Researching brand loyalty
Joseph Plummer, McCann-Erickson, uses new research to show how little marketing effort is seen to go into building loyalty – in spite of its value to brands


HE IMPORTANCE OF building customer loyalty has been much discussed and written about over the past decade. A recent Admap review (1) summarised much of the research on brand loyalty. A major conclusion was: ‘It is widely stated on both sides of the Atlantic – but less widely evidenced – that brand loyalty is declining, as consumers are faced with burgeoning choice and parity performance between competing brands.’ Marketing scholars such as Duncan and Moriarty (2) discuss the large investment required to attract new users to a brand when compared with the investment required to maintain a customer. Duncan and Moriarty argue that it costs six to eight times more to acquire a new customer than retain a current customer. Why, therefore, is there this discrepancy between ‘talking the talk’ of loyaltybuilding efforts and ‘walking the walk’ of loyalty building in terms of commitment (investment and executional staying power)? One obvious explanation is that building loyalty is difficult and involves more than marketing. Building brand awareness and trial has been a classic competence of marketing – especially mass advertising and promotion. Loyalty building is difficult In a recent article (3), James Anderson and James Narus highlighted the difficulty in

creating loyalty efforts: ‘If they wish to achieve profitable, sustainable growth, suppliers seeking a larger share of their customer’s wallets need a finegrained, disciplined approach to getting, leveraging and documenting customer knowledge.’ Another possible answer that this article explores is that few marketers and their agencies are convinced that loyalty-building efforts via marketing pay off. Yes, frequent flyer or points programmes have become a staple of the travel industry. And, yes, marketers do admire brands like Harley-Davidson, Capital One, Mercedes, Wal-Mart, Heinz Ketchup and others for their skill in building loyalty. But what about the customer? Some studies have shown that retaining customers is highly profitable. Fred Reichheld and Christine Detrick report in a recent article (4) that ‘In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit. That is because return customers buy more from a company over time. In addition, return customers refer others to your company.’ Of course, brands also need to attract new customers and create new demand in order to grow. Examination of most marketing budgets, however, indicates that a majority (70–80%) is allocated to mass advertising to build brand awareness and promotion to encourage trial.

We are not investing heavily in marketing to build loyalty. We all like to be recognised for our loyalty. We are pleasantly surprised when a brand rewards us in some way for our loyalty. Just a simple sentence such as ‘Welcome back, Mr Rapp’ from a hotel staff member makes us feel rewarded for our loyalty. How does loyalty compare to other marketing drivers of brand health? This is a very difficult question to answer, but we have initiated a research effort at McCann-Erickson WorldGroup to learn more about the key marketing drivers. One of these marketing drivers is loyalty. This new research tool is called McCann Brand Clout. McCann Brand Clout™ overview Brand Clout is based on a concept of universal marketing drivers, developed by McCann-Erickson. These marketing drivers provide a common framework to examine the effect of all the principal marketing communications disciplines. This approach recognises that across markets and categories there are seven ‘universal marketing drivers’ that marketers invest in to varying degrees to build successful brands. These drivers are: brand awareness, emotional bond, product news, activation, product experience, loyalty and buzz. Universal marketing drivers Brand Clout deals with the relationship people have with a brand through the types of marketing communications programmes the brand uses. The seven universal marketing drivers can be defined as follows. 1. Brand awareness Keeping the brand name on people’s minds. 2. Emotional bond Forging a connection with people’s hearts and feelings. 3. Product news Creating new relevance through news and innovation. 4. Activation Encouraging immediate purchase via incentives or sampling. 5. Loyalty Rewarding customer relationships and retention. 6. Product experience Enabling
© World Advertising Research Center 2003

The importance of marketing drivers’ influence
Driver influence score 30 25 20 15 10 5 Awareness Emotional Product bond news Activation Loyalty Product experience Autos Computers Credit cards Buzz Driver influence

30 Admap • December 2003

Each brand studied receives a marketing impact score on each driver. after brand awareness. as can be seen from Figure 1. and mid-size cars) loyalty is the third most important driver for credit cards and computers. These measurements differ from those in traditional brand tracking or attitude and usage studies. Recent studies shed some light on the impact and influence of loyalty within the seven major drivers. consumers do not perceive high levels of loyalty-building activities by most brands in a number of categories we have studied. 7.Dr Joseph Plummer is executive vice president. Marketing Management. It has a strong influence on brand choice. consistent with previous December 2003 • Admap 31 . 1997. F Reichheld and C Detrick: Loyalty: A Prescription for Cutting Costs. Most packaged goods and retail categories show that activation is the second highest in perceived impact. Category averages Computers Credit cards Autos Activation Loyalty Product experience Buzz joseph. and computers. Here emotional bond and loyalty rise to the top in ‘influence’ in the credit card and computer categories. especially when interacting with emotional bonds. The results show clearly that in most categories loyalty is low in impact overall. R White: Best Practice. Technology categories show that either product news or buzz is second in perceived impact. T Duncan and S Moriarty: Driving Brand Value: Using Integrated Marketing to Manage Profitable Stakeholder Relationships. and director of research and insight development for McCann-Erickson WorldGroup. 3. McGraw-Hill. and is tied with Marketing drivers’ impact Impact score 75 70 65 60 55 50 45 40 Awareness Emotional Product bond news © World Advertising Research Center 2003 buzz in automobiles for third place. government. May 2003.’ Our Brand Clout research supports this and should encourage marketers to reconsider the potential of loyalty efforts. While behavioural loyalty is clearly the ultimate goal it seems clear that it has the best prospect of being sustained if it is accompanied by attitudinal loyalty. experience or use a brand without purchase. computers. and later ASW and DMB&B. except for credit cards. credit cards. 2. especially on the drivers with the highest influence. This research supports previous findings that loyalty is under-appreciated by most marketers – thus. ■ 1. word of mouth. Admap. The exceptions are in specific brand profiles such as Discover in credit cards. whether focused on loyalty effort or highly differentiated from the competition. On the other hand. Figure 2 shows that loyalty as a driver is perceived at low impact levels for all three categories. 4. The research approach also tells us about the relative influence and importance of the drivers on future brand choice within the category and among key targets. Totally new kinds of customer survey measurements have been developed for the marketing drivers. where a wide variety of analytical approaches and marketing tactics compete. Buzz Building credibility through third-party sources – industry. J Anderson and J Narus: Selectively Pursuing More of Your Customer's Business. Brand Clout shows how well a brand is doing on its marketing impact. prospects to get to know. While brand awareness and emotional bond are the top two drivers of influence on brand choice for all three categories (credit cards. Spring 2003. The Brand Clout for a brand is a ‘profile’ of the marketing impact across the seven marketing drivers for the brand – a profile against its key competitors. But this research suggests that loyalty is underleveraged in categories such as cars. Apple in computers and Subway in fast foods. and how well it fares versus its competition. Product news. The scores are based on the ratings each brand receives on the Brand Clout Item battery. All of our studies to date indicate that the primary impact (what consumers perceive most) of marketing efforts is brand-awareness building efforts. Brand Clout methodology Brand Clout tells us the perceived marketing impact of the drivers – the consumer perception (or their experience) of the degree to which a brand in a competitive set is successfully utilising each particular marketing driver. designed to work across the full range of product and service categories. where loyalty is higher – driven in large degree by the American Express rewards programme and numerous affinity efforts with airlines. September/October 2003. with the added FIGURE 2 context of the driver influence in that category for the marketing drivers. As the May 2003 Admap article (1) concluded ‘Brand loyalty is a complex and controversial subject.plummer@mccann. He began his career at Leo Burnett in Chicago before joining Y&R. What is interesting from recent Brand Clout research in the US is the influence of the marketing drivers on brand choice. Sloan Review. Driver influence reveals which drivers are more closely linked with brand choice. activation and buzz are perceived much higher in impact. or consider the alternative of losing valued customers.