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Loyalty is a long-term process

News, 03 May 2016

LONDON: In difficult economic times, marketers are inevitably tempted by the quick results that sales promotions tactics can offer but generating true brand loyalty is a long-term process that requires building a proper understanding of both the existing and the potential customer base.

In a Warc Best Practice Paper – How to build long-term brand loyalty – Martin Hayward, formerly a leading strategist at Aimia and Dunnhumby, argues against the idea that it may be possible to build loyalty quickly through incentives.

Training the consumer to "expect some form of instant incentive every purchase … ultimately restricts investment in brand premium, potentially leading to the danger of a downward spiral towards commoditisation".

But, he adds, "brands that truly understand their customers can continue to thrive in such an environment if they have the right data, the right strategy and the right loyalty programme to reward customers for long-term not short-term behaviours".

And, in an aside, he takes issue with Byron Sharp's contention that brand success is driven by brand penetration and that the marketer's focus should therefore be on penetration not loyalty.

It's important to focus on both, Hayward maintains. "Without penetration, a brand has no base to build loyalty from, and without loyalty a brand will lose at least as many customers as it gains."

The most successful brands, he states, have always tried to optimise both metrics – continually bringing new customers to the brand while also working to keep as high a share of their spend as possible.

How one does that varies, since loyalty can mean different things depending on category; daily purchases in a coffee shop with an occasional free beverage as a reward are far removed from the way in which a car brand has to go about building loyalty for a major purchase that might only take place every few years.

But both will need to gather hard and soft data about their customers in order to understand which segments are most valuable and what their emotional attachments are to the various brands in the category.

And having carried out that analysis, it becomes easier to define exactly what the loyalty strategy needs to achieve.

"Simple statements of desired behaviour change for different customer groups are a very powerful way to bring the strategy to life," Hayward suggests.

Data sourced from Warc