Ads must break loyalty barriers

Retailers have been quick to recognise the importance of consumer loyalty and have used own-label goods to build it. John Shannon is president of Grey International

The direct link between profits and brand loyalty should force European advertisers to move beyond traditional techniques in their efforts to reduce brand promiscuity. By John Shannon

During the past few years, customer loyalty has emerged as the most important factor for building long-term brand profitability.

UK retailers have been quick to recognise the relationship between profit and loyalty and have pioneered schemes, such as loyalty cards, to stem customer defections.

In contrast, Europe’s advertisers have found it harder to develop communication techniques specifically designed to build brand loyalty and have thus witnessed the gradual but relentless erosion of loyalty among their core consumer groups.

Research from Grey’s global loyalty measurement and evaluation programme, Brand Loyalty +, shows the issue is more pressing in Europe than in the rest of the world and that German consumers are the most likely to switch between brands regularly. So serious is the problem of Germany’s “brand promiscuity” that it is threatening the commercial viability of some major brands.

In the late Eighties, before Europe’s economy began to slow, many brand manufacturers tended to underestimate the importance of retaining customers. After all, with consumers spending at un-precedented levels, any signs of brand erosion could be quickly redressed as new products were launched and therefore new customers attracted.

However, in the more frugal and more competitive post-recession era it is becoming clear that the most cost-effective way to increase profits is to find new methods of strengthening customer loyalty. A recent study by Frederick Reichheld of Bain & Company showed a five per cent decrease in customer defections can boost profits by as much as 85 per cent.

The question advertisers now face is how to use commercial communications to directly influence loyalty levels. Traditionally, agencies use a combination of brand share and satisfaction measurements to help them develop relevant advertising. But these tools are too crude to provide sufficiently penetrating insight into the complex intricacies of loyalty.

To build strong, sustainable brands, advertisers must move beyond traditional techniques and focus on the key drivers and barriers to loyalty. They must equip themselves to exploit this knowledge with advertising designed specifically to enhance loyalty.

The challenge of using commercial communications to build consumer loyalty to brands and their core values is arguably the most important priority facing today’s advertisers in Europe.

Success re-quires nothing less than a complete reappraisal of the ways in which brand performance and consumer satisfaction are evaluated.

Latest from Marketing Week

NOT REGISTERED? IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now

THE BEST CONTENT

Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3711 or email subscriptions@marketingweek.com

If you are looking for our Jobs site, please click here