Brand Loyalty : a must-have marketing metric.
The buzz about 'brand loyalty'...
There's been discussion in the media lately about brand loyalty. It's worth talking about because, of all marketing metrics, brand loyalty is one of the most telling and diagnostic of your brand health.
According to an internal study recently sent out on the PR wires by IBM ...
- Building and sustaining brand loyalty is the top concern for today's midmarket CMOs, yet 72 percent do not feel sufficiently prepared to effectively build this loyalty;
- 61 percent of midmarket CMOs are struggling with how to manage the impact of social media will have on their marketing function;
- 72 percent of CMOs are underprepared to manage the "plummeting" level of brand loyalty.
- Big factor affecting brand loyalty: Online sites and the spread of social media give buyers ready tools for discovering, evaluating, and experiencing brands.
While we have just read the press release, and not seen the study itself, we're not really sure if the majority of CMO's actually reported in the survey that their brand loyalty was “plummeting” as reported in their bullet point summary. As always is the case, the competitive world is dynamic with some brands gaining strength, others holding dominance, and others, yes, declining.
The real implication of the newsy study is that knowing your brand loyalty position is a vital dashboard indicator of your brand health.
Will the real 'brand loyalty' stand up?
In our world of prolific online chatter and cloudy vocabulary, 'brand loyalty' as a term and a concept can lose its meaning.
Primary Definition
In brief, brand loyalty an indicator of the rate of repurchase of your brand among customers who have bought in the past. If, when customers face a requirement to buy again, do they choose to repeat with your brand, or do they choose a competitor, or do they migrate to a different solution or category altogether?
Alternate Definition
For some product categories, the primary definition doesn't apply. This is the case for product categories where the need to “repurchase” is infrequent or non-existent altogether. Purchase of major capital goods, e.g. plant machinery, or selection of a senior living facility for an elderly person are examples. In these cases, it's usually preferable to use an alternate definition of brand loyalty: purchase intention.
Measuring Brand Loyalty
Once brand loyalty is clearly defined, the measurements and research approach become fairly obvious:
- Quantitative research is required. Brand loyalty requires precise measurement, that which is delivered by high-quality quantitative research.
- The usual data source is survey research. In some cases, however, accurate internal data might be available, e.g. software sales licensed on a renewal basis.
- Survey questions required to calculate repeat purchase are straight forward:
- brand purchased last two purchase occasions,
- reported brand switch,
- reasons for switch (price, performance, deal, support).
- Measuring purchase intention requires a question design innovation:
- Intention is an "attitude", not a behavior; therefore,
- Asking additional questions to verify the 'intention' in critical for a quality study.
- Maximize value with defined tracking intervals.
- While knowing the absolute level of brand loyalty is useful, knowing the direction of change provides immediate feedback.
- Tracking allows statistical tests of changes between each survey wave.
- To execute survey research to compare repeated samplings (monthly, quarterly, yearly), advanced sampling and execution procedures must be employed.
- If internal customer data is used, the tracking can be done frequently at a relatively low cost. Some companies have a brand loyalty data point on executive marketing dashboards.
- Sampling validity is critical.
- Since 'tracking' is involved over spaced intervals, sampling procedures and execution must be the same, time after time.
- The 'sampling frame' must be inclusive without systematic elimination. Ideally, all customers must have an equal chance of selection. This may rule out purchased panels that are not exhaustive in their recruiting from all possible people in the defined universe of customers.
- Response rate must be maximized: this means call backs, appointment interviews, incentives as needed, and other methods to insure the highest possible response rate.
- If internal customer data is used, be sure that you precisely define the customer 'bucket' for extracting the sampled customers from your database.
- Capture diagnostic measurements.
- Parallel to the quantitative brand loyalty metrics, include qualitative diagnostic questions in your survey measurements.
- Knowing the 'reasons why' provide guidance for finding and fixing problems.
- These diagnostic questions can be easily included in your tracking brand loyalty survey.
- If you use internal sales renewal type data, periodically conduct a diagnostic 'lost sales' survey among those who have migrated to a competitive product.
A must-have metric.
In allocating your marketing information spend, be sure to have 'brand loyalty' measurement at the top of your list. It will deliver a sensitive, forward looking metic to drive actions for competitive advantage.
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