Identifying The Customer Loyalty Gap
I know, most of you are probably thinking, what is a “customer loyalty gap?” If you’re asking yourself that question, you (and your brand) have probably fallen into it.
For purposes of this discussion, ‘the gap’ can be defined as the difference between what the consumer is “saying” they want versus what they will really “buy” (in-market purchase behavior). If you’re a marketing executive who still believes that today’s dynamic consumer is capable of accurately articulating their needs through in-depth interviews or focus groups, I apologize in advance for the rude awakening.
Just ask the nice folks at Krispy Kreme. In first quarter of 2003, Krispy Kreme was at its apex; they were growing faster than lead rival Starbucks; their stock price was 26% up; and every Wall St. analyst had them marked as a ‘strong buy.’ So what went wrong? And it was not the “low carb craze.” If that was truly the reason, then competing brands like Dunkin’ Donuts and Starbucks would’ve been negatively impacted. Nope, the traditional market research documented that Krispy Kreme’s customers were very loyal and “extremely likely to return.” But alas, we all now know, they didn’t. What the Kripsy Kreme research missed were the underlying, unarticulatable values that truly drive actual purchase behavior in the coffee & donut category (things like “convenience”). This, my friends, is a painful example of The Customer Loyalty Gap. It is the ‘decent down Mount Everest’ of the marketing world; the point at which the majority of brands either stagger around in search of oxygen, or simply fall to their death.
So how can we attempt to identify the customer loyalty gap and reposition our brands to avoid it? By taking a hard look at your methods and approach to market research. Think about it – if it is increasingly difficult to differentiate and grow market share despite your products being better and your staff smarter – what’s the only variable left? The consumer. They are now more dynamic than ever with increasing needs and expectations, thus, much tougher to understand. Documented in more research trade journals than I have room to cite is the fact that today’s consumers are making purchase decisions with the 70/30 rule. That is, 70% of their purchase decision is emotionally and value-driven (cognitive behavior), while the other 30% of the decision is rationally based. With the consumer functioning at such a multi-dimensional level, why are we still trying to “understand” them by asking one-dimensional questions? The typical consumer insight research culminates in such one-dimensional questions as, “How likely are you to recommend..?” or “How likely are you to purchase…?” If the answers consumers gave you to these very traditional questions were enough, you’d be able to consistently differentiate your brand and grow market share with the same ease as years past.
To effectively identify if your brand will bridge the customer loyalty gap, start by understanding your consumer both emotionally and rationally; identify what will truly drive their future purchase behavior in category – NOT relying on what they “say” will do it. Plenty of “loyalty metrics” solutions exist out there for you to explore; but “buyer beware.” Focus on a customer loyalty research metrics model that incorporates both the emotional and rational sides of your consumer, while producing “predictive” leading-indicator measures of their “behavior.” This ‘predictive of future behavior’ component will be the key to truly understanding which consumer needs and expectations will result in your brand grabbing ‘next purchase’ versus your competitor. From the major CPG companies to fallen stars like Krispy Kreme, one fact remains abundantly clear: just because a customer buys your product today, no longer guarantees they will buy it again tomorrow. Welcome to The Customer Loyalty Gap.
by Pam Batalis
Partner and Vice President – Brand Keys, Inc.
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