The issue of customer loyalty and the role of loyalty marketing continues to be a big issue being discussed in almost every company right now. With smaller budgets, smaller marketing departments and a focus on customer retention, it is no surprise that marketers are trying to figure this out.
A large number of them have been reacting in a knee-jerk manner – creating and launching loyalty programs.
But, are loyalty programs really necessary? Is loyalty really an achievable goal for most brands in most categories?
I have a very clear point-of-view. Most brands don’t really need a loyalty program. What they actually need is a frequency marketing program – a program that will bring their customers back more frequently than they currently are. That’s what most marketers want. And, that’s actually what they need (to drive transactions). But, there is enough confusion in the definitions that very few marketers are distinguishing between the two.
In an attempt to simplify the discussion, I have provided some thoughts on distinctions between frequency and loyalty.
Frequency is about getting more transactions than you currently get from your existing customers. If someone comes once-a-month (12X a year), can you get them to come one more time? Loyalty is about deepening the relationship that they currently have with you.
Frequency is behavioral while loyalty is attitudinal. Behaviors drive transactions and make the cash register ring. Attitudes make for nice charts in tracking studies.
Frequency is easier to effect with more relevant communications and offers – timed right. Loyalty is harder to gain. Changing attitudes to the deeper level takes significant level of time and resources. It is also a goal that is unachievable in most categories.
Increasing frequency has the potential to create loyalty – you have to use the simple equation (2RL+2RC+RW=CL) – but execute consistently over time. It also assumes that your category has the level of emotional cachet to allow those bonds to be made.
Frequency marketing programs are easier to execute. They do not create liabilities on your balance sheet and can be evolved and refined at the company’s discretion. Loyalty marketing programs, on the other hand, require a long-term commitment that becomes a big factor for the company and the balance sheet. It becomes extremely hard to refine and evolve the program without the agreement of your customers.
Frequency can be executed by marketing with some support of other departments. Loyalty programs require alignment across the entire organization.
None of my arguments above should constrain your aspirations to generating loyalty. I posit that if you can begin to improve frequency levels among your core customers, with the appropriate attitudinal beliefs, you will create loyalty. It will be the outcome of a strategic frequency marketing program and will be cheaper and faster to execute.
Given that reality of time being our worst enemy, it’s the way to have a quick and immediate impact on the business.