Brand Loyalty: Logistics or Love?
Loyalty is one of my favourite subjects in the brand space – it encompasses and impacts so many key marketing metrics and measures– advocacy, frequency, LTV, pricing, product and service design, stretch and so much more.
Truly loyal customers give brands a HUGE advantage in all of the above areas.
Market share is not the same as loyalty. And many brands have fallen into the trap of lazy thinking based on their ‘share’. Think Nokia. Blockbuster. Tesco. Taxis.
Massive market share. High levels of repeat purchase and frequency of use. Surely… they had ‘loyal’ customers? Surely their brand alone will carry them through difficult times and increasing competition. Err…
There are two ends of the loyalty spectrum to consider. Imagine at either end of what is known as ‘the loyalty line’ two statuses a brand can hold.
At one end of the loyalty line: There was no-one else. Loyalty through logistics.
At the other end: There could be no-one else. Loyalty through love.
One that has true and absolute customer loyalty built it and a future. One hides a multitude of dangers, masquerading as a brand with loyal customers – where arrogant, lazy or out of touch brands sit and, sadly, sleepwalk to failure.
Some brands find themselves here as they’re growing. That’s fine – but it must then be the key objective of the business to create a powerful bond and connection with their customers, moving them towards the other side of the loyalty line. And fast.
Both positions can be wildly profitable – but one is short, or mid-term at very best, they are burning brands – and under threat.
The other has increased value, is longer-term and a powerful platform for growth, if you keep at the things that made your customers fall in love in the first place.
Let’s focus in on the type of loyalty no brand wants long-term… ‘there was no-one else’. Three of the key threat characteristics shared by brands in this camp are a) large scale distribution / market share, b) a myopic view of what they do, and c) limited competition.
Blockbuster. Pretty much the only way to rent a film, before the digital revolution. The brand had all three threats. Their shops were everywhere. They had some independents doing what they do, but often with much more limited copies of movies and in secondary or tertiary retail sites. There’s the much talked about story of Blockbuster having had the chance to buy Netflix… and they turned it down. It’s a red herring. If Blockbuster had bought Netflix, the would have held it back and been killed off by the other alternatives. There biggest mistake? They thought they were a retailer, not an entertainment brand. Not a brand to allow people to enjoy movies. They viewed themselves myopically. They relied on their logistical advantage. And died.
Tesco. Okay, they’re not gone. But they’re not the retail success they once were. Why? Well, Tesco was captured more retail £s in the UK than any other retailer, made huge profits and showed sensational growth. How? They offered an experience customers wanted and were more available than other brands – they had more stores and occupied a mid-tier brand position. They operated the UK’s most successful loyalty scheme. And every little helps, right? Wrong. Queue credit crunch and a reduction of disposable income, combined with cheaper alternatives in ALDI and LIDL, UK consumers changed their habits. Middle classes suddenly travelled further to shopping in multiple stores to lower their grocery spend. They did the unthinkable. They bought from discounters. Tesco relied on their logistical advantage. And caught a cold. They’re reinventing. They’re doing fine. But they were sleepwalking, comforted by their success.
Nokia. A quick one this. The best phones in the world. Until they weren’t. And they were done. No one was loyal to the brand. At all. They just wanted the best. They relied on logistical advantage. Got lazy. And in one of the most sensational crashes of any brand ever, nose-dived.
Taxis. Simple one again. Think about the black cab. Hard to hail at peak times. Expensive. But there was no alternative. Logistical success. Until Uber put control of ordering a cab, at a lower cost, onto our mobile, worldwide.
For brands everywhere. A logistical advantage should never be confused with brand loyalty. It can be built on. It can be a platform for huge success… or it can collapse underneath you in seconds.
An article by Gellan Watt – gellanwatt.co.uk