LagrangePoint - Brad Howarth: How online brands keep consumers on-side

It has always been cheaper to keep existing customers than to find new ones, even online. So it’s not surprising that there has been an increase in interest in loyalty programs by online companies conscious their competitors are only a click away. Offline brands have geography on their side, making it harder physically for customers to switch loyalties. For banks or utilities say, the effort required to change brands is sufficient to retain many customers, regardless of how disgruntled they may be.
Customer retention is an issue that weighs on marketers such as Joe Talcott, group marketing director for News Limited. With the barriers for consumers to exit from online services being so low, Talcott says not even Google is immune.

“What keeps people there is a great product, and over time the way that they operate and their philosophy of interacting with consumers builds some brand affection, and that probably lends itself to brand loyalty,” Talcott says.

“If somebody came out with a new search engine that somehow was far superior to Google’s and they couldn’t match it quickly, I’m not sure how far brand affection would keep people there. And that’s what’s changed the game in brand loyalty online – you just have far fewer levers to pull to try and keep people loyal to you. Online, the cost of switching is so low, that unless you are doing business in an area where you are truly providing a unique product that can’t be achieved somewhere else, you just don’t have that frequent use without some brand affection and a good product.”

Talcott says that while his company can drive awareness from its offline products, that advantage disappears as soon as that customer goes online. “After that we have to fight for frequent use,” he says. “I’m even reluctant to call it brand loyalty, because if we don’t perform every day people go somewhere else.”

According to David Whittle, managing director of M&C Saatchi’s digital, direct and data agency Mark, loyalty is driven by rewards and recognition. But rewards, such as frequent flyer points, come at a cost, and are not always effective if they are not worth the experience of achieving them. Recognition, on the other hand, indicates a level of awareness by the company of the consumer, resulting in an improved status for the consumer such as extra baggage limits on an airline or access to an executive lounge.

“They’re not things that money can’t buy, but they are things that are more than just a cash equivalent,” Whittle says. He points to the example of the online Biz Think Tank, which Mark has been working on with Optus. It delivers information and education to small business owners. “We are using that as a loyalty tool because we are not just giving them a couple of points for every dollar they spend, but giving them information that is going to help them do business better,” he says.

Whittle says the other important element to building loyalty is data – knowing about the consumer’s behaviour rather than just their stated preferences – and making inferences from this.

He describes Amazon.com as a company that effectively gathers preference data and then makes inferences of products the consumer might like.

“They’re delivering consumers targeted and relevant and anticipated and personalised content, and that’s just brilliant,” Whittle says.

According to Clemenger Proximity’s general manager Michelle Holland, it is theoretically easier and cheaper to get to know the customer online, but few companies do. “You know what they (consumers) are doing on a site, and can deliver up content that serves their purposes better,” Holland says. “That starts to build a level of loyalty around things, because people feel like you know them. It’s not always about points and price if you are giving them something extra.”

In the case of Mitsubishi, Clemenger Proximity has taken its offline owners club for the Pajero 4WD and moved it online at a site called 4wd4life.com.au, where enthusiasts can upload their latest pictures and adventure tales.

“That is actually helping to add value to our offline program, and for that target audience we are getting high volumes,” Holland says. “And that is a good example of where we have tried to create online loyalty. It works in this space because a lot of our target market aren’t really Facebook people.”

One of the most common measures of loyalty is straight sales conversions. The founder of the online art sales site and community RedBubble, Martin Hosking, says a site such as Amazon will want to convert 7-8% of visitors to cover advertising costs.

However, he says RedBubble is happier with a lower conversion rate because its primary marketing mechanism is word-of-mouth, based on the community it has created. While many members come initially to sell their art, they come back for the community elements of the site. He calls this social commerce, and it requires multiple means of measuring loyalty. “You need to bring new members into the site in the way that an e-commerce site would do, otherwise the community becomes t0o incestuous,” Hosking says. “At the same time, you need to have a core group of users who are generating the most social aspects of the site, and be measuring what they are doing as well.”

According to Andrew Beecher, the head of the online marketing company Webfirm (a division of Ansearch), this is especially important now.

“The thing that is most significant at the moment when it comes to customer loyalty and customer retention in a tightening economy, is that what online gives you is the ability to not only measure, but to react in real time,” Beecher says. “In a tightening market bread-and-butter stuff works.”

And although transactions with consumers are being handled online, it is important not to forget customer service. Beecher cautions that online loyalty does not mean ignoring human contact. “If you look at all the successful online businesses, they have all got call centres,” he says.

For Carlsales.com.au, that offline support includes a network of 2500 car dealers, who are all trained on how to best respond to enquiries.

Customer service is one of the key elements that Carsales.com.au chief operating officer Shane Pettiona believes keeps consumers coming back. Others are audience and inventory, which the company supplies through a network of 25 websites that draw 2.6 million unique browsers each month, who can look at 180,000 vehicles. A final factor that is critically important online is trust.

“Security measures have to be in place to ensure the inventory is clean and that when someone is interacting with your site they feel that the info is protected,” Pettiona says. “Once they do interact, such as putting in an enquiry, we need to ensure that our network underneath can give them the highest level of service to ensure they have the right user experience, which then builds the loyalty.”
21 November 2008

Comments

I read your post on internet marketing and found it interesting to add it in my college notes. I am an IT student and I need to go around on the web to search for new IT info.

Posted by: Jeff Paul Internet Millions | March 12, 2009 at 06:57 PM

I was just looking around for material on internet marketing and stumbled on your post. Nice post. I’m still looking for materials for my research.

Posted by: Jeff Paul Internet Business | March 13, 2009 at 03:59 PM

I have seen Joe Talcott speak many times. He is a good teacher and quite motivating. His 'fighting for frequent use online' comment I really 'get'. Loyalty tools have been integral in online marketing for years. First time I saw this piece. Enlightening learning from all, such as Mitsubishi, RedBubble, Mark, Proximity.

Posted by: Chris Simon | March 16, 2009 at 07:40 AM