Loyalty: there is no one single version
A single version of loyalty… a single truth? Maybe not.
The idea of creating a definition of loyalty in marketing terms is the same idea as trying to come up with an agreed single proposition for what the term marketing means as well.
There are so many different interpretations that I believe that there is no ‘right’ one, it is very dependent on how the definition is applied to the type of marketing discipline in discussion. Thus, the same applies for the marketing meaning of Loyalty.
In effect, I believe that as with all drivers of ‘meaning’ that a definition or context of a word does and will change over time. It is just the nature of the English language and our ongoing usage of the language. So, I have predictably retrieved from the web a dictionary description to start. In know this is old hat but like all good debate you have to start from a solid base or meaning.
1. the quality of being loyal
2. a feeling of friendship or duty towards someone or something
So, this dictionary meaning is of course quite generic in its reference of the meaning of loyalty. But this is my point. For businesses and marketing practitioners to apply what we believe are the core elements of loyalty would be to; create the intangible feeling of wanting to be loyal and to further link this into an action, when making purchase decisions by a feeling of friendship or duty.
Okay, so we have identified some of the emotive and intangible drivers of loyalty. But how does business use this intangible human driver to create a meaning or definition of what loyalty is for their business?
All loyalty programmes have one end goal in mind, sustainable increased incremental revenue and greater profits. The key for business is how this is applied and what ‘mechanic’ the business chooses to use in the market relative to their immediate competition but the best known example is American Airlines (AA) whom actually invented the first loyalty programme.
The programme was known as AAdvantage and was an instant success it was so successful all the competitors copied it as the programme was based on a simple model (low barriers to entry). The more you travel (Miles) the more points (rewards) you can redeem from the programme. I could further analyse AA’s programme and debate that this was actually a frequency programme rather than loyalty as it just rewarded usage.
So, in effect the ‘mechanic’ for AA was to build a programme which identified customers and then based on the information (data) collected the customers are then rewarded for their ongoing usage of the product. Looking at this example you can start to see the beginnings of an argument where we could look at two different meanings of loyalty marketing already, we have a frequency based programme with AA which rewarded frequency.
There is also the possibility of another type of loyalty based on the intangible desire to below to a cohort of users. This is highly relevant to the automotive industry where a customer will generally not be in market on average more than once every 1 to 3 years at the earliest.
Whilst frequency loyalty marketing is important for AA (supermarkets are another good example) and can fill seats that either would have been empty or reward customers with seats at marginal cost. Automotive suffers from the opposite of Airlines in that the tyranny of time in the duration between purchases.
What do automotive companies do differently to the Airlines with their frequency loyalty marketing? Well it is all about having an ongoing conversation with your existing customers. The biggest problem automotive company’s face is actually maintaining contact with their existing customers so they can keep you going back to their branded dealer network for servicing and of course ultimately sell you another 5 cars over your lifetime.
So, we now have two types of contexts for loyalty marketing, we have frequency programmes and we have a communications programmes. Both share the same objective, getting the customer/user to buy more from the same company over time.
So the definition of loyalty here… well it comes down to what type of service product you sell and what your objective is with the programme. But ultimately it is about influencing your customers to buy from you more often and to feel a great sense of satisfaction with their choice to purchase from your business so they will buy again and again.
I think we can make this even more succinct in fact: your company chooses to create a loyalty programme which will by design increase the loyalty of your customers and exceed their expectations. As long as the services or products your business supplies to your customers are of a matching or higher quality relative to the competition, this will lead to higher customer satisfaction, which then leads to customer loyalty, which then drives greater profitability.
In effect, what we have here are the antecedents for building not only a successful loyalty programme for your business, but even as a strategic framework for your business overall to become a market leader in your chosen sector.
Till next time, The Integrati team.