Why We Should Stop Worrying So Much About Loyalty And Relationships, And Focus On Getting A Lot Of Penetration
What's love got to do with it?"
The language of relationships versus the mechanics of growth
Much of our language today is the language of long-term, loyal relationships. It is almost impossible to get through a strategic or creative discussion of whatever kind without words such as ‘Relationship’, ‘Engagement’, ‘Conversation’, ‘Community’ or ‘Collaboration’ coming up time and time again.
Language matters because it not only reveals our patterns of thought, but because it actually shapes our expectations, perceptions, and behaviours. And this kind of language is the language of commitment, of long-term relationships. It’s the language of steady partners and marriages. Some take it further and insist that brands can actually inspire love in people.
Perhaps this language is attractive because it gives us the feeling that we have a friendly, non-combative, respectful relationship with consumers. That we’re not in the grubby business of selling people anything, but the wonderful, nurturing business of creating warm and loving relationships.
The trouble is that it somewhat distracts us from the true mechanics of brand growth.
At this point we have to turn to the work of the great Professor Andrew Ehrenberg, who sadly passed away last month. If only more of us were familiar with his important work. It's still as relevant and challenging as ever.
Loyalty isn’t what makes the difference
As a result of his extensive analyses of purchase data, Ehrenberg was able to point to two key, predictable patterns in consumer behaviour and their loyalties:
First, that loyalty levels of brands are in fact broadly alike.
And secondly, that smaller brands had slightly lower user-loyalty.
McDonald and Scriven (Admap, October 2006) provide more supporting data for this argument. Below we can see that brand leaders exhibit more loyalty, albeit only slightly more: they have more frequent buyers, but also more occasional buyers, in absolute numbers:
If brands with varying market shares have broadly the same rates of loyalty, then it’s fairly obvious that loyalty is not the key determinant of success.
Consumers have open relationships with brands
Marketers like to talk about consumers of their brand. As if there were such a thing as ‘Budweiser consumers’. Or ‘Cadbury Dairly Milk consumers’. And the empty rhetoric of so much chatter about ‘engagement’ seems to conveniently assume that no-one else is vying to have a conversation with us too.
But the other key pattern Ehrenberg reminds us of is that at least for fairly frequently bought goods, most consumers - despite the language of commitment we bandy around - are actually polygamous, with their loyalties divided across several steady brand 'partners'. As Ehrenberg put it:
“In general there are relatively few 100% loyal or sole buyers of a brand, especially over any extended period of time. A typical and predictable finding for frequently bought grocery products is that in a week, 80 or 90% of buyers of a brand buy only that brand, that in half a year the proportion is down to 30%, and that in a year, only 10% of buyers are 100% loyal. To expect any substantial group or segment of consumers to be uniquely attracted to one particular selling proposition or advertising platform would therefore generally seem entirely beside the point.”
So, we don’t ‘own’ our consumers anymore than they have a monogamous relationship with us. ‘Your’ consumer is simply a buyer of another brand who sometimes happens to buy you. And as Ehrenberg showed, this overlap between competitive brands varies simply with the brands' penetrations.
What this means for communications
Ehrenberg’s advice (Admap, October 2004) to marketers was clear:
“These various aspects of brand loyalty imply that the main target of marketing communications, whether for brand growth or for brand maintenance, has to be how many customers the brand has. Their loyalty will be much more difficult to budge, because brand loyalties have never been budged much before.”
This is borne out by the analysis of the IPA dataBANK conducted by Les Binet and Peter Field - published as Marketing in the Era of Accountability. The IPA dataBANK is the result of the IPA’s Effectiveness Awards and now consists of over 880 case national case studies, all codified in a standard format, and their analysis of it provides strong supporting evidence for Ehrenberg’s point of view.
While the dataBANK contains almost twice as many loyalty campaigns as penetration campaigns, loyalty as an objective would appear to only rarely lead to successful business results. In fact, only 9% of these loyalty campaigns actually increased loyalty significantly.
In sharp contrast, penetration as an objective does appear to lead to successful business results. 46% of penetration campaigns succeeded in significantly increasing penetration. And where both loyalty and penetration are recorded, penetration growth is usually the greater effect.
The reason for this disparity in effectiveness between loyalty- and penetration-driving campaigns is simple. Despite the talk of depth and loyalty, and of ‘engagement’ and ‘relationships’, the truth of the matter is that as Sharp and Newstead (Admap, September 2010) have shown us, a brand’s user base - whatever category it operates in and whatever its market share - is made up of many very light, occasional buyers and a few very heavy buyers.
The very loyal aren’t that important to a brand because 100% loyal customers actually don't buy the category very often. If you only drink beer once a year, then you will only buy one brand. So while you will be a 100% loyalist, you will not in fact, contribute that much to the brand’s overall volume.
In contrast, heavy category buyers - who do a lot of buying - also buy a lot of different brands. They are not loyal. But they are more likely to be more valuable to you. The problem is that they are also valuable to your competitors. So as Sharp and Newstead put it: “If you aim for a customer base made up largely of heavy category buyers, you are aiming to be a really small brand.”
To grow brand share, you need a lot more light buyers and a few more heavy buyers.
The language of depth versus the language of breadth
We're a frequent victim of our own language. Mark Earls has done much to caution us that the anthropomorphism that runs through so much of our brand thinking gets in the way of clarity and reality. We can forget it's metaphor.
What is clear is that too much of our current marketing rhetoric is at odds with what we know drives brand growth. We need to become a little less reliant on the concepts and language of ‘Relationship’, ‘Engagement’, ‘Conversation’, or ‘Collaboration’ - because chasing loyalty is not the route to growth. In most cases, pursuing penetration is.
So rather than think narrowly about how our creative content can work to deepen relationships, we should be thinking about how we give our creative content breadth. We should be focusing on how it can grow the customer base, rather than just seek to nurture existing customers and build loyalty. Reach - however we achieve it today - is still crucial for brand growth. We must still ask of our intitiatives - how does it scale?
Sharp and Newstead (Admap, September 2010) highlight rather nicely the altogether different challenge this sets up for marketing:
“Light and nonbuyers have far weaker mental structures for your brand. They don't notice your advertising or your brand on the shelf and it doesn't come to mind in buying situations. They may not even know where to buy your brand, or they might shop where your brand is not available... To become a bigger brand, you need many more customers, and most of these will be light buyers of the category and light buyers of your brand. They won't think about you much and they won't love you – but you'll make lots of money.”
Treating knowledge, indifference, and availability as the challenges for marketing to solve is a very different enterprise from nurturing existing customers, confident in their knowledge, affinity, and interest. So we should let go just a little of the assumptions of commitment. It’s time we got a little more predatory and a little less cosy and fluffy.
Time we thought less about loyalty, and more about getting a whole lot of penetration.
Andrew Ehrenberg, ‘Repetitive advertising and the consumer’, Journal of Advertising Research, Vol. 40, No. 6, November/December 2000
Andrew Ehrenberg, ‘What Brand Loyalty Can Tell Us’, Admap, October 2004, Issue 454
Byron Sharp and Kate Newstead, ‘Loyalty is not the Holy Grail’, Admap, September 2010
Les Binet and Peter Field, ‘The Conflict Between Effectiveness and Accountability’, Admap, June 2007
Les Binet and Peter Field, Marketing In The Era Of Accountability
McDonald and John Scriven, ‘Why Marketing Needs Marketing Science’, Admap, October 2006, Issue 476
Mark Earls, Herd: How To Change Mass Behaviour By Harnessing Our True Nature
Special thanks to John Scriven, Director of the Ehrenberg Centre at the London South Bank University