Myth busting series: no.2: Target your loyal customers

On a regular basis, we’re going to take on some of the common marketing myths being peddled by the industry.

Why? Because all too often commercial solutions are being recommended to clients based on bias, conjecture and hear-say. We believe all solutions should be based on hard evidence and fact.

 

Target your loyal customers.

The exciting world of digital has made loyalty marketing an attractive option for clients – it’s a cost-effective way of targeting the ‘right’ people. In fact, there are millions of articles online about the effectiveness of loyalty marketing, particularly on the role social media plays in creating communities and building personal relationships with customers.

With this in mind, it prompts us to ask whether there’s any relevance in mass advertising anymore? Is it now better to target narrowly rather than reach wide? Is it better to be aiming for loyalty rather than increasing penetration?

Unfortunately, this isn’t the case.

As Les Binet and Peter Field show us once again, broad reach campaigns (those targeting all customers, existing and new) are still better at driving business growth than campaigns targeting solely existing customers.

IPA

Why? There are 3 primary reasons identified by the IPA:

  1. Marketing effectiveness is, to a large extent, a numbers game – the more people exposed to a particular activity, the bigger the effects. For most brands, existing customers only represent a very small proportion of the market, so the effects of loyalty marketing are therefore limited.
  2. Marketing has less impact on existing buyers than new buyers. Perceptions of new buyers tend to be influenced by advertising, whereas the perception of existing buyers tend to be shaped by their experiences with the brand or product. There is, therefore, only so much impact marketing can have on existing customers.
  3. It is much harder to get existing customers to increase their consumption/ time with a product or pay more for a brand than it is to get them to try another brand. Frequency of purchase does not tend to fluctuate between brands – this is defined more by general category behaviour.

For these reasons, loyalty campaigns tend to struggle to produce meaningful results. In fact, loyalty campaigns that do produce some results actually seem to have more of an impact on penetration rather than loyalty.

Byron Sharp’s book, How Brands Grow, is incredibly insightful on the subject. He demonstrates that the primary driver of market share is penetration. The main way brands grow

is by selling to more people – so the best marketing communications aim to drive growth by increasing penetration, understanding that the biggest gains come from acquiring new customers.  Brand loyalty is less important and is, to a large extent, a by-product of penetration.

Sharp argues that, in most cases, a brand’s target market is in fact all buyers of the category and, in fact, markets are much less segmented than we tend to believe.

So the best brands will talk to all buyers of the category, customers and non-customers, as often as they can. The main job of marketing is to make sure the brand in question is as front of mind as possible, so that all customers think of it over competitors.

Sources: IPA Media in Focus 2017Byron Sharp, How Brands Grow 2010