Economics of Brand Loyalty – Does it really exist?

Sorry for the delay & silence between posts, I’ve only just returned from a few weeks holiday in Italy & Scandinavia.

During one of my flights I randomly pick up a copy of the London Times and found a story that caught my interest. It was about loyalty in the times of the GFC and changes in consumer behaviour. The story details a USA based brand study, sponsored by the USA CMO Council from 2007 to 2009 that focused on consumer loyalty and retention across 685 brands. The study used  data from 32 million consumer loyalty cards, similar to a Woolworth’s Every Day Rewards program.

Consumer Behavioural Data

The study found that in 2008, during the height of the GFC the average brand lost a third of its highly valuable customers – a staggering and frightening reality for direct marketers. This defection came from a group that habitually bought a specific brand for more than 70% of their purchases in a category. Brand measures of affinity, esteem and loyalty collapsed under price and promotion pressures. The study also found that in times of economic pressure, customers once loyal to premium brands in a category could be easily shifted to private-label house brands. The shift downwards was found to rapid, however the upwards shift to return to premium brands took far far longer. Over the two years of the study & data analysis, on an aggregate basis 52% of customers deemed as highly loyal either reduced their loyalty or completely defected from the brand.

shopping CMO Study

The findings raise big questions for marketers and agencies (both creative & media). These include:

  • Is the current strategy of hope, that deploys a spray & pray approach of TV, print, outdoor etc still relevant?
  • How do we target more effectively through digital media? What is the impact of Search, Social Media, Blogging etc on purchase behaviour and intent at a retail level?
  • What is the role and effectiveness of current loyalty programs? It would seem that they don’t influence behaviour as much as we all would hope. Do they need to be better planned and executed using dynamic behavioural data in an almost real-time way?

Loyalty as we all know is a key driver of revenue for brands and most marketing activity and investment are focused primarily on customer acquisition metrics with some form of loose LTV ascribed to a business case that justifies the campaign activity. As the above study indicates, in the majority of cases loyalty and retention programs lack structure, data insights, don’t track consumer behaviour and engagement and from the customer perspective lack relevance. Most programs at best follow a strategy of HOPE, where a single digit response rate is deemed successful and everyone involved slaps each other on the back and we as an industry celebrate flawed success.

Mark Buckman - CMO at the CBA

Mark Buckman, the CMO of the Commonwealth Bank in Australia loudly shared his views on the role of direct communications and customer relevance at the 2009 ADMA Forum and in the Sydney Morning Herald. Simply put he believes its time for marketers to lift their game, become smarter and more insightful about engaging in a relevant way with consumers. I couldn’t agree more, most marketing is executed here in a lazy laissez-faire way with a “good enough is good enough” attitude.

Here at Downstream, we’ve also seen the rapid change in consumer behaviour. Search query volume is up significantly across almost every category and especially across banking, finance and travel, consumers are increasingly benchmarking brands against each other. The biggest rate of change we’ve also observed is in retail where Search has been traditionally shunned by bricks and mortar businesses in favour of mass media. This disconnect in the marketing equation unfortunately is consumers are increasingly turning to Search price check and either buy online or being driven to a retail outlet. Unfortunately brands that aren’t found aren’t relevant and are losing share of mind and wallet to their more dynamic, insightful and nimble competitors.

I’d love to know what has happened here in Australia over the past 2 years, how have customers defected from brands they once loved regardless of the price differential. Have the DM & eDM programs held off customer defection, how are the biggest brands in Australia thinking about the more effective use of data, segmentation, evaluation and brand engagement? What is the future of loyalty and how will it be executed more effectively than it is today?

Thoughts and opions are warmly welcome.

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Michael J Fox, Always Looking Up – Positive Quote Widget

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Economics of Positive Thinking

While not strictly advertising or economics I’ve been inspired to write a quick short post.

It is a lazy Sunday morning in Noosa (taking a short break from Sydney) & I’m currently reading a great book by Michael J Fox titled “Always looking up”. It details his personal journey from world famous actor to Parkinson’s Disease sufferer & inspirational foundation patron. Great stories about challenging conventions, common place thinking and inspirational stories from Muhammad Ali, Lance Armstrong et al who faced massive challenges to achieve something in the face of adversity. I’m a huge fan of Lance Armstrong, not for just his super-human cycling achievements but what he has done with his fame and recognition for the good of all people.

I will write a more detailed post on this soon. A great read if you are looking for positive thinking, inspiration and considering creating something new in both your personal and professional life.

New inspirational book by Michael J Fox

New inspirational book by Michael J Fox

A Inspirational Human

A Inspirational Human

Digital trends from the USA

AdTech Day One Opener – San Fran 09I’m a little slow off the mark after coming back from the US & have a whole bunch of new posts that are currently works in progress. Great content on social media, online / IP TV, the Future Agency etc etc. In the meantime here is a quick snapshot of online trends from the US across digital media, social networking, ad revenue monetisation etc etc. Hope it helps or provides some insights for your work here in Australia. Digital Trends from the USA.

Economics of Inspiration

I’m lucky enough to currently be in San Francisco, eagerly awaiting the kick-off of SFO AdTech for 2009.

Moscone Center - Ad Tech San Francisco

Moscone Center - Ad Tech San Francisco

The thing I’m most excited about is seeing & hearing new ideas on digital performance marketing and general new on-line trends from North America, the biggest and most progressive digital country. Hopefully I’ll come back with a head full of new ideas & perspectives, ready to challenge the status quo even more, and yes beyond just Search Marketing.

I’m most interested in seeing:

If anyone is interested, let me know. I’ll be posting updates over the next few days and if you are interested will make notes, content available.

Cheers

JH

Economics of a Google & Twitter collision…

So I’ve been thinking about what happens when like things collide.

The most interesting thing I could come up with is a big social media trend & technical collision between Google & Twitter, think Toogle or Gitter…ok maybe not on a brand front. But seriously lets think about the two most potent forms of digital marketing on the planet today, Search & Twitter (Social Media).

Twitter - the new social tool

Twitter - the new social tool

Google - the new Master of the media Universe

Google - the new Master of the media Universe

In order:

Search

Google

  • Fastest growing media on the planet (Australian est 60% year on year compound growth)
  • Search network – larger scale than any ad / publisher network
  • Media with the highest level of accountability & conversion
  • Performance related media – no click, no pay
  • Live media auction based market driven by relative pricing mechanic
  • Investment based on conversion yield
  • Media with the shortest conversion latency
  • Highest integrity media – only deals in post click metrics and avoids the BS of cookie spraying, post impression conversion & analysis
  • A CONSUMER DRIVEN MEDIA THAT MAPS CONSUMER THOUGHTS WHEN THEY ARE IN AN ACTIVE MIND STATE

Twitter

Twitter Mobile

Twitter Mobile

Twitter - the real value is the searchable content

Twitter - the real value is the searchable content

  • Collaborative social media tool
  • Growing exponentially fast
  • Maps social groups & connections
  • Maps social conversations about content & brands
  • Combines desk  & mobile functionality
  • Has indexable content / conversations / links
  • Has location based functionality in mobile devices
  • Easy to execute algorithm based analysis on conversation value & stickiness of content or users
  • A Consumer driven media – WHEN IN AN ACTIVE ENGAGED MIND STATE


QUESTION : What if you combined the power of them both?

  • A performance based, digital media super power
  • Advertising at the speed of thought (or conversation)
  • Behaviorally targeted advertising based on a collective combination of conversations and connections / social media groups
  • Location based advertising & ad serving based on real-time geo-targeting
  • Two sticky, lean forward, consumer engaged media channels

IMPACT

Immense revenue scale for both Google & Twitter.

On Google’s side an inordinate amount of live, actively engaged impression inventory to serve ads to based on conversations (past & present), combined with consumer clustering (birds of a feather flocking together etc) and search & surfing history. For Twitter a ready made ad revenue stream of either text ads, by making Twitter effectively part of the content network ( yes some tweaks to algorithms required) or make it a part of the biddable display market from a content placement perspective.

Twitter would have a ready made, low or no cost sales channel at their instant disposal. Google would have the most valuable and dynamic digital inventory available.

Together they would be unbeatable, together they’d own social & performance media, together they’d have scale and momentum that couldn’t be broken. Together they’d provide a one stop, easy solution for brands to capitalise on both in terms of performance media, social media and mobile media.

The Economics of Online Music

Short & sweet today. I’ve been talking with a new on-line music portal www.bandit.fm being pioneered by Sony BMG here in Australia. Downstream are looking at potentially partnering with Sony to help build an audience for their new service.

Now anyone that knows me, knows how much of an Apple fan I am. I think anything Apple touches, generally turns to gold. Apple have successfully become the trail blazer in almost every product category (think iMac, iPhone, iPod, Mac Books of all types and descriptions). They’ve also revolutionised the consumer software market with easy to use intuitive applications (think iPhoto, iMovie, iDVD and before anyone cans me the whole iWork suite, awesome productivity suite for $99! Let’s also not forget iPhone apps – just brilliant way to build and scale your mobile platform).To date no brand really comes close to Apple’s innovation and foresight.

But when it comes to music, I think there is a true challenger that could really take it to them. Sony have developed what I believe is the BEST music site / portal on the market today.

New iTunes killer

New iTunes killer

I think it is the best for the following reasons:

  1. Great content – they’ve developed the site intuitively with a mixture of channels, artist specific pages, video, news feeds etc. You can engage in specific genres like R&B, Hip-Hop, Rock, Pop or you can navigate to specific content rich artist pages like N.E.R.D, John Legend, Duffy etc etc.
  2. Great site build – mixture of indexable HTML & interactive flash elements, URL structures, title tages, H1 tags etc
  3. Downloads are easy after simple registration process
  4. Music & videos are DRM free
  5. Great experience – you can listen to a whole song or view a video in high quality full screen mode vs. Apple’s 30 second preview function
  6. Not constrained by an app like iTunes – you can access it from any browse
  7. Easy content network integration (PPC) into YouTube & Myspace. They are “THE PLACE” to view music related content.
Specific Music Genre Channels

Specific Music Genre Channels

Usher on Bandit.fm

Usher on Bandit.fm

The site will work very, very well for Paid Search / PPC campaigns, the site structure allows you to deep link to exact content as well as being able to achieve great quality scores which impacts highly on economical bid prices and as content is more compelling than iTunes, I believe with a much higher conversion process too.

The site also has very high potential to work very very well for Social Media, as the site structure let’s consumers be very specific about their Tweets, blog postings etc and create specific interest in genre based content communities. One area they could approve is allowing their content to be aggregated and syndicated on other sites, think embedding audio files or video files to MySpace or Facebook profile pages with pre & post roll Bandit.fm ads promoting their service – very economical way to drive new subscriptions, downloads or cross sell new artists / releases / albums.

So the product I think is truely world class, if this is release 1.0 I can’t wait for new versions updates. Bandit.FM can successfully take on iTunes and Apple in the market they really pioneered and commercialised (on-line music), and hopefully give consumers a compelling reason (safety – no viruses / Trojans, reliability ets) to BUY music rather that steal it from sites like Limewire.com. They only have to carve out small incremental percentages of the on-line global market to create real value & high return for their pioneering investment in on-line music. Congrats to the whole team at Sony BMG!

If you are into music give it a go.