Emotional Brand Loyalty Measurement

The Challenge
With corporations spending billions trying to figure out how best to make their customers loyal, a real understanding of why customers stick with a brand or service has been, until now, elusive. So, it has not been surprising to learn that customer and brand loyalty ranked first among management concerns of CEO's in a former Conference Board survey. It has been demonstrated (Frederick F. Reichheld, 'The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value') that conversion of just 5% more of the customer franchise would lead to profit increases ranging between 25%-100%.

Further, since it has been known for quite some time that the cost of acquiring new customers can be as much as 6-8 times the cost of servicing existing ones, the reality is that companies attempting all sorts of new business efforts to lure new customers will almost always be lagging behind those organizations who have mastered the art of keeping established users happy. So, the question becomes: how can marketers determine which customers will be loyal to their brand and which ones won't?

The Power of Loyalty

• Loyal customers represent a brand’s or service’s greatest chances for acquiring revenue. They can be counted on as a solid base of continued and even expanded usage.
• These are the users who would be most likely to try new offerings, extensions and even an extra-categorical new product (Weight Watchers’ Frozen Meals; Tropicana and Dole Frozen Juice Bars; Sprint and T-Mobile Camera Cell phones)
• Strongest word-of-mouth is most likely to emanate from these users
• The more loyal and committed your customers are to your brand, the less vulnerable the brand is to competitive tactics and the more forgiving they are in the face of public relations disasters (e.g., Tylenol, MacDonald’s, Audi, Dunkin’ Donuts, Coke in the wake of ‘New Coke’, etc.)
• As loyalty increases, marketing investments become more efficient and payout becomes dynamic
• Most loyal customers provide ‘lifetime value’ to your business

Satisfaction alone doesn't explain why customers become and remain loyal:

• Customers who are satisfied today may develop a different array of needs and wants in the future
• Satisfaction tracking study results, when modeled, don’t predict future behavior as well as would be liked
• Satisfaction measures reflect past experience, and is not an effective predictor or profitability. Loyalty, on the other hand, tends to come closer than all other measures.

How Loyalty Becomes Self-Perpetuating
Once a company recognizes that its brand enjoys strong loyalty, it can start implementing dynamic growth.

Starbucks started issuing prepaid cards that customers can use instead of cash. In the first month of the program in selected markets, they sold 2.3 million cards worth $32 million. Since that time, they’ve sold an additional 11.3 million cards equating to another $160 million. The card has been acknowledged to be one of the most successful launches of its kind, now accounting for one of every 10 transactions at all stores, with one-third of all cardholders reloading.

In the process, Starbucks has transformed a basic convenience card into a ‘smart’ device that identifies its most loyal customers, which insures they’ll be coming back for more.

Emotional Attachment as it Relates to Loyalty
For over 40 years, the academic world has provided a foundation for measuring emotional attachment via Attachment Theory and the Bonding Process. A methodological protocol was established to attempt to understand emotionally attached (secure) and emotionally detached (insecure) relationships. Grounded in these academic findings, the concept of emotional Brand Loyalty, which spawned the WEALR8VA algorithm, has become the only patented research approach that captures the most influential emotional correlates that explain and predict a definitive quantitative measure of loyalty.

At its core, the WEALR8VA algorithm measures passion—the passion for a consumer to hold on to brands, products, services, promotions, events, sponsorships, media, television programs and series---even advertising messages and spokespersons. It was created by synthesis of a multiplicity of academic findings regarding life-long relationship attachments to core business issues.

The 8-Variable WACSSCI Emotional Attachment Loyalty-Retention Algorithm

Based on how your survey respondents respond to these 8 questions, they are classified into 5 segments, ranging in intensity about YOUR brand from ‘Extremely Passionate’ --> ’Coldly Impassionate’

• The larger your sample size, the greater the number of segments we can generate AND the more stable each segment is to read; smaller sample sizes usually generate at least 3 segments. Larger sample sizes allow us to identify 7 segments or more. For a major insurance company, we have identified 10 stable and replicable loyalty segments which cut across 28 countries world-wide.
• The key segment to identify, of course, is the one that is ‘Extremely Passionate’ about YOUR BRAND.
• Of course, it behooves you to identify your competitors’ ’Coldly Impassionate’ customers: they could become YOUR next new customers.

Loyalty-Based Segmentation Models
Using output from WEALR8VA? and your survey, by applying loyalty-based segmentation to your survey data, you are able to hone in on different underlying segments with different loyalty ‘drivers’. One segment’s loyalty can be based upon perceptions of value, while a second one’s loyalty may be based upon perceptions of uniqueness and being ‘pre-emptive’, as in being first-in. A third segment may have its loyalty based purely upon sensory response to the brand while a fourth segment could have its loyalty dependent upon price and value perceptions.

Finally, loyalty based segments can be profiled to determine all significant elements resulting in inter-differentiation in order to maximize targeting and their identification. At this point, the segments can then be managed in order determine how best to allocate resources. Resource allocation is a principal benefit of loyalty-based segmentation: it will determine whom to focus most and least on, as well has how much attention each segment deserves.

This is an excerpt from the full presentation posted below: