyal buyers except how to make them “engaged”. This is actually a mathematical mistake. If you analyze the sales changes from the four loyalty groups of a growing brand you will see a remarkable thing. Sales actually must increase from every one of the loyalty groups! (For the readers who are a bit wonky, as I proudly am, I am happy to describe this one on one if you contact me.) In other words, your brand growth marketing strategies must have a customized component that addresses each group, even the less loyal buyers.
Brand loyalty analysis proves that approaches which are exclusively based on building brand engagement are incomplete. I hope to bring back brand loyalty analysis for a digital marketing age. It’s throwback, but with a modern marketing twist.