Does loyalty in retail extend to the whole stable of products a brand produces, or just some? We are encouraged to believe that if a customer is loyal to one product, then the obvious conclusion is that they will be loyal to the whole range. Cross-selling is a well-known feature of the loyalty cycle; is this a reasonable expectation? Perhaps it is not that simple.
I once undertook an experiment with someone I know where we considered the contents of our make-up bags. We were in different demographic groups, being a good ten years apart, with one single and living in a suburb and the other married and living in central London. Culturally, we are pretty much the same. Suffice to say, we both had a bit of a mixture that ranged from the very expensive items that we had almost religious devotion to, to the downright cheap throw-away.
How can this behaviour be explained, and the concept of loyalty marketing defended as a worthwhile pursuit? Well, it would take a stronger woman than I to try to explain a woman’s make-up bag. Perhaps retailers believe that customers demonstrate a lack of loyalty because they follow a brand promise and like the idea of different things. One brand may promise a sophisticated look, another flawless skin. If this were always the case, then customer choice would be as fickle as the wind. However, as well as being driven by Daniel Kahneman’s System 2 thinking, which involves considering their finances, feeling left out, recommendation, being a neophile and all the other reasons we try to evoke in our planning and strategy, consumers also make choices based on Kahneman’s System 1 – intuition. This means the customer’s own wisdom.
In the example of make-up, it may be the knowledge of their skin and also how they see themselves as a person. Different products do different things for different skin types; whilst a cream-based foundation is good for older skin, the accompanying eye-shadow may prove to be too heavy for the same person, and so on. And so, consumers feel loyal to a brand’s specific product and how they see themselves wearing it in a mixture of System 2 thinking, which takes longer to process. Behavioural economics gurus tell us that we need to activate their emotional loyalty, the System 1 thinking, if we are to activate loyalty across the brand. When we do, it is the opening between the feeling of loyalty to just one product and the brand’s wider portfolio.
Cross-selling products to entice customers to buy across the range, rather than just one product, will need more thought on the consumer’s behalf, as well as enticement and offers. When we establish redemption as the driving force of loyalty, it becomes the glue that makes a consumer relationship sticky. Redemption is the place where thoughtful cross-selling comes to the fore in the retail loyalty marketplace. Rather than lose incremental revenue from reductions on the products customers already buy, we need to analytically identify the most appropriate next-best product to offer as a redemption test. If we are asking a member to spend time doing something, we need to consider their decision-making process and make sure it is a good match. It must be close enough to the product that the customer is devoted to so that they will value the redemption, but also be sufficiently different to allow us to expand the customer’s engagement with a brand. This is an arena where a good data scientist and predictive modelling can work wonders for loyalty planners. Loyalty rewards can then be firmly established by our customers and their behaviour. Let your customers drive your loyalty rewards and they, in turn, will reward you.
Written by Louise King