Why Branding and Loyalty Program Fails

Dear Valued Customers

Branding endow products and services with the power of a brand.  Companies around the world spend enormous amount of money, time and energy in branding their products or services, simply because this strategy pays in the medium or long term.  A successful brand name, word, sign, design or symbol involves art, science, lots of money and luck to be able to act as the differentiating device.  At its core rests an appreciation from the consumer of the product’s values and character and an associated element of trust.

However, there are still some frequent causes of brand failure where companies often do not understand the full meaning of the brand.  They fail to live up to the brand promise with inadequate support and control while being impatient for profit hike in the immediate future.  Also it concerns the pitfalls to avoid when choosing a loyalty strategy.  There is need to properly balance consistency and change with the brand and understand the complexity of brand equity measurement and management.  For instance, the typical grocery store loyalty program does not reward loyal behavior, it rewards card ownership.  The devil has always been in the details.

Nowadays companies’ biggest challenge includes clarifying business goals, engineering the reward structure and creating incentives powerful enough to change buying behavior but not so generous that they erode profit margins.  Additionally, companies have to sort out the amazing puzzles of consumer psychology, which can, for example, result in two rewards of equal economic value but inspiring very different levels of purchasing.

Companies striving to generate customer loyalty should avoid the following five common mistakes namely:

• Do not create a new commodity which can result in price wars, another tit-for-tat competitive move;

• Do not cater to the disloyal by making rewards easy for just anyone to reap;

• Do not reward purchase volume over profitability;

• Do not give away the store – there is no reason to cut into profit margins if a customer can be made happy with a costless reward; and

• Do not promise what cannot be delivered especially when customers can easily compare the two level of service.  Normally customers do not compare averages but they compare extremes with extremes.

Therefore, the best kind of competitive advantage is those loyalty programs which make customers happier.

JTU