WHO LET THE DOGS OUT?
Why Loyalty Marketing Fails
 In
a study of the American archetype, a noted French anthropologist
reported the consensus icon for loyalty: the dog. Ever-faithful,
unqualified love, never asks questions. I find this to be apropos,
since just about every loyalty marketing scheme I’ve seen is truly a
dog.
Bark once if the following statements are true for you:
1. Your loyalty program has raised your marketing costs, with arguable returns.
2. Your loyalty program rewards ordinary behavior from your best customers.
3. Your loyalty program isn’t a strategic differentiator. Your competitors can copy it easily.
4. You believe loyalty is about being emotionally connected to
someone/something. It is the antithesis of incentives and rewards.
These statements are true for almost all marketing execs. So why is
there so much effort put into points-based programs and other unnatural
acts?
Loyalty Explained By Neuroscience
Here’s a textbook definition of loyalty: a feeling of devotion, duty,
or attachment to somebody or something. Joseph de Rivera, a social
psychologist and theorist on the structure of emotions, describes
loyalty as an active movement towards another person/thing that it
holds in high esteem, similar to a feeling of belonging.
 At
Gang & Gang, we turn to recent advances in neuroscience to
understand where these feelings or emotions come from, and how they
manifest into behavior. We’ve drawn on new insights into the origin and
causes of loyal behavior, and used them to explain long-standing
riddles about consumer marketing.
One of our most powerful insights from neuroscience is that loyalty -
like all emotions - operates at a subconscious level and is quite
segregated from rational thinking. Emotions are not in constant
conflict with logic, contrary to popular belief; in fact, they
continuously integrate with logic (in the pre-frontal cortex
of the brain) to guide us towards thoughtful decisions. Emotions have a
wide range of intensity (i.e. passion) that results in motivation when
highly positive and inhibition when highly negative. One can find
strong parallels between the terms motivation and customer value - both
refer to the realized personal benefits of a product or service
offering.
This Dog Won’t Hunt
 In the
context of customer loyalty, the marketer is striving for passionate,
positive feelings from customers that will result in repeat business
and perhaps even advocacy. But while the objective of loyalty marketing
is sound, it’s the tactics that are all wrong - at least in
neurological terms. When a retailer tries to create loyalty through
monetary incentives, they are stimulating the cortical functions in the
brain (the part that governs logic) with a message built on a
price/value equation. A particularly strong incentive (e.g. Frequent
Flyer programs) can create trained behavior - but not loyal behavior in
terms of duty, devotion, or a feeling of belonging. Trained behavior
can become untrained as quickly as the core transaction value equation
is upset, such as a price increase or a strong competitive offer.
Loyalty withstands the pressure of price, and in fact can command
premium pricing in most circumstances.
Almost every supermarket chain has offered a loyalty card program for
over ten years now. By their own admission, loyalty marketing efforts
have made negligible contribution to business growth. Supermarkets are
no closer to gaining 100% of their customers’ requirements, and in fact
have lost share to club stores and supercenters. The problem is, they
have trained customers to equate low prices with their value
proposition. Card usage is high (a minor success), but the needle on
the loyalty meter hasn’t moved. Since the supermarket across the street
has the same program, it’s simply become a defensive posture and a
higher cost of doing business. Literally, it’s a dog-eat-dog world.
Getting Out of the Doghouse
 To
win the loyalty game, you need sharper tools and - more important -
better data. Demographic, psychographic and transaction data aren’t
enough to tell you about your customer’s entire experience. Doing more
focus groups or phone surveys will only confirm what you already don’t
know.
We apply ResonanceTM
technology to customer acquisition and retention problems, and we get a
much different results. By capturing and measuring emotion data, we are
able to see into the exact causes of loyalty (or disloyalty) through
the eyes of the customer. When we identify motivations, we are able to
elude the High Say, Low Do trap and help our clients develop compelling messages and programs. We establish Motivational IntelligenceTM (MI) our name for the systematic application of emotion-based insights - through all departments that touch the customer.
An e-commerce client was plagued with significant attrition (35-40%)
from its subscription-based offering. After misdiagnosing the problem
using traditional methods, our client used Resonance to help them
really understand what made their customers loyal. They re-positioned
their brand message to build on their unique convenience benefits, and
immediately reduced defection by more than 50%. They re-trained
Customer Service to trade with a new currency: recognition and
appreciation. Their customers were gratified by a desired feeling of
community and belonging, and demonstrated their loyalty with
best-in-class order frequency (average customer placed 40 orders per
year). 27% of new customers were referred by current customers, which
cemented their loyalty.
All Dogs Go To Heaven
At Gang & Gang we specialize in solving customer loyalty problems.
We follow a four-step process: Understand, Segment, Execute, and Track
that uses Motivational Intelligence to achieve superior results. If
your loyalty program is dogging it, and you’re ready for radically
improved results, contact us. We’ll show you how to become Best of
Breed.
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This article was written by Tim Guen, Senior Vice President for Gang & Gang, Inc.
For more on how the Resonance technology instrument works, click Resonance
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