The two sides of loyalty
- PDF / 290,230 Bytes
- 13 Pages / 595 x 842 pts (A4) Page_size
- 19 Downloads / 186 Views
The two sides of loyalty Don E. Schultz and Dana Hayman Abstract
Brand loyalty is good for brands, for companies and for shareholders. Brand loyalty may not be as good for customers, who derive little added value from being loyal to a brand. This paper reviews what is known about brand loyalty from both views and explores how brand loyalty may be used by marketing organisations to build and enhance the benefits of brand loyalty to both sides. The authors initially present a conceptual model of how an organisation might use brand loyalty as a method of determining how much to invest in specific groups of customers and prospects, how to estimate returns and how to measure success. The model is illustrated by a case history example from the marketplace. Additional financial models that might follow from the basic approach are also suggested.
Introduction
Over the past few years, much has been written about customer and brand loyalty. Reicheld1 has focused on the importance and value of building customer loyalty and the savings and returns that accrue to the organisation from that loyalty. Hughes2 has focused on lifetime customer value, that is, the ongoing benefits to the organisation of maintaining customers over various periods of time. Hallberg3 has emphasised the importance of heavy users, ie loyalty, to a brand and category. He has applied the well-known Pareto 80:20 principle to primarily scannercaptured consumer data from supermarkets and mass merchandise retail outlets. Many others have contributed research and writing that have illustrated and emphasised the value of customers continuing to purchase brands from an organisation on an ongoing basis.
The value of loyalty
Don E. Schultz, Medill School of Journalism, Northwestern University; Agora Inc, 1007 Church Street, Suite 105, Evanston, Illinois, USA Tel: +1 847 328 6488 Fax: +1 847 328 6486
Almost all researchers and practitioners maintain and demonstrate that loyal customers are (a) more profitable, ie provide more net value return to the organisation based on the investments made in them; (b) add substantial value if they become advocates for the firm or the brand, that is, they become non-paid sales people if they are vocal and aggressive in lauding the product or firm to others; (c) cost less to maintain and retain than brand switchers or short-term buyers; and (d) are less expensive to maintain and keep as customers than is the cost of acquiring new customers to replace them.4 In truth, few if any marketers would argue that there is less value in brand-loyal, ongoing customers in the short or long term compared to transient buyers or brand switchers.
© H E N R Y S T E W A R T P U B L I C A T I O N S 1 4 6 3 - 5 1 7 8 . I n t e r a c t i v e M a r k e t i n g . V O L . 1 N O . 1 PP 31-43. J U LY / S E P T E M B E R 1 9 9 9
31
Schultz and Hayman
Which customers belong in a loyalty programme and how much should be invested in it?
For most marketers, measuring ROI is not simple
Many loyalty programmes do not build loyalty at all
32
So, brand
Data Loading...
