There can be little doubt in the minds of most marketers that the focus for the Nineties is on customer loyalty. Much is written about defining loyalty and devising schemes to encourage it. Less, perhaps, has been available on how to uncover just how many buyers of a product or brand can really be described as loyal, or how others, who may not yet fit into this category, can genuinely be motivated to change their purchasing behaviour.
Fingerhut Associates has uncovered some interesting research from the Cranfield School of Management, which is now making this analysis easier and so has practical implications for brand managers in the development and management of their brands.
Few would disagree that, traditionally, retailers have worked with manufacturers to market their products to the consumer. More recently, however, the retailer has begun to force the manufacturer to accede more to the retailer’s requirements in return for the lead to the consumer. This has meant that brand issues and relationship marketing which go beyond the store interface need to be developed, so the brand manufacturer can re-form relationships with the consumer, while still ensuring that they work in partnership with the multiples.
Marketers have long been familiar with the “ladder of loyalty” concept, climbing from trial, through repeat purchasing, to brand loyalty.
However, through its research, Cranfield has developed a model to “emotionalise” the relationship between consumer and brand in order to answer the key question of how to categorise brand loyalty. The result is the “Diamond of Loyalty”.
This outlines the relationships between consumers and the brands they purchase in a matrix describing the type of products they buy against the association of each of the four groups by marrying attitude and behaviour.
Switchers have a high purchasing repertoire but low involvement with an individual brand. They purchase the type of product frequently but are not loyal to any particular brand and are generally highly influenced by price.
Habituals have low involvement and a narrow purchasing repertoire. They purchase a particular product or brand out of habit and may switch if their interest is aroused.
Variety seekers love the product and probably buy a lot of it, but are not committed to only one particular brand, preferring to vary their choice.
Finally, the truly loyal consumers have a narrow purchasing repertoire from a particular category and a high involvement with that individual brand.
Cranfield is extending this research to uncover which outside influences and techniques can be used to change the buying patterns of consumers displaying these purchasing styles. It argues that more research is needed by most manufacturers to establish just where their brand equity lies within the Diamond of Loyalty. This could be used to establish market share of loyals, variety seekers and so on. It would form the basis for setting market share targets based on loyalty types rather than aggregate sales.
Dr Simon Knox, head of the Institute for Advanced Research in Marketing at Cranfield, comments: “Across product categories, the composition of loyals, variety seekers and so on will vary, since the purchasing behaviour of an individual is likely to vary category by category.
“For instance, in the cereal market there are a large number of variety seekers, while newspapers are bought primarily as a loyal purchase. It remains an open question whether or not the deep price cuts that newspaper proprietors are currently engaged in is an appropriate strategy for developing ‘loyals’ or encouraging ‘swit-chers’. There may be more effective marketing strategies which could be deployed to build market share cost effectively, particularly among habitual newspaper purchasers. For instance, widening distribution channels and sampling points in city centres and on commuting trains could be more cost-effective in the long run.”
Therefore, to use the diamond to improve loyalty for a brand, it is essential that manufacturers look at their own brands and determine what the profile of its loyalty diamond looks like, and then to contrast this with the loyalty diamond for its competitors.
This is a vital role that can be played by the promotional marketing consultancy. By taking a step back from the brief to consider the strategy and background of brands, it is often possible to develop strategies which indicate that a totally different approach is warranted.
Cranfield has been using this model to develop appropriate strategies for clients’ brand marketing. Once the initial concept has been grasped, clients will be keen to look at the wider implications of brand relationships with consumers, and formulate a strategy which creates changes in brand purchasing behaviour, reducing switching.
In a recent study for a wine retailer with a chain of stores in the London area, the management was keen to explore the extent of portfolio purchasing of its customers.
The results showed that both switchers and habituals – all low involvement customers – make up about half the customers but contribute under a third of in-store expenditure.
More interestingly, from a management point of view, was the retailer’s remaining customer base, which made up two-thirds of all store purchases. These were loyals and variety seekers, with both groups expressing a real interest in the brands of wine they buy, whether proprietary or from the store’s own-label selection.
Since both loyals and variety seekers have a real interest in the purchasing process, but seek different purchasing outcomes, management can develop separate point of-sale material and promotional schemes that capture the imagination of both groups. By aiming to increase frequency of purchase of loyals, and portfolio purchasing of variety seekers, using differential sales promotion techniques, cost efficiencies and selective market share gains across priority customer types can be achieved.
Cranfield’s research has already involved a number of companies in the packaged goods and retail sectors. Together with Fingerhut Associates, the University is seeking new partners to extend the project and establish a research programme.
Certainly, the results produced so far have proved very exciting and, with the extension that would come with the next stages of the project, current thinking on patterns of consumer loyalty will be significantly extended.