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The Beauty of Data-driven Loyalty

By: Naomi Kasolowsky
Posted: March 24, 2014, from the April 2014 issue of GCI Magazine.

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  • Consumers have opportunities to discover new beauty brands and products at every turn, so you have to create real reasons for them to stay loyal to your brand.
  • With the amount of data brands and companies are now able to capture about their consumers, it is imperative loyalty initiatives and programs are personalized for consumers.
  • Consumers hold four currencies they can dedicate to a brand: Spend, Talk, Engage and Prefer. Referred to as STEP, each action demonstrates the multiple dimensions of loyalty at a very personal level. Understanding and utilizing these currencies are true ways beauty brands can get ahead.

In a beauty market that grows more competitive by the day, the decline of consumer loyalty is unwelcome news. Ernst & Young reports brand loyalty is plummeting, and only 25% of consumers say brand loyalty affects their buying behavior. Discovering alternative products from friends or bloggers, as well as enticing offers from an ever-growing list of new brands, is easier than ever. Social sharing and growing use of mobile technologies make loyalty a moving target.

But while consumer behavior might be changing, consumer needs have not. They still crave brands and retailers that make them feel smart and deliver consistency. This represents a huge opportunity for brands. By capitalizing on innovation in data-driven consumer centricity, beauty marketers can gain unprecedented loyalty from consumers—by demonstrating unprecedented loyalty to consumers.

The Myth of the Loyalty Ladder

Marketers often talk about taking consumers up the loyalty ladder from brand awareness to preference, loyalty and advocacy. If loyalty is just a series of steps building to stronger love, why have so few companies managed to hold on to their customers? Loyalty doesn’t work this way.

Many marketers often think they’ve done enough to capture consumers’ affections. That’s why customer retention rates in the 60–65% range are considered good in some categories. Let’s be clear: It’s unacceptable to lose four of every 10 customers because they don’t follow your rigid, pre-determined path to loyalty.

This Time, It’s Personal

Just as every consumer is unique, every path to purchase is a multifaceted and multidirectional journey, influenced by many factors. Today, these include a combination of traditional media, advertising, store visits, social media, direct marketing, websites, mobile apps, word of mouth and habit. Some journeys may be direct and the result of a particular shopping mission, or they may be more spontaneous and inspired by several influences.

Brands need to consider all the potential actions a consumer takes when engaging in the beauty category and with their brand, and understand what will have the greatest impact on loyalty.

Marketers play a vital role in these influences. By developing a deeper understanding of consumers’ wants and needs, every aspect of the consumer experience can become much more personalized. Personalization makes brands more human and relevant. Further, personalization helps win greater consumer attention. In today’s economy of distraction, attention is highly prized and hugely valuable in building loyalty.

The Loyalty Program Crutch

Loyalty goes beyond a program. It’s an approach to doing business that places value in understanding what consumers value, delivering this consistently and prioritizing loyal customers—the engine of growth for brands.

Data analysis shows a loyal consumer can be worth between 12 and 20 times the value of a non-loyal consumer. Taking care of your best consumers sounds simple, but most companies try to grow business through acquisition. Without a commitment to learning about the consumer, it’s impossible to know what resonates best with loyal customers and encourage them to keep coming back. In categories like beauty, where there is a greater capacity to connect with consumers, loyal customers can often be the best people to tell you straight what works and how to give them more of what they want.

However, research often misses the drivers behind loyalty, because people aren’t always aware of why they do what they do. Shopping data can illuminate what consumers value. This includes what drove the decision, giving clues to the rewards where they might find value. Combining data sources from influences throughout the customer journey can provide a full picture understanding of what matters to them. When you consider how much they reveal about themselves in browsing and purchasing behaviors, it’s offensive not to use that information to improve their experience.

The Devil is In the Details

There is often a wide gap between what a beauty brand promises to deliver and what consumers experience. The pump dispenser that breaks after a month, the bronzer-smeared sampling station littered with dirty tissues, the snooty sales associate—these all leave negative impressions. An accumulation of failures large and small, usually totally unnoticed by the brand, destroys loyalty.

Measuring Loyalty by STEPs

Purchases are only one output of loyalty. Looking solely at purchases gives a narrow view of the contribution consumers can make to a business. It’s not exploratory or descriptive of the underlying motivation. It also fails to explain why a consumer is loyal to a brand.