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Branded! Using CRM to boost brand loyalty

20th Nov 2006
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Companies spend huge sums on customer relationship marketing programmes to build relationships. In turn, those CRM-centric relationships are fundamental planks of brand loyalty. And loyalty matters...

Stuart Lauchlan

By Stuart Lauchlan, news and analysis editor

Relationships are key. Companies spend a fortune on customer relationship marketing programmes to build those relationships. In turn, those CRM-centric relationships are fundamental planks of brand loyalty.

And loyalty matters. According to US trade publication Brandweek, 76 percent of consumers across all demographic groups consider a product's brand before making a final product selection. The average cost for acquiring a new customer is approximately five times more than keeping an existing customer for almost all industries. Therefore, building brand loyalty can save your organisation up to 500 per cent on new customer acquisition year-after-year.

Brand loyalty is the repeat purchase made by the consumer out of commitment to the brand. Brand loyalty is evident when the consumer deliberately chooses a brand from a set of alternative brands rather than simply through inertia - there is inevitably overlap between habit and loyalty.

It's an evolutionary process. When a consumer develops loyalty towards a brand he/she develops a favourable attitude towards the brand resulting in commitment. When the customer becomes emotionally rather than merely intellectually vested in a brand, loyalty to the brand becomes cemented.

Customers will buy a company's products or services if there is true or perceived differentiation, a high level of service and consistent value. Brand differentiation pivots on a company's ability to meet customer needs on that emotional level mentioned above rather than merely an intellectual level.

But functional differentiation is inevitably shortlived as this can typically be replicated by rivals. Companies need to be able to execute customer service at a consistently high level – hence the value of aligning CRM strategies correctly to create a quality of service differentiator.

There are good examples of how CRM can be used to boost brand loyalty. For example, L'Oréal, the world’s largest beauty, skin care and cosmetics company wanted to broaden the scope of its luxury products marketing to focus on customers. The firm operates in a highly-competitive marketplace for luxury beauty products where customer retention is a key performance indicator.

It standardised on Siebel CRM and Analytics software which resulted in greater customer loyalty. As well as improving customer brand loyalty, L’Oreal benefited from an improved response rate and lower cost of direct mail, and gained a consistent 360-degree view of its customers across multiple channels. Most importantly, it can now classify ‘value customers’ more easily and retain them, boosting brand loyalty.

Consistent experience

The ultimate goal of branding is to create loyal customers. With loyal customers, marketing is easier, selling is faster, premium pricing is more acceptable, repeat business is extremely higher, and positive word of mouth helps generate new business.

From a marketing perspective, brand customers build a relationship with the brand and often become advocates of the brand by word of mouth which results in further strengthening the brand.

Delivering a consistent customer experience across markets is essential for building a strong brand. Initially brand loyalty is most likely to stem from functional benefits, but the relationship that develops is likely to go beyond this in a short space of time.

So what does it take to strengthen brand loyalty? As noted above, delivering a high level of customer service and ensuring customer satisfaction are clearly the most powerful differentiators in the marketplace — cementing brand loyalty in the process.

But it’s worth going back to basic principles. There are some fundamental tenets of brand building that apply. For a start you need to have a proper identity to work with and to use as the springboard for unique positioning and differentiation. It must be nurtured and remain consistent at every touch point, inside the company and outside. There has to be a single, cohesive brand experience. For the customer, every touch point must work together to create that experience.

Once you have that in place, you need to differentiate yourself. Focus on something that sets you apart from the herd. Create a position. Positioning is the place a product or service occupies in the minds of prospects. Decide what position suits your background, abilities, and audience, then build the marketing and CRM strategies around that..

There are certain questions to be asked in order to align CRM, customer loyalty programmes and brand management.

  • What is the annual and lifetime value of your loyal customers?

  • How do you allocate marketing spend between loyal customers, in revenue and profits?

  • What is your brand's level of repeat purchase and how does this compare to your industry average?

  • What is the profile of your loyal customers? How do you acquire more of them?

  • How well do we reward loyal customers?

  • What opportunities can you give to loyal customers to buy more, or to recommend you?

  • Have you learned all you can about the buying process from the incoming customers eg: what are they buying, when, how important is price as a factor and so on.

  • Are there mechanisms in place to gather feedback at the end of the sale? Eg: how was the customer experience, any suggestions for improvement etc?

  • Are you proactive enough in your customer outreach? Eg: do you contact customers on special occasions and ask if they would like to order as you prioritize your existing customers.

Above all, be aware that this is a long game. It’s going to take time. Don't confuse brand awareness with brand loyalty and certainly not with brand equity. Awareness is step one. If customers don't know you exist, they certainly won't consider you, but that's very different to having a loyal, long term relationship.

CRM can help, but loyalty comes through experience and time. CRM technologies must be viewed as enablers that operate within the context of wider business strategies – valuable as a means to an end, but not the 'silver bullet' that some might claim to be.

Find out more about Stuart Lauchlan

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