When Loyalty isn’t Loyalty
Brilliant post by Thomas Baekdal on loyalty showing how loyalty isn’t real loyalty.
95% of market does not need loyalty to win. Another important point about loyalty is that many brands don’t need loyalty at all to succeed. What they need instead is better options and better conveniences. Grocery stores are a great example of this.
Supermarket Loyalty Cards
In business terms, those cards kind of work because they entice people to keep buying all their groceries from just that store. But in reality, they don’t create any real loyalty. Instead, what they create is incentivizing lock-in.
It’s the same concept as before. We choose the store not based on real loyalty, but rather on whether that store is slightly more convenient.
Frequency vs Recency
(Source: Kevin Hillstrom, a retail analyst, recently published a graph from one of his clients illustrating profit by recency and frequency (our main loyalty metrics)
Many loyalty leaders focus on retaining and reactivating existing customers but not enough on acquiring new customers – hence don’t allocate enough resources to marketing / sales.
Loyalty vs Churn
Vital to measure churn for subscription based sites / customers.
Scale (volume) vs Momentum (loyalty)
. Momentum and scale are two words that both signify that something is growing over time. But scale is usually used when we are looking at the business as a whole across everyone, while momentum is strongly focused on when you are growing for each individual person
So, how do you determine whether loyalty is important for your business or not? Well, it’s simple. It’s based on just a single concept: Momentum.