Brand loyalty management is important given the enormous investments and impact on the bottom line taking into account the fact that generating new brand users costs 6-10 more than keeping existing brand users. In contexts where brands need to be supported heavily by employees / people (service, B2B, ...), big negative impact of employee turnover on customer brand loyalty. Short-term oriented vision hampers development of customer brand loyalty (e.g. focus on sales figures of current quarter).

1. Brand loyalty management: an introduction Prof. dr. Kristof De Wulf Managing partner, InSites Consulting Associate marketing professor, Vlerick Leuven Gent Management School March 20, 2008

2. Content 1. How big is the challenge? 2. What have we learned? 3. Generating and keeping brand loyalty 4. Measuring brand loyalty

3. How big is the challenge? 5 4 1 In years, 50% of customers leave In years, 50% of employees leave In year, 50% of investors leave Source: The Loyalty Effect, Frederick Reichheld CUSTOMER BRAND LOYALTY INTERNAL BRAND LOYALTY INVESTOR BRAND LOYALTY

5. How big is the challenge? Source: Ogilvy Loyalty Index, 2000-2003 % loyal % price-driven % repertoire Globally Belgium Consumers don’t think of themselves as loyal ... “ Consumers mostly have habitual on-going or polygamous split-loyalties to a ‘repertoire’ of several brands.” – Ehrenberg & Scriven

6. What have we learned? Source: Samson A. (2006), “Understanding the Buzz That Matters: Negative vs Positive Word of Mouth,” International Journal of Market Research Brand loyalty is connected with revenues and profits

7. What have we learned? Spurious loyal True loyal Not loyal Latent loyal Loyal to the brand is MORE than satisfied with the brand ! Source: Adapted from Heskett et al. (Service Profit Chain) Non-competitive zone : regulated monopoly, few substitutes, dominant brand equity, high switching costs, powerful loyalty program, proprietary technology Highly competitive zone: many substitutes, fierce competition, low switching costs, commodization of low differentiation, consumer indifference Satisfaction low high Behaviour high low NMBS Airlines Hospitals PC’s Cars

8. What have we learned? Smaller brands are punished twice for being small, following the well-known “Double Jeopardy” pattern (Ehrenberg) Source: Ehrenberg Buying volume Buying frequency Weak Strong Weak Strong Small brands Large brands

9. What have we learned? Source: Henley Institute Why are customer disloyal? Indifference

10. What have we learned? Building brand loyalty is less and less in your hands ... EVERYONE IS A CRITIC NOW POWERFUL HUMAN TO HUMAN CONVERSATIONS MAKE BREAK

11. Generating and keeping brand loyalty Brand image Product experience Service experience Personal bonding

12. Measuring brand loyalty “ The good news is that all the different loyalty-related measures tend to vary together. Crucially, they therefore measure something , which conveniently may be labeled ‘loyalty’.” – Ehrenberg & Scriven

13. Measuring brand loyalty “ Retention is for wimps. We measure the percent of customers who have our name tattooed on one of their body parts.” (Harley Davidson Annual report)

15. Measuring brand loyalty Customer churn Customers retained after x years (as a % of first year customers) 77% 67% 43% 35% 29% 25% 17% 11% 0-1 2 3 4 5 6-7 10-11 20-40 53% 21% 8-9 12-14 15-19 67% 62% 57% 53% 46% 41% 37% 32% 28% All types of defection Controllable defection only 9% 27% Tenure (years)

18. Measuring brand loyalty Loyal / at risk profiling Source: Etter, B. (2005), “Loyalty Leverage: Measure and Increase Customer Retention,” Marketing Research

20. Measuring brand loyalty Financial measures Source: InterBrand

21. Measuring brand loyalty Financial measures Source: InterBrand