Building brand loyalty in turbulent times
Harvard Business School reported that increasing customer retention rates by 5% increases profits by between 25% and 95%. Microsoft reported that a 7% increase in brand loyalty increases the customer lifetime value (CLV) of each customer by 85%. According to evidence, higher quality and better service are the primary drivers of brand loyalty. Brand ambassadors, loyalty programs and ethical consciousness are secondary drivers.
Customers are loyal to brands they trust to deliver on their functional, emotional and social needs. However, brand loyalty mustn’t be confused with customer loyalty. Customer loyalty is derived from pricing and discounting. A better way to think about this type of loyalty is customers continuing to buy out of habit, fear of change or inertia.
In this blog, Stine discusses how to build brand loyalty in turbulent times and the important benefits of hybrid segmentation.
The changing face of loyalty
Service loyalty: the COVID-19 pandemic changed what loyalty means to people. We sought to reduce risk in a strange, uncertain world. We sought comfort in the nation’s best-loved brands that are an integral part of family life. We sought familiar brands that we could trust to take and fulfil our orders, and who we could communicate and deal with easily.
Empathy loyalty: the question now is how the cost of living crisis will make people re-evaluate the brands they are loyal to. Just like during the pandemic, customers will seek ways to reduce risk. This time, however, people will become more ‘loyal’ to brands that help them through the crisis, enabling them to continue as normal without incurring losses to their current quality of life. Ironically, customer loyalty can become a platform for building brand loyalty for companies that learn how to empathise with their customers and create the right experiences.
Hybrid Segmentation: a data-led approach to customer loyalty
With the changing face of loyalty, companies need to understand what service loyalty and empathy loyalty mean to different people. Inevitably, this means having a segmented view of the market. In an ideal world, identifying opportunities should include not just a segment-level understanding of category needs and attitudes but evidence of how they behave over time. This is where Hybrid Segmentation comes in. Hybrid Segmentation is created by integrating survey data with customer data (e.g. personal and behavioural) to create a truly integrated picture of the ‘who,’ the ‘what’ and the ‘why’. Importantly, it is this insight and evidence that gives clients the confidence to react rapidly to changes in the external environment.
Here are three examples of how Hybrid Segmentation benefits in changing markets:
1/ Tactical Targeting: more effective marketing through personalised communications, product offers and promotions. Opportunity to build empathy loyalty.
2/ Product or Service Development and Optimisation: manage product portfolios and innovate through understanding segment needs and changing behaviours. Opportunity to build empathy loyalty.
3/ Improved brand engagement: identify the types of customers who will respond positively to your brand, products and benefits in the current social, technological and economic context. Opportunity to build a loyal base of the right customers.
If you would like to know more about Hybrid Segmentation or how STRAT7 Incite and STRAT7 Bonamy Finch can help your business build brand loyalty, please get in touch.