brandloyalty

Researching brand loyalty

Joseph Plummer, McCann-Erickson, uses new research to show how little marketing effort is seen to go into building loyalty in spite of its value to brands

HE IMPORTANCE OF building customer loyalty has been much discussed and written about over the past decade. A recent Admap review (1) summarised much of the research on brand loyalty. A major conclusion was: It is widely stated on both sides of the Atlantic but less widely evidenced that brand loyalty is declining, as consumers are faced with burgeoning choice and parity performance between competing brands. Marketing scholars such as Duncan and Moriarty (2) discuss the large investment required to attract new users to a brand when compared with the investment required to maintain a customer. Duncan and Moriarty argue that it costs six to eight times more to acquire a new customer than retain a current customer. Why, therefore, is there this discrepancy between talking the talk of loyaltybuilding efforts and walking the walk of loyalty building in terms of commitment (investment and executional staying power)? One obvious explanation is that building loyalty is difficult and involves more than marketing. Building brand awareness and trial has been a classic competence of marketing especially mass advertising and promotion. Loyalty building is difficult In a recent article (3), James Anderson and James Narus highlighted the difficulty in
FIGURE 1

creating loyalty efforts: If they wish to achieve profitable, sustainable growth, suppliers seeking a larger share of their customers wallets need a finegrained, disciplined approach to getting, leveraging and documenting customer knowledge. Another possible answer that this article explores is that few marketers and their agencies are convinced that loyalty-building efforts via marketing pay off. Yes, frequent flyer or points programmes have become a staple of the travel industry. And, yes, marketers do admire brands like Harley-Davidson, Capital One, Mercedes, Wal-Mart, Heinz Ketchup and others for their skill in building loyalty. But what about the customer? Some studies have shown that retaining customers is highly profitable. Fred Reichheld and Christine Detrick report in a recent article (4) that In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit. That is because return customers buy more from a company over time. In addition, return customers refer others to your company. Of course, brands also need to attract new customers and create new demand in order to grow. Examination of most marketing budgets, however, indicates that a majority (7080%) is allocated to mass advertising to build brand awareness and promotion to encourage trial.

We are not investing heavily in marketing to build loyalty. We all like to be recognised for our loyalty. We are pleasantly surprised when a brand rewards us in some way for our loyalty. Just a simple sentence such as Welcome back, Mr Rapp from a hotel staff member makes us feel rewarded for our loyalty. How does loyalty compare to other marketing drivers of brand health? This is a very difficult question to answer, but we have initiated a research effort at McCann-Erickson WorldGroup to learn more about the key marketing drivers. One of these marketing drivers is loyalty. This new research tool is called McCann Brand Clout. McCann Brand Clout overview Brand Clout is based on a concept of universal marketing drivers, developed by McCann-Erickson. These marketing drivers provide a common framework to examine the effect of all the principal marketing communications disciplines. This approach recognises that across markets and categories there are seven universal marketing drivers that marketers invest in to varying degrees to build successful brands. These drivers are: brand awareness, emotional bond, product news, activation, product experience, loyalty and buzz. Universal marketing drivers Brand Clout deals with the relationship people have with a brand through the types of marketing communications programmes the brand uses. The seven universal marketing drivers can be defined as follows. 1. Brand awareness Keeping the brand name on peoples minds. 2. Emotional bond Forging a connection with peoples hearts and feelings. 3. Product news Creating new relevance through news and innovation. 4. Activation Encouraging immediate purchase via incentives or sampling. 5. Loyalty Rewarding customer relationships and retention. 6. Product experience Enabling
World Advertising Research Center 2003

The importance of marketing drivers influence

Driver influence score 30 25 20 15 10 5 Awareness Emotional Product bond news Activation Loyalty Product experience Autos Computers Credit cards Buzz Driver influence

30 Admap December 2003

Dr Joseph Plummer is executive vice president, and director of research and insight development for McCann-Erickson WorldGroup. He began his career at Leo Burnett in Chicago before joining Y&R, and later ASW and DMB&B.

prospects to get to know, experience or use a brand without purchase. 7. Buzz Building credibility through third-party sources industry, government, word of mouth. Totally new kinds of customer survey measurements have been developed for the marketing drivers, designed to work across the full range of product and service categories. These measurements differ from those in traditional brand tracking or attitude and usage studies. Brand Clout methodology Brand Clout tells us the perceived marketing impact of the drivers the consumer perception (or their experience) of the degree to which a brand in a competitive set is successfully utilising each particular marketing driver. Each brand studied receives a marketing impact score on each driver. The scores are based on the ratings each brand receives on the Brand Clout Item battery. The research approach also tells us about the relative influence and importance of the drivers on future brand choice within the category and among key targets. Driver influence reveals which drivers are more closely linked with brand choice. The Brand Clout for a brand is a profile of the marketing impact across the seven marketing drivers for the brand a profile against its key competitors, with the added
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context of the driver influence in that category for the marketing drivers. Brand Clout shows how well a brand is doing on its marketing impact, and how well it fares versus its competition, especially on the drivers with the highest influence. Recent studies shed some light on the impact and influence of loyalty within the seven major drivers. All of our studies to date indicate that the primary impact (what consumers perceive most) of marketing efforts is brand-awareness building efforts. Most packaged goods and retail categories show that activation is the second highest in perceived impact. Technology categories show that either product news or buzz is second in perceived impact. The results show clearly that in most categories loyalty is low in impact overall. The exceptions are in specific brand profiles such as Discover in credit cards, Apple in computers and Subway in fast foods. What is interesting from recent Brand Clout research in the US is the influence of the marketing drivers on brand choice. Here emotional bond and loyalty rise to the top in influence in the credit card and computer categories. While brand awareness and emotional bond are the top two drivers of influence on brand choice for all three categories (credit cards, computers, and mid-size cars) loyalty is the third most important driver for credit cards and computers, and is tied with

Marketing drivers impact

Impact score 75 70 65 60 55 50 45 40 Awareness Emotional Product bond news
World Advertising Research Center 2003

buzz in automobiles for third place, as can be seen from Figure 1. On the other hand, consistent with previous studies, Figure 2 shows that loyalty as a driver is perceived at low impact levels for all three categories. Product news, activation and buzz are perceived much higher in impact, after brand awareness, except for credit cards, where loyalty is higher driven in large degree by the American Express rewards programme and numerous affinity efforts with airlines. This research supports previous findings that loyalty is under-appreciated by most marketers thus, consumers do not perceive high levels of loyalty-building activities by most brands in a number of categories we have studied. But this research suggests that loyalty is underleveraged in categories such as cars, credit cards, and computers. It has a strong influence on brand choice, especially when interacting with emotional bonds, whether focused on loyalty effort or highly differentiated from the competition. As the May 2003 Admap article (1) concluded Brand loyalty is a complex and controversial subject, where a wide variety of analytical approaches and marketing tactics compete. While behavioural loyalty is clearly the ultimate goal it seems clear that it has the best prospect of being sustained if it is accompanied by attitudinal loyalty. Our Brand Clout research supports this and should encourage marketers to reconsider the potential of loyalty efforts, or consider the alternative of losing valued customers.
1. R White: Best Practice. Admap, May 2003. 2. T Duncan and S Moriarty: Driving Brand Value: Using Integrated Marketing to Manage Profitable Stakeholder Relationships. McGraw-Hill, 1997. 3. J Anderson and J Narus: Selectively Pursuing More of Your Customer's Business. Sloan Review, Spring 2003. 4. F Reichheld and C Detrick: Loyalty: A Prescription for Cutting Costs. Marketing Management, September/October 2003.

Category averages

Computers Credit cards Autos

Activation

Loyalty

Product experience

Buzz

joseph.plummer@mccann.com
December 2003

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