Description
Enormous investments and impact on the bottom line taking into account the fact that generating new brand users costs 6-10 more than keeping existing brand users, In contexts where brands need to be supported heavily by employees / people (service, B2B, ...), big negative impact of employee turnover on customer brand loyalty
Brand loyalty management: an introduction
2 Brand loyalty management: an introduction
Content
1. How big is the challenge?
2. What have we learned?
3. Generating and keeping brand loyalty
4. Measuring brand loyalty
3 Brand loyalty management: an introduction
How big is the challenge?
5
4
1
In years, 50% of customers leave
In years, 50% of employees leave
In year, 50% of investors leave
Source: The Loyalty Effect, Frederick Reichheld
CUSTOMER BRAND LOYALTY
INTERNAL BRAND LOYALTY
INVESTOR BRAND LOYALTY
4 Brand loyalty management: an introduction
How big is the challenge?
Source: Carlson Marketing Group / Vlerick Leuven Gent Management School
Belgian brand net promoter scores are not looking great ...
% of detractors substracted from the % of promoters
Recommendation to a friend or colleague can be seen as
an ultimate act of loyalty
Displays results of “Would recommend” answers in a clear
manner
Ten-point scale
– Ten means “extremely likely” to recommend
– Five means “neutral”
– Zero means “not at all likely” to recommend
1 2 3 4 5 6 7 8 9 10
Detractors Neutral Promoters
? Mobile operators: -34.8%
? Banking/insurance: -34.1%
? Supermarkets: -12.7%
? Fixed phone/TV/internet: -42.3%
? Utilities: -70.8%
? Automotive: -5%
Belgian findings
5 Brand loyalty management: an introduction
How big is the challenge?
Source: Ogilvy Loyalty Index, 2000-2003
% loyal % price-driven % repertoire
Globally Belgium
46%
12%
42%
47%
17%
36%
Consumers don?t think of themselves as loyal ...
“Consumers mostly have habitual on-going or polygamous split-loyalties to a „repertoire?
of several brands.” – Ehrenberg & Scriven
6 Brand loyalty management: an introduction
What have we learned?
Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative
vs Positive Word of Mouth,” International Journal of Market Research
Brand loyalty is connected with revenues and profits
7 Brand loyalty management: an introduction
What have we learned?
Non-competitive
zone: regulated
monopoly, few
substitutes,
dominant brand
equity, high
switching costs,
powerful loyalty
program,
proprietary
technology
Highly competitive
zone:
many substitutes, fierce
competition, low switching
costs, commodization of
low differentiation,
consumer indifference
Satisfaction low
high
B
e
h
a
v
i
o
u
r
high
low
NMBS
Airlines
Hospitals
PC’s
Cars
Spurious
loyal
True
loyal
Not
loyal
Latent
loyal
Loyal to the brand is MORE than satisfied with the brand !
Source: Adapted from Heskett et al. (Service Profit Chain)
8 Brand loyalty management: an introduction
What have we learned?
Smaller brands are punished twice for being small, following the
well-known “Double Jeopardy” pattern (Ehrenberg)
Source: Ehrenberg
B
u
y
i
n
g
v
o
l
u
m
e
Buying frequency
Weak Strong
W
e
a
k
S
t
r
o
n
g
Small brands
Large brands
9 Brand loyalty management: an introduction
What have we learned?
Source: Henley Institute
Why are customer disloyal?
Indifference
10 Brand loyalty management: an introduction
What have we learned?
Building brand loyalty is less and less in your hands ...
11 Brand loyalty management: an introduction
Generating and keeping brand loyalty
Brand
image
Product
experience
Service
experience
Personal
bonding
12 Brand loyalty management: an introduction
Measuring brand loyalty
“The good news is that all the different loyalty-related
measures tend to vary together. Crucially, they therefore
measure something, which conveniently may be labeled
„loyalty?.” – Ehrenberg & Scriven
13 Brand loyalty management: an introduction
Measuring brand loyalty
“Retention is for wimps. We measure the percent of customers
who have our name tattooed on one of their body parts.” (Harley
Davidson Annual report)
14 Brand loyalty management: an introduction
Morgan (1999/2000)
Authority - trust and respect commanded by the brand and perceived by the
customer
Identification - convergence of brand's values with that of the person, and the
degree to which the brand is regarded as having personal relevance
Approval - perception that the use/purchase of the brand will achieve a result
that is likely to meet a person's perceived needs in a social sense
Belen del Rio, Vazquez and Iglesias (2001b)
Willingness to recommend the brand
Pay a price premium for it
Accept brand extensions
Measuring brand loyalty
Customer-based measures
15 Brand loyalty management: an introduction
Customers
retained after
x years (as a
% of first year
customers)
0
20
40
60
80
77%
67%
43%
35%
29%
25%
17%
11%
0-1 2 3 4 5 6-7 10-11 20-40
53%
21%
8-9 12-14 15-19
67%
62%
57%
53%
46%
41%
37%
32%
28%
All types of defection
Controllable
defection only
9%
27%
Tenure (years)
Measuring brand loyalty
Customer churn
16 Brand loyalty management: an introduction
A negative experience with a brand decreases loyalty to a greater degree
than a positive experience increases loyalty
The double whammy:
Consumers find NWOM more useful in making purchase decisions
than PWOM or positive word-of-mouth (advocacy, acquisition)
NWOM captures better true loyalty than PWOM (loyalty, retention)
– High commitment and low competition (less alternatives) will lower the
threshold for engaging in PWOM
? E.g. When you buy a car that just meets expectations but does not exceed
expectations, you will rationalise your poor choice („cognitive dissonance
reduction?) and engage in PWOM out of necessity (you are stuck with your car, so
you might as well consider it a good buy…)
– In contrast to PWOM, NWOM is more strongly correlated with both
satisfaction and recommendation likelihood
Negative word-of-mouth
Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative
vs Positive Word of Mouth,” International Journal of Market Research
Measuring brand loyalty
17 Brand loyalty management: an introduction
The best of both worlds:
NPS: measures intention to promote: „would-be promoters?
NWOM: measures reported negative word-of-mouth
LSE Net Advocacy Score = NPS promoters - NWOM
NPS Promoters = % responding 9-10 on NPS scale
NWOM = % responding having done very negative WOM about the brand in the
last 12 months
A 2-point increase in this „LSE Net Advocacy Score? roughly corresponds
to a 1% increase in revenue growth
Measuring brand loyalty
Net advocacy score
Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative
vs Positive Word of Mouth,” International Journal of Market Research
18 Brand loyalty management: an introduction
On a scale of 0–10, how likely is it that you would recommend
[company/brand x] to a friend or colleague?
Not at
all
likely
Very
likely
0 1 2 3 4 5 6 7 8 9 10
On a scale of 0–10, how likely are you going to continue to
use/purchase [company/brand x]?
Not at
all
likely
Very
likely
0 1 2 3 4 5 6 7 8 9 10
On a scale of 0–10, how does [company/brand x] overall meets your
requirements?
Not at
all
Very
0 1 2 3 4 5 6 7 8 9 10
Measuring brand loyalty
Loyal / at risk profiling
Source: Etter, B. (2005), “Loyalty Leverage: Measure and
Increase Customer Retention,” Marketing Research
19 Brand loyalty management: an introduction
If customer scores 9 or 10 on all three questions: LOYAL
If customer scores 0 to 6 on at least one question: AT RISK
If not Loyal nor At Risk: NEUTRAL
Measuring brand loyalty
Loyal / at risk profiling
Source: Etter, B. (2005), “Loyalty Leverage: Measure and
Increase Customer Retention,” Marketing Research
20 Brand loyalty management: an introduction
Measuring brand loyalty
Financial measures
Source: InterBrand
21 Brand loyalty management: an introduction
Measuring brand loyalty
Financial measures
Source: InterBrand
22 Brand loyalty management: an introduction
Concluding remarks
Brand loyalty drives revenues and profits, but ...
Generating and keeping brand loyalty is increasingly difficult
Brand loyalty is a matter of behaviour AND attitude
Indifference is the biggest explanatory factor behind attrition
Connect with your customers
Create great brand experiences (image, product, service, relationship)
Understand the new reality: everyone can be a critic or a fan
Brand size matters
Smaller brands have a lower buying frequency and volume
Select a relevant brand loyalty KPI
Benchmark performance over time
Develop an action plan for brand loyalty enhancement
23 Brand loyalty management: an introduction
Kristof De Wulf
Managing Partner
[email protected]
Tel. +32 9 269.15.03
Mobile +32 496 23.29.20
InSites Consulting
Evergemsesteenweg 195
B-9032 Gent
Belgium
Tel. +32 9 269 15 00
Fax. +32 9 269 16 00
[email protected]
www.insites.eu
Contact details
doc_809101004.ppt
Enormous investments and impact on the bottom line taking into account the fact that generating new brand users costs 6-10 more than keeping existing brand users, In contexts where brands need to be supported heavily by employees / people (service, B2B, ...), big negative impact of employee turnover on customer brand loyalty
Brand loyalty management: an introduction
2 Brand loyalty management: an introduction
Content
1. How big is the challenge?
2. What have we learned?
3. Generating and keeping brand loyalty
4. Measuring brand loyalty
3 Brand loyalty management: an introduction
How big is the challenge?
5
4
1
In years, 50% of customers leave
In years, 50% of employees leave
In year, 50% of investors leave
Source: The Loyalty Effect, Frederick Reichheld
CUSTOMER BRAND LOYALTY
INTERNAL BRAND LOYALTY
INVESTOR BRAND LOYALTY
4 Brand loyalty management: an introduction
How big is the challenge?
Source: Carlson Marketing Group / Vlerick Leuven Gent Management School
Belgian brand net promoter scores are not looking great ...
% of detractors substracted from the % of promoters
Recommendation to a friend or colleague can be seen as
an ultimate act of loyalty
Displays results of “Would recommend” answers in a clear
manner
Ten-point scale
– Ten means “extremely likely” to recommend
– Five means “neutral”
– Zero means “not at all likely” to recommend
1 2 3 4 5 6 7 8 9 10
Detractors Neutral Promoters
? Mobile operators: -34.8%
? Banking/insurance: -34.1%
? Supermarkets: -12.7%
? Fixed phone/TV/internet: -42.3%
? Utilities: -70.8%
? Automotive: -5%
Belgian findings
5 Brand loyalty management: an introduction
How big is the challenge?
Source: Ogilvy Loyalty Index, 2000-2003
% loyal % price-driven % repertoire
Globally Belgium
46%
12%
42%
47%
17%
36%
Consumers don?t think of themselves as loyal ...
“Consumers mostly have habitual on-going or polygamous split-loyalties to a „repertoire?
of several brands.” – Ehrenberg & Scriven
6 Brand loyalty management: an introduction
What have we learned?
Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative
vs Positive Word of Mouth,” International Journal of Market Research
Brand loyalty is connected with revenues and profits
7 Brand loyalty management: an introduction
What have we learned?
Non-competitive
zone: regulated
monopoly, few
substitutes,
dominant brand
equity, high
switching costs,
powerful loyalty
program,
proprietary
technology
Highly competitive
zone:
many substitutes, fierce
competition, low switching
costs, commodization of
low differentiation,
consumer indifference
Satisfaction low
high
B
e
h
a
v
i
o
u
r
high
low
NMBS
Airlines
Hospitals
PC’s
Cars
Spurious
loyal
True
loyal
Not
loyal
Latent
loyal
Loyal to the brand is MORE than satisfied with the brand !
Source: Adapted from Heskett et al. (Service Profit Chain)
8 Brand loyalty management: an introduction
What have we learned?
Smaller brands are punished twice for being small, following the
well-known “Double Jeopardy” pattern (Ehrenberg)
Source: Ehrenberg
B
u
y
i
n
g
v
o
l
u
m
e
Buying frequency
Weak Strong
W
e
a
k
S
t
r
o
n
g
Small brands
Large brands
9 Brand loyalty management: an introduction
What have we learned?
Source: Henley Institute
Why are customer disloyal?
Indifference
10 Brand loyalty management: an introduction
What have we learned?
Building brand loyalty is less and less in your hands ...
11 Brand loyalty management: an introduction
Generating and keeping brand loyalty
Brand
image
Product
experience
Service
experience
Personal
bonding
12 Brand loyalty management: an introduction
Measuring brand loyalty
“The good news is that all the different loyalty-related
measures tend to vary together. Crucially, they therefore
measure something, which conveniently may be labeled
„loyalty?.” – Ehrenberg & Scriven
13 Brand loyalty management: an introduction
Measuring brand loyalty
“Retention is for wimps. We measure the percent of customers
who have our name tattooed on one of their body parts.” (Harley
Davidson Annual report)
14 Brand loyalty management: an introduction
Morgan (1999/2000)
Authority - trust and respect commanded by the brand and perceived by the
customer
Identification - convergence of brand's values with that of the person, and the
degree to which the brand is regarded as having personal relevance
Approval - perception that the use/purchase of the brand will achieve a result
that is likely to meet a person's perceived needs in a social sense
Belen del Rio, Vazquez and Iglesias (2001b)
Willingness to recommend the brand
Pay a price premium for it
Accept brand extensions
Measuring brand loyalty
Customer-based measures
15 Brand loyalty management: an introduction
Customers
retained after
x years (as a
% of first year
customers)
0
20
40
60
80
77%
67%
43%
35%
29%
25%
17%
11%
0-1 2 3 4 5 6-7 10-11 20-40
53%
21%
8-9 12-14 15-19
67%
62%
57%
53%
46%
41%
37%
32%
28%
All types of defection
Controllable
defection only
9%
27%
Tenure (years)
Measuring brand loyalty
Customer churn
16 Brand loyalty management: an introduction
A negative experience with a brand decreases loyalty to a greater degree
than a positive experience increases loyalty
The double whammy:
Consumers find NWOM more useful in making purchase decisions
than PWOM or positive word-of-mouth (advocacy, acquisition)
NWOM captures better true loyalty than PWOM (loyalty, retention)
– High commitment and low competition (less alternatives) will lower the
threshold for engaging in PWOM
? E.g. When you buy a car that just meets expectations but does not exceed
expectations, you will rationalise your poor choice („cognitive dissonance
reduction?) and engage in PWOM out of necessity (you are stuck with your car, so
you might as well consider it a good buy…)
– In contrast to PWOM, NWOM is more strongly correlated with both
satisfaction and recommendation likelihood
Negative word-of-mouth
Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative
vs Positive Word of Mouth,” International Journal of Market Research
Measuring brand loyalty
17 Brand loyalty management: an introduction
The best of both worlds:
NPS: measures intention to promote: „would-be promoters?
NWOM: measures reported negative word-of-mouth
LSE Net Advocacy Score = NPS promoters - NWOM
NPS Promoters = % responding 9-10 on NPS scale
NWOM = % responding having done very negative WOM about the brand in the
last 12 months
A 2-point increase in this „LSE Net Advocacy Score? roughly corresponds
to a 1% increase in revenue growth
Measuring brand loyalty
Net advocacy score
Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative
vs Positive Word of Mouth,” International Journal of Market Research
18 Brand loyalty management: an introduction
On a scale of 0–10, how likely is it that you would recommend
[company/brand x] to a friend or colleague?
Not at
all
likely
Very
likely
0 1 2 3 4 5 6 7 8 9 10
On a scale of 0–10, how likely are you going to continue to
use/purchase [company/brand x]?
Not at
all
likely
Very
likely
0 1 2 3 4 5 6 7 8 9 10
On a scale of 0–10, how does [company/brand x] overall meets your
requirements?
Not at
all
Very
0 1 2 3 4 5 6 7 8 9 10
Measuring brand loyalty
Loyal / at risk profiling
Source: Etter, B. (2005), “Loyalty Leverage: Measure and
Increase Customer Retention,” Marketing Research
19 Brand loyalty management: an introduction
If customer scores 9 or 10 on all three questions: LOYAL
If customer scores 0 to 6 on at least one question: AT RISK
If not Loyal nor At Risk: NEUTRAL
Measuring brand loyalty
Loyal / at risk profiling
Source: Etter, B. (2005), “Loyalty Leverage: Measure and
Increase Customer Retention,” Marketing Research
20 Brand loyalty management: an introduction
Measuring brand loyalty
Financial measures
Source: InterBrand
21 Brand loyalty management: an introduction
Measuring brand loyalty
Financial measures
Source: InterBrand
22 Brand loyalty management: an introduction
Concluding remarks
Brand loyalty drives revenues and profits, but ...
Generating and keeping brand loyalty is increasingly difficult
Brand loyalty is a matter of behaviour AND attitude
Indifference is the biggest explanatory factor behind attrition
Connect with your customers
Create great brand experiences (image, product, service, relationship)
Understand the new reality: everyone can be a critic or a fan
Brand size matters
Smaller brands have a lower buying frequency and volume
Select a relevant brand loyalty KPI
Benchmark performance over time
Develop an action plan for brand loyalty enhancement
23 Brand loyalty management: an introduction
Kristof De Wulf
Managing Partner
[email protected]
Tel. +32 9 269.15.03
Mobile +32 496 23.29.20
InSites Consulting
Evergemsesteenweg 195
B-9032 Gent
Belgium
Tel. +32 9 269 15 00
Fax. +32 9 269 16 00
[email protected]
www.insites.eu
Contact details
doc_809101004.ppt