The art of a differentiated customer loyalty approach

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Attaining new customers is hard, even for the strongest of retail brands. This is why a great deal of energy is invested in maximizing revenues from existing clients. First, by maximizing sales per visitor. Second, by making sure the customer comes back to buy again. We enter the field of customer loyalty programs. Savings cards, gadgets, any kind of incentive to keep consumers coming back for more.

Real success stories, however, are rare. This could have something to do with the fact that „the customer” is approached as a single homogenous group in most loyalty marketing campaigns. I would like to share with you some thoughts on potential improvements that could be made by differentiating your loyalty marketing efforts.

Schijns & Nelissen (1997) came up with a smart way of dividing customers into four categories, based on loyalty and the customer’s perception of the relationship. The matrix below shows how the division is made. On the y-axis, we find involvement. This indicates how strong the customer’s experienced connection with your brand is. On the x-axis we find behavior, which indicates how much money the customer actually spends in your business.

Customer categories

Customers spending little money, and having a weak connection with your brand are called acquaintances. These people mean very little to your business at the moment, but have a potential for growth. Customers who feel a strong connection to your brand, but who spend very little money are called sympathizers. They have a strong positive attitude towards your business, but it is not translated into purchases. In the bottom right corner we find people who spend a lot of money, without feeling a strong connection. They have a functional approach towards your business. Last but not least, there are your friends. Customers who experience a high degree of involvement with your brand, and make the purchases to match.

This rough division shows how a single one-size-fits-all approach is unlikely to be very effective. Every group requires a specific kind of attention. Let’s have a look at the implications for loyalty programs per group.

Acquaintances are not doing anything for you at the moment. They might have a latent need for your products that needs activation. Or they might need to be persuaded to leave the competitor and give your business a try. Marketing efforts should therefore be focussed on activation or acquisition. Both rational and emotional arguments should be used.

Functionalists deliver a large part of your revenues, but seem insensitive to the experience that surrounds your brand. You can try to get them more involved. However, there will always be a group of customers that is immune to your charms. These customers are best bound to the business with rational, functional incentives. Add more functionality for them. A savings system could work well. Focus on the rational.

Sympathizers have a strong positive attitude to your brand, but you have failed to translate that attitude into sales. It might be advisable to see whether you can use your strong emotional connection with them to overcome the rational obstacles. Again, acquisition marketing is required. A strong focus on rational arguments is likely to work best.

Friends are responsible for a large share of your revenues and they have a strong positive attitude towards your brand. They are your ideal customers. Loyalty programs could be aimed at showing your appreciation, pampering your most loyal, happy customers. Making them feel as special as they are to you, will reinforce your position in their perception. Emotional arguments are recommended.

Looking at the above, we find that, in theory, it could be advisable to run four different marketing streams at the same time. Two aimed at acquisition, and two at retention. This requires serious marketing competence though. Not only will you have to be able to identify the right divisions and target them individually, you also need to keep your overall communication congruent.

Still, it could very well be worth the additional efforts. Pushing your sympathizers into the friends zone and your acquaintances into the functionalists and friends zones might just boost your business significantly.

Thomas van Straaten
Instore media consultant

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