MadMen shows the dominance of the advertising age and the power mass marketing once had on consumers. Now, as the power shifts from suppliers to buyers it is loyalty that keeps a company competitive, not just the ability to persuade.
The historic approach was for companies to use cognitive marketing, to change customers perceptions to create a shift in attitudes that allow for differentiation from substitute products. Today customers need more than just the benefits of products and services but also the stimuli to create a desire to purchase (behavioural marketing). Many companies do this through extrinsic motivators, such as loyalty programs or discounts, to achieve a desired purchasing behaviour. However, this is superficial loyalty and only relevant in the short-term. It is relationship marketing that creates deep emotional connections (emotional marketing) that keeps a customer loyal and a lifetime association with a brand.
A sophisticated loyalty program distinguishes the great (angle) and unprofitable customers (devil). A company wants to listen to what the right customers say, while other customers should not be incentivized to remain a client.
There are two different directions of loyalty, attitudinal and behavioural. Attitudinal is loyalty that is in a customer's state of mind and is only loyal if there is a positive attitude towards a brand. If the focus is on attitudinal loyalty a company needs to focus on staying competitive by improving the product, image, service or other elements of the customer experience. Behavioural loyalty is focused on re-purchase activity, rather than the attitudes or preferences. Many grocery stores use behavioural loyalty and customers may repurchase even if they do not like the company or feel any degree of emotional connection, its only a functional relationship.
More often than not, companies will do give aways and then never follow up with customers once the give away is over leaving a wasted opportunity to learn and connect with customers. A good loyalty program is customizable where a customer can mix and match aspects of a promotion to fit their needs and it works with other programs (i.e. star alliance). Programs need to focus on customers not products and measure the positive impact made on behaviour that develops a stronger trusting relationship.
I do not often sign up for loyalty programs, but I always do with airlines. When Porter first started I remember they sent me a $10 Starbucks gift card on my birthday and I was appreciative. I still fly Porter even though I think their customer service is inadequate after many terrible experiences with them, those memories pass much quicker then them sending me a present on an important day.
Loyalty programs can be incredibly effective if it's more than just capturing a sale with a complex pricing strategy (i.e. promotions!) and it is actually about learning how to serve the customer better. Knowledge is power and information allows people and businesses to make better decisions.
What are your favourite brands? How do the brands develop your customer loyalty? Who do you shop with that thinks you are loyal, but you are just there out of convenience (Sobeys *cough*)?