‘Loyalty’ is a phrase marketers need to be much more careful about using as they are generally not “precise” enough about what it means or “what kind of loyalty” they are talking about, according to Marketing Week columnist and Passionbrand founder Helen Edwards.
Speaking at the Festival of Marketing in London today (10 October), Edwards reminded marketers that “when we talk about loyalty in marketing it is a metaphor”. She urged against carelessly assuming brand loyalty is the same as that which people show to friends, but also criticised the definition implied by Professor Byron Sharp of the Ehrenberg-Bass Institute, that it is synonymous with how often consumers buy a brand.
“You can’t extrapolate to loyalty from frequency because other things come into play,” Edwards asserted, pointing out that market-leading brands are likely to have better distribution through retail channels. This doesn’t leave room for the concept of ‘loyalty at parity’, which is “the tendency to choose one brand in a category when all things are equal”.
Of course, all things almost never are equal, but Edwards argued that loyalty at parity remains useful to brands – particularly smaller brands and startups, where purchases by customers showing this kind of loyalty make up a higher percentage of total purchases than at bigger brands. “It’s important to help you compensate for that distribution disadvantage,” she added.
Analysing purchase frequency alone fails to reflect this and there is a “danger of only reading back from the [sales] data, making assumptions and giving things terms [such as ‘loyalty’] that lead us to make certain choices in marketing that might not always serve us well”.
Loyalty at parity is a “tactical loyalty, a strong and brief loyalty” that can help small brands secure distribution through bigger retailers by giving them a good reason to stock a brand. Even though these brands do not have many customers yet, they know they will keep coming back.
When the price goes up, the purchasers who feel closer to the brand hold their purchasing more than those who are less close to the brand.
Helen Edwards, Passionbrand
Another kind of loyalty startups are using successfully is “constrained loyalty”, Edwards said, which can also be thought of as “satisfied inertia”. This is chiefly exploited by direct-to-consumer product brands that tie consumers into subscriptions, meaning that repeat purchases are guaranteed at the expense of established competitors.
Shaving brands such as Harry’s and Dollar Shave Club have demonstrated the potential of this, taking significant share away from the market leader, Gillette.
Three ways to build loyalty
There are a number of things any brand can do to increase levels of loyalty. One of these is simply to “make a better product”, Edwards stated, but she noted this is easier said than done for marketers, who will have to win internal company battles to achieve it.
Another is to take a leaf from direct-to-consumer brands’ book and over-deliver on service. “These brands regard the physical and the service experience as very interwoven. Even in what we might call typical product brands, you’re seeing a service built into them and that’s to keep customers coming back in,” she observed.
The third is to offer a proposition that appeals to consumers’ sense of idealism. Psychological research by academics Hazel Markus and Paul Nurius indicates that consumers are “cognitively motivated” to seek out brands that help them move their self image from an “actual self” to an “idealised self” – a phenomenon that is obvious from people’s Instagram feeds.
She gives Method as an example of a brand that has succeeded on this front, breaking through in a “moribund” cleaning products category with a combination of “a bit of sass, a bit of style and some eco credentials”.
The benefits of loyalty are not only in sales figures but also profitability, Edwards suggested, citing new research carried out by Passionbrand.
“When the price goes up, the purchasers who feel closer to the brand hold their purchasing more than those who are less close to the brand. What that tells you is that if you can forge some sort of emotional connection with your customers, then you’ve got some price elasticity built in.”