What price brand loyalty?

There has been quite a furore about certain online- retailers using differential prices in favour of new customers over loyal ones. In its simplest terms if you have the cookie to show you have bought from the site before, you get a different set of prices from a those presented to a new visitor.

The financial logic is quite straightforward and akin to new customer bonuses and loss leaders. Indeed, there have been various scenarios developed questioning the comparative values of brand-loyal customers who may spend small amounts compared to a disloyal customer who spends the occasional large sum. The arguments go back and forth, but there is also a psychological dimension that asks: ‘Why should I give my loyalty to a brand that values my loyalty less than the business of a new customer?’  Ultimately, any brand loyalty is devalued – but for the brand operator who has already made the decision that the ‘loyal’ customer is just a mug who buys for convenience and out of inertia, brand loyalty is obviously a low value commodity. They have already made that strategic decision, but it is naive to thing the customer will not arrive at similar conclusions.

The important factor here the cost of customer acquisition. It is a truism that it requires considerably less resource to get additional and on-going sales from a current customer than to acquire a new one. There should be a financial imperative to looking after loyal customers as well as a value driven one.  Of course it makes sense to offer bonuses and inducements to new customers, but it makes little sense to penalise existing ones. We have seen the results in the financial sector of advantageous new products not available to existing customers.  The outcome is a cynical churning of customers moving from one brand to another as soon as a more advantageous offer appears.

At least some of these other strategies are to a greater measure overt.  What dismay’s me about the online etailers’ approach is its underhand nature – customers like me feel we are being taken for a ride. It is also sobering to note that some of those embroiled in this mess include names from the UK’s top brands list published just a few weeks ago. All of a sudden their perceived and hard-won brand values have been lost.

Well, I’m off to Tesco now – at least their points indicate that they value my on-going custom – oh, that’s after I have deleted some cookies.

New website

Okay, I admit I’ve not been doing much blogging recently as I’ve been working on my company websites and developing a new site aimed at my European business – www.one-marketing.eu.

Do brands need flexible friends?

Study: Brands Need Flexibility Adweek 09 Feb 2009.
“Sixty-three percent claimed traditional brand-positioning approaches don’t work as well as they did in the past. Why? Rapidly shifting media habits and the advent of new technologies require brands “to tell a bigger story,” said Verse Group managing partner Randall Ringer. “The brand-positioning model was designed for a world of 30-second commercials. It doesn’t work in the world of new media. It’s like a square wheel.”

Okay, for this US survey for Forrester, all respondents’ companies had revenues of $250 million or more, and we could argue that this is something smaller brands have know for some time.  Ask any agency or consultancy dealing with medium to large clients below this revenue slice and pressure to demonstrate improved ROI has been at the top of the agenda for quite some time.  Flexibility of approach has been in the blood of any brand communications organisation servicing this market – if it hasn’t been they have probably already disappeared.

I would caution against the danger of throwing out the baby with the bathwater, however.  Even though most of my work is in digital media, I don’t believe it is a case of, ‘New media good – traditional media bad’; there are tasks which manifestly traditional media can achieve better than digital media. ‘Flexibility’ means just that… and having an open mind to strategic planning.  And don’t assume traditional media is static: media owners also have the capability to be flexible, so keep a close eye on their responses to tumbling revenues.  This is maybe where some of the most exciting opportunities may present themselves.

Can digital let us put more fun into branding?

In a fascinating article in Revolution, Sept 2008, Justin Billingsley, Orange’s UK brand director told Adam Woods that digital was going to ’steal considerable budget from above-the-line marketing’ – no surprises there. However what was interesting was his comment that it was going to be used to more ‘cool stuff’ (by which I understand he means exciting, innovative digital activities) but with a more relaxed view to ROI.

It’s a phenomenon I have also observed: a client who had perhaps a £4m TV budget, decides to take, say, 10% out to spend on digital can be more prepared to take a few more risks. The same psychology that underlies the Orange approach of ring-fencing a proportion of the budget for more experimental activities seems increasingly common. Of course the results will be measured, and will inform future strategies, but provided the actions are on-message for the brand they will allow more adventurous conceptual thinking… and a bit more fun in these depressing times.

Brands and social networking

I have long advocated the use of social networking in brand developent – it seems so fundamental to what brand awareness is about, people talking to each other about the brand.

Well, for uk brand owners and promoters there is an even stronger case for including social internet in the branding mix. It seems we brits top the league in social Internet use.

UK leading social network use

Brits average 5.8 hours per month on social networking sites

Yet still major companies are missing the opportunities:

Businesses fail to tap social networking

Gartner identifies major challenges for corporates

Domain name shake up – good or bad for brands?

The latest action that the press tells us will lead to confusion, despair, plague and pestilence is the proposed liberalisation of domain names – See the clip from the BBC story. The theory seems to be that we will be able to have any domain we want, so long as we have the money. The first pass at this seems to be that it will be bad for brands as it will lead to customer confusion.  Asusual, this assumes that brand owners and promoters are fools: of course the opposite is true.  The Holy Grails for any brand owner are clarity and differentiation and of course they will do all in their power to achieve these objectives. To assume they will throw up their hands in resignation and allow customers to be confused is ridiculous. Even now, I am sure that shrewd brand marketers are pouring over the opportunities presented to use this new freedom to enhance clarity, memorability, recall and differentiation.

The internet effect

I have often looked at how internet marketing and digital media affect branding and brand strategies. But one obvious effect I overlooked is the development of new brand names where digital media is of critical importance. Anyone who is even a little SEO savvy knows if you can get search terms into urls you are ahead of the game. So now we see brands developing that are scarily descriptive of what the brand does. Online only brands have long used this approach, from lastminute.com onwards, but now we are seeing brands that exist in the normal retail and commercial worlds being named literally – doing ‘just what it says on the tin’.

I would love to know people’s favourite literal brand names.

Managing multiple personalities

There was a recent article in the New York Times, discussing how individuals present themselves in virtual worlds and the social internet. The author referred to the work of psychologist and sociologist, Erving Goffman who used the analogy of theatrical performance for the way we present ourselves to others in the world.

We all have multiple identities in this life – parent, child, workmate, lover, friend, enemy, teacher, pupil etc.  In the virtual world of social internet we present ourselves in various ways and manage out identities by subtle means. We choose or usernames or screen names to convey meaning; the interests we choose to list, the books and the music – out of all the things we could list, we are very selective to create subtle impressions, even though we often do this partly subconsciously.

Brands to do this: there are the explicit and overt things they do – the copy, the selection of images, the clients they choose to list. If we follow the brand as person model, it is like a person choosing to list Wittgenstein and Dickens in their book list rather than Jeffrey Archer and Harry Potter, where a brand might select multinationals with spotless records rather than dodgy arms dealers or polluting manufacturers.

New media v traditional media

How does new media stack up against traditional media? 

There’s and interesting bit of research from Ketchum/University of Southern California on user trends in media usage by consumers. In brief, one of the key findings is that consumers rely more on TV and press than the web, in making their buying decisions.  Good news for media owners you would have thought – except like many academic studies the element of cost does not figure – comparisons in terms of effectiveness per pound (or dollar) might show a very different picture.

Another interesting finding is the importance of recommendation by a trusted friend in making buying decisions. This is probably further endorsement for social internet as a tool for enhancing brand reputation bu recommendation.

Read the summary of the report here.

How do we learn what we know about brands?

There are two main ways we process information about brands, one is actively dealing with facts and the other is information we absorb and deal with without consciously processing it. There are various terms for these but I tend to use Active Involvement Processing (AIP) and Passive Involvement Processing (PIP).

For example I can give you a lot of information about, say, the Mercedes brand – it’s a German manufacturer, has a particular range of vehicles, its history, pricing, dealer network, residual values etc.  You can actively use that information to make decisions by AIP.  But there is a lot of knowledge you have about the Mercedes brand in terms of its values, ethos and personality that you have acquired while never being consciously involved in processing – you acquired it by PIP.

The first kind of knowledge is very accessible to normal marketing communications techniques, advertising, PR, literature etc. – its the ‘what’ we tell customers. PIP is about far more – it is not just about the ‘voice’ and the ‘how’ we tell it, but it is about the organisation and products or services themselves. Once again it is about brand relationships.

Increasingly this is an area that can be explored by engagement with social internet: becoming involved in and listening to the conversations about our brands and products.