Many companies has loyalty programs. Think about any company that you have signed up to. Chances are you have some sort of Air Miles card or petrol station card (thinking Esso Extra or Petro-Points or some such), if you fly you likely have an Aeroplan card or an equivalent. You might be receiving e-mails from travel agencies, clothing stores, jewelery retailers and any number of other types of stores, offering you this percent off or coupons for savings. Some of these work, some don't. The airline industry is an especially difficult market in which you can create a successful loyalty program.
For example: you want to fly from New York to London, UK. You might have an Aeroplan card, that would provide you with reward miles for flying Air Canada or an Star Alliance member. However, unless you are a frequent enough flier to accumulate the kind of points that translate into meaningful rewards (such as business travellers), most consumers will choose the flight that has the cheapest fare regardless of carrier. Why? Because they'll both get you to where you need to go and outside of timing and terminal, offer comparable services. It comes down to how low can you go, and chances are we'll take the cheapest fare every time.
The airline industry is hardly alone on this. In Canada at least, the wireless market operates in the same sort of fashion. I have just switched carriers from one major player to another, and in a large part it was about what can you do for me. The bills for my old contract were outrageous for the services I was being provided, only brought to my attention when my sister changed her plan. It was a four-year old plan, well past the maturity of my contract. No data, nothing fancy and yet my bills were high. Naturally, my carrier was contacted and asked what they would do to make me a happy camper. I wanted a new phone, a data plan and whole list of other services that were being sold from other carriers for less than my current bills. My carrier's plan were complex, add-on heavy and difficult to understand. Any movement required a significant amount of discussion and negotiation. At the end of the day, we were hung up on price: my carrier couldn't give me the phone I wanted for the price of the other guy. So I switched.
So what can a marketer learn from this:
- Consumers are smart - Consumers know what they want, the features they want and how much they want to pay for it. Just look at this article to know what I mean (thanks Shaminda and Alan Quarry for this article). Try not to muddy the waters with complexity, but be clear. Selling techniques have changed: it is no longer build them and they will be sold, but find out what's needed and make it available. Everyone has the same phones now, so you need to understand that the consumer knows the phones they like but is looking for the best service.
- Price is very important, but not everything - Price leadership is important, no question. But not at the cost of all the other elements of strategy. My example of the airlines was based on comparable service, and where all elements are the same except price, brand loyalty is almost impossible. If you are trying to build loyalty, sacrificing all your other strategic elements in the name of price leadership means you're missing the boat. Price leadership will make short-term sales, but for loyalty it needs to be used along with great customer service and maintaining the best products. Know what you want to compete on and make your strategic choices: sacrifice is the first step in strategy. Price is not a strategy on it's own, for sales or loyalty.
- Brand loyalty is built on service, not price - Just because I switched, doesn't mean I am not loyal or disloyal to any one character. If you want me to become loyal, that relationship needs to be built on trust and service, not on price. If I am not given a reason to stay outside of price, I will only go where the best savings will be found.