Loyalty, Do not resuscitate?

Michelle Holland
By Michelle Holland | 13 November 2020
Michelle Holland

Michelle Holland, managing director, Ogilvy Sydney

Loyalty is a funny word. Its actual definition talks to faithfulness and commitment – which isn’t often how consumers think of their relationship with businesses, particularly when economic hardship comes into play. Nor does it really reflect what can happen during highly unusual circumstances like the recent COVID-19 lockdowns. That’s because in brand speak, loyalty is an outcome, not a feeling. It’s what happens when a customer becomes less indiscriminate with where they choose to spend their time and money in a given category. Instead, for whatever reason, they start awarding these things to a specific brand or product.

Beyond this broad definition, the meaning of loyalty starts getting slippery. Am I loyal to my favourite QSR because I eat there at least once a week, overlooking the odd mincorrect order and keep going back? Or am I loyal to my supermarket chain because I get reward points each time I shop, rather than just because they are the closest to me? Or am I loyal to Apple because I could catch the flu queuing for the new iPhone?

Well, all of the above. But talking in the vague terms of ‘loyalty’ may only prove appropriate during less shaky times, because each example only sheds light on one part of the bigger picture. Instead, to help protect brands and businesses against the
effects of an economic downturn, it may prove more relevant to think of loyalty as a bond – a reciprocal relationship in which both the brand and its customer gets something they need.​ A customer who feels sufficiently ‘bonded’ to a brand will be
more likely to stick with it through the hard times.

We have been talking for some time at Ogilvy about four types of bond that really matter: Financial, Structural, Emotional and Social (a concept that was first suggested by Leonard L Berry in 1995.) And it appears that now, more than ever, these bonds may prove useful in helping brands work through the changing consumer habits and current economic downturn in Australia.

Research shows that companies successful in creating both multiple bond types have higher retention ratios (84% to 30%) and Cross-Sell Ratios (82% to 16%), compared to those that did not (Research conducted by Ogilvy for its annual BrandZ loyalty survey). This is no small difference and one, that for some, could mean negating the effects of an economic downturn.

So how might businesses bond with consumers particularly through these challenging times?

Develop a Financial Bond which gives the customer a financial or value-based benefit for continuing loyalty to the brand (i.e. low cost, discounts). Virgin Active did this well in response to COVID-19. When gyms were closed by the government, they immediately put all payments on hold and automatically froze all memberships with no fees to pay until their clubs re-open. They even credited members with the pro-rata membership of dues already paid for the period from 23 to 25 March 2020.

While I may have felt the negative impact of the pandemic on my thighs, I appreciate the positive impact on my bank balance.

Ensure a Structural Bond which makes it easier for the customer to keep buying the brand or harder for them to switch brand.

Apple do this very well, imagine switching your music, apps, photos and re-establishing new settings. Apple will now
build their joint COVID-19 notification system into future versions of their respective iOS and Android operating systems, no longer requiring users to download separate apps to participate in contact tracing efforts. Even further bonding you to the brand.

Another may be an online retailer putting a flexible return policy in place as consumers are conscious of money during tough economic times.

The manner in which the brand is able to affect an individual’s fears, aspirations, and inner dialogue can build an Emotional Bond. Ideally a brand builds an emotional affinity between themselves and the customer by demonstrating shared values. How
do you take care of your customers? How do you make certain that the value you are delivering to your customer becomes even higher? How do you solve problems that your customers have? An emotional bond might be roadside assist when you
desperately need it from AAMI.

Create value between a brand and the customer’s social networks through a Social Bond, something which increases a customer’s status in their network or gives them a place in a new community. Social bonding is a powerful contributor to loyalty and can be leveraged or activated (push or pull). Think about this as something that activates a user’s pride or creates bragging rights over friends. Like when you discover the KFC secret menu on the app before your mates do.

In less shaky times, talking in the vague words of ‘loyalty’ was fine. But now, to shield our businesses against the shockwaves of a recession, it might be time to move onto a more useful vernacular – say hello to "bond building".