The golden age of loyalty
When I studied marketing in the 1990s, achieving ‘brand loyalty’ was the Holy Grail of marketing. The accepted doctrine was to focus your marketing efforts on heavy users - the loyalists. The goal was to encourage them to buy your brand exclusively.
We believed in Pareto’s Law: 80% of your sales come from 20% of your consumers. We read studies that persuaded us that acquiring a new consumer was much more expensive than retaining existing ones. We believed in the idea of ‘lifetime customer value’. That people who bought our brand could stay with us forever.
I remember reading a bestselling book written in 1993 by Peppers and Rogers called The One to One Future. It envisioned a future where businesses moved away from mass marketing. Where we tailored offerings to meet each customer's specific needs and preferences. ‘Relationship marketing’ was all the rage. Loyalty schemes exploded. Look after your loyalists was the mantra. Don’t worry about the ‘mass market’.
It was a very seductive idea. Loyalty is good, isn’t it? We didn’t want people buying other brands. We wanted people to love our brands. We didn’t want to ‘waste’ our money on fickle consumers. It was much better to focus marketing funds on your loyalists.
When did this all change?
The big shift in these beliefs came with the work of the Ehrenberg-Bass Institute.
I remember a famous Andrew Ehrenberg quote.
‘Your customers are the customers of other brands that occasionally buy you’
Then there was the release of Byron Sharp’s seminal book in 2010, ‘How Brands Grow’. The key thesis of the book was that brand growth is more likely by gaining new users. In other words, by increasing penetration/acquisition. The research was robust and persuasive. They were presented as a series of new marketing ‘laws’. We were shocked to learn that loyalty programmes don’t work. That the Pareto Law is over-stated. That all the doctrines around loyalty were false.
Not everyone agrees with the laws in the book, but other studies support the argument for a more ‘mass marketing’ approach to brand building.
A famous study by Binet and Field called ‘The Long and Short of It’ analysed the IPA database. It made the case for long-term ‘brand building’ communication. It asserted that attracting new users was a key driver of brand growth. It concluded that we need both long and short-term marketing investments.
So is loyalty entirely discredited?
Loyalty schemes are still widespread. According to a recent YouGov poll, 9 out of 10 Britons are currently signed up to at least one loyalty programme. We join them because they’re free and because we’re looking for discounts. But our relationship with them is very transactional. Just because we’ve joined a scheme, doesn’t mean we’re loyal.
Once a brand has started a loyalty scheme it’s hard to exit it or reduce the benefits, without a consumer backlash. Brands who run them are stuck with them.
It’s argued that some brands evoke a high level of ‘brand love’. But these are rare. Every brand has its fanatics, but most of us simply like brands. We don’t love them.
What’s the current doctrine?
Some people still believe in the importance of loyalty. Marketers find it hard to let go of the idea that people don’t love their brands unconditionally. And many people get paid to run loyalty schemes.
However…
Nowadays, it’s understood that people buy across a repertoire of brands. We buy what’s easily available. We buy brands that we can easily remember.
We accept that customer acquisition is a primary driver of brand growth. Case studies stress the importance of attracting the ‘broader market’ to build brand equity. We know that brands need light, infrequent buyers. The Byron Sharp camp has won the argument. Sensible brand plans focus on long-term brand building as well as activation. No one dreams of creating world-beating loyalty schemes anymore. The ‘one-to-one future’ envisioned by Peppers and Rogers in 1993 has yet to become a reality.