5 WAYS TO BUILD TRUE LOYALTY WITH CONSUMERS
U.S. YANKELOVICH MONITOR
LIVE SPOTLIGHT: The Growing Loyalty Chasm
THE CORE INSIGHT
Many of today’s loyalty assumptions must be rethought if they are to
better align with changing consumer attitudes and values. True loyalty will
only be achieved by tapping into the emotional space between brands and
customers and building relationships that are based on kinship.
THE OPPORTUNITY AREAS
1. Think in three dimensions
Loyalty initiatives must include not just the consumer transactional benefit and the business cost or
benefit, but the emotional return of the product as well.
2. Establish kinship with customers
Loyalty initiatives must establish relationships based on intimacy, altruism and reciprocity.
3. Demonstrate your humanity
Your customers are people, not one of Pavlov’s dogs. Treat them with warmth and empathy, not
merely rewards, points or miles.
4. Facilitate experiences, not just transactions
In today’s “Kinship Economy,” experiences and meaning trump possessions and materialism.
5. Connect with your consumers’ values
Consumers expect the brands they purchase to be consistent with what they believe.
©
2014
UNLOCKING THE
OPPORTUNITY
Work with us to develop a better
loyalty strategy for your brand,
one that closes the “chasm” and
resonates with today’s
consumers. We have just
released a loyalty offer designed
to help clients navigate this
space, so whether you think you
have loyal customers or not, we
can help through our loyalty
program audits, customer loyalty
scoring or future proofed loyalty
services. Contact your account
executive at The Futures
Company or email us to find out
more.
sales@thefuturescompany.com
2
Why aren’t our
loyalty efforts
producing the
results we
expected?
How can I
future-proof
my loyalty
program?
How do we
assess the true
value of our
loyalty efforts?
How do we make
our loyalty
efforts more
effective?
How do we rise
above everyone
else?
What do our
customers really
want from our
brand?
How can I
create a more
meaningful
emotional
connection with
consumers?
The idea of loyalty is simple…
“Loyalty” is defined as:
“Customer loyalty” is defined as:
“A feeling of strong support
for someone or something”
“The likelihood of previous
customers continuing to buy
from a specific organization”
THE MERRIAM-WEBSTER ONLINE DICTIONARY
BUSINESSDICTIONARY.COM
The ultimate objective of a
“loyalty program” is:
“To get closer to a customer”
and entice them to “return
more frequently to you
and/or spend more money
than they otherwise would.”
ANDREW CURRY
THE FUTURES COMPANY
…And its importance to businesses is clear
On average, loyal
customers are worth up to
as much as their first
purchase
It’s
more expensive to acquire
new customers than it is
to keep a current one
SOURCE: ZUNCH, INC.
SOURCE: BAIN & COMPANY
Loyalty is worth an estimated
a year in the U.S. alone
SOURCE: FORBES.COM
Research suggests that
companies lose
of their customers
every year
SOURCE: BAIN & COMPANY
Strategic vs. Programmatic Loyalty
LOYALTY INITIATIVES
LOYALTY INITIATIVES
 Designed to connect with customers
through the emotional space between
consumers, the customer experience and
the brand
 Operate in the space bounded by the
perceived consumer transactional benefit
and the business cost/benefit only
 Intended to establish close, meaningful
relationships that are built on kinship
 Considerations of the quality of
relationships are secondary
The execution of loyalty initiatives is difficult...
2012
Of the roughly
in rewards points and miles
issued annually, at least
one-third ($16 billion) go
unredeemed.
SOURCE: FORBES.COM
I don’t believe that the brands
I am most loyal to are doing
enough to reward me
SOURCE: CLICKFOX APRIL 2012 BRAND LOYALTY SURVEY,
AS CITED BY NEOLANE 2012
…And their efficacy is decidedly mixed
According to a McKinsey analysis of
55 European and American public
companies, those with extensive
loyalty programs grew no faster than
those without.1
53% of loyalty program members
said they had stopped participating
in at least one program in 2013.2
The average U.S. household has
enrolled in more than 18 loyalty
programs, but are active in less
than half of these.3
1.
2.
3.
BUSINESSINSIDER.COM, “EFFECTIVE LOYALTY PROGRAMS,” 2013
MARKETINGCHARTS.COM, “LOYALTY PROGRAMS SEEN HAVING DESIRED INFLUENCE ON CONSUMER BEHAVIOR,” 05.09.13
“FROM TRANSACTIONAL TO EMOTIONAL: EVOLVING CUSTOMER LOYALTY STRATEGIES,” NEOLANE, JULY 2012
Initiatives are mainly focused on the transactional element
of the consumer relationship
of loyalty program members
report they haven’t heard a single
word from a loyalty program since
the day they enrolled.
Since 2008, the number of
companies who feel that
loyalty programs don’t offer
any real value jumped by
of consumers received a reward
or promotion that made them
come back to the store.
NEOLANE, FROM TRANSACTIONAL TO EMOTIONAL: EVOLVING CUSTOMER LOYHALTY STRATEGIES: THE IMPORTANCE OF DATA AND DIFFERENTIATION IN CROSS-CHANNEL PROGRAMS,
JULY 2012
Are these programs really winning loyalty?
What resonates today for consumers is kinship
2013
Brand growth in the current era is all
about establishing the highest form of
relationships, and that’s family. And
family means kinship. In the current
economy, kinship is the guiding
principle that will help marketers most
resonate with consumers.
“There is at least one brand I
feel a strong positive emotional
connection with”
Yet, of these, 73% say they only
have a strong connection with
1-3 brands
The Futures Company 2013 U.S. Yankelovich MONITOR
Service and relationships are key drivers of loyalty
in today’s marketplace
70% of buying experiences are based
on how the customer feels he or she
is being treated.
SOURCE: MCKINSEY
$83 billion is estimated to be lost by
U.S. businesses every year due to
poor customer service.
SOURCE: GENESYS
It takes 12 positive experiences to
make up for one unresolved negative
experience.
SOURCE: HELPSCOUT
As consumer attitudes change, and loyalty programs do not,
tension (and a massive opportunity) is created
We are referring to this as the “Loyalty Chasm”
This chasm makes things worse for all consumers—
from those loyal to those ready to leave
As this tension grows, those
with little loyalty will
abandon it.
As this tension grows, those
with moderate loyalty will
need less to leave.
As this tension grows,
those with strong loyalty
will become annoyed.
In the current post-recessionary environment,
survival mode is lifting
My personal financial situation
is going very/fairly well
2013
The Futures Company 2013 U.S. Yankelovich MONITOR
Consumers have found a foothold
They are feeling more in control of their finances
and spending with more discipline and vigilance
2013
“I feel I am in control of my
financial future”
The Futures Company 2013 U.S. Yankelovich MONITOR
“I don’t have as much discipline as
I would like when it comes to how I
spend my money”
Experiences are trumping possessions
Sign of success and
accomplishment:
Being satisfied
with your life
2013
Sign of success and
accomplishment:
2013
Having a large,
expensive home
The Futures Company 2013 U.S. Yankelovich MONITOR
Consumers are embracing flexibility and experimentation
“I am more open to trying
different brands than I have
been in the past”
2013
The Futures Company 2013 U.S. Yankelovich MONITOR
While also looking for novelty and innovation
“I would welcome more novelty
and change in my life”
The Futures Company 2013 U.S. Yankelovich MONITOR
The problem is loyalty initiatives typically pull one
of three levers to drive engagement
A loyalty discount,
either as a flat rate or
on selected purchases
Image source: www.carrefour.com
A reward after a number
of repeat purchases
Source: www.fooddigital.com
A loyalty bonus or
status upgrade
Source: www.flyertalk.com
And rewards are given based on answers to
one of three business questions:
Do I have spare
capacity that I can
afford to give away?
How much margin
can I afford to
give away?
How can I find a
subsidy to reward
my customers?
We have taken a very two dimensional approach to loyalty
Typically, loyalty programs opt for “behavioral loyalty,”
and neglect “emotional loyalty”
The consumer’s tendency
to repurchase a brand.
A “psychological preference”
or attachment
Moving forward, will the chasm and its tension
continue to widen?
We need to lessen this tension by considering
the emotional return
Sometimes people concentrate too much on devices
like a loyalty card...These really are just methods by
which you create loyalty. They don’t create loyalty in
themselves. The only way you create true loyalty is by
your behavior over time.”
Sir Terry Leahy, Former CEO, Tesco
“We’re making (our loyalty program) more than just
about encouraging transactions at Kohl’s to making a
more emotional connection.
Wesley McDonald, Chief Financial Officer, Kohl’s
What’s needed is the inclusion of an emotional return,
not just a transactional one
Get Human: Add some empathy and warmth
“What’s sorely missing (today) are
empathy, sensitivity,
flexibility, and warmth—in life in
2013
“I am frustrated by brands that treat
people like me as an afterthought”
The Futures Company 2013 U.S. Yankelovich MONITOR
general and particularly in
engagements with the marketplace.”
THE FUTURES COMPANY, MONITOR MINUTE, 8.14.13
We need to ask different questions
Do I have spare capacity that
I can afford to give away?
How do I develop relationships with
my customers that are genuine, and
perceived that way?
How do I best communicate to and
interact with my customers?
How much margin
can I afford to give away?
How do I make my offerings
personalized to their specific wants
and needs?
How can I find a subsidy
to reward my customers?
How Do I surprise and delight my
customers with offerings that are
innovative and unique?
Image source:
foboblo.com
Image source: limelike.com
Think in 3 dimensions
“What if companies
used their loyalty
programs to make the
product or service better
for me? What if, instead
of compensating me for
what is usually a similar
(and not very good)
experience, they made
the experience better?”
TADDY HALL, BUSINESS INSIDER
Top 5 attributes in
determining where I shop:
Total Pop
1. Has reasonable prices
84%
2. Has outstanding customer
service
78%
3. Consistently offers the lowest
prices around
72%
3. Makes it quick and easy to shop
72%
5. Offers loyalty/rewards programs
48%
The Futures Company 2013 U.S. Yankelovich MONITOR
Image source: graphicmediadesignstudent.tumblr.com
Establish kinship with customers
2013
2013
“There is at least one brand I buy
regularly regardless of what other
brands are available”
“There is a brand that has
delighted me so much that I will
always buy the brand even if it
costs more”
The Futures Company 2013 U.S. Yankelovich MONITOR
Demonstrate your humanity
2013
“Most companies today are
becoming too inhuman and
impersonal when it comes to
connecting with their customers”
The Futures Company 2013 U.S. Yankelovich MONITOR
Facilitate experiences, not just transactions
2013
“I am more likely to choose a brand
if it exposes me to new sensations
or experiences”
The Futures Company 2013 U.S. Yankelovich MONITOR
Connect with your consumers’ values
2013
2013
“I am more likely to purchase brands
that push for change on issues I care
about”
“Companies that make sincere efforts to
be a part of or invest in my community
deserve my loyalty”
95% of loyalty program members who
Only 40% of loyalty program
members feel their values are aligned
with those of the programs in which
they participate (2013 Maritz Loyalty Report)
say they “agree with their program’s
values” also say they are “satisfied” with
their program (2013 Maritz Loyalty Report)
The Futures Company 2013 U.S. Yankelovich MONITOR
Moving forward
These strategies will lessen the tension and bring loyalty programs
back into alignment with consumer attitudes
Think in
3 dimensions
Establish
kinship with
customers
Facilitate
experiences, not
just transactions
Demonstrate
your humanity
Connect with
your consumers’
values
Questions? We’re here …
craig.wood@thefuturescompany.com
919-932-8696
Twitter: @craigmwood
justin.laborde@thefuturescompany.com
919-932-8640
Twitter: @futuresco
August LIVE Spotlight:
The Future of the Home
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When:
Wednesday, August 20th,
Noon EST