Volume 152: Loyalty. Or What Passes For It.
1. Loyalty. Or What Passes For It.
tl;dr: A quick review of a fleeting concept, which most get wrong.
Brand loyalty is one of those concepts that, at first glance, seems entirely logical, especially if you’ve drunk the branding Kool-Aid and are busy pouring it out for others. Yet the further down the rabbit hole you dive, the more you realize just how wrongheaded so many “data-driven” executives are on the concept.
Let’s start with my own summary of the empirical data:
True loyalty is rare. And it’s almost never strong enough to base growth predictions on.
Famously captured by Byron Sharp in his book “How Brands Grow,” where he says:
“Your loyal customers are just someone else’s customers who buy from you occasionally.”
This very much tracks with my own educational background, where we were taught that repeat purchase behavior and loyalty are rarely the same thing, and by my own experience where I can’t tell you how often I’ve said to a client that “loyalty is something to be earned, daily.”
In other words, the combination of brand affiliation, product performance, communications effectiveness, and overall experience necessary to create meaningful loyalty from a customer is both hard to develop and even harder to keep.
So, why, you might be forgiven for asking, if loyalty is rare and hard to develop, do corporations spend so much time and energy obsessing over it?
Well, at least some of this is emotional. We want to think people will be loyal to our brand and to our products because we spend all day thinking about, talking about, and working with said brands and products. In other words, we really, really want customer loyalty because their loyalty says we must be doing something right. I mean, they tried us, and then they came back for more! Win!
A second reason, and vastly more pernicious, is that we’ve mastered the art of projected loyalty. What I mean by this is that we love nothing more than to use loyalty as a core part of future sales projections. And it’s seductive because we’ve persuaded ourselves that it’s cheaper to re-attract a customer to buy more from us than it is to bring a new or occasional customer into the fold. Even though the evidence to support that supposition is relatively thin.
This concept of projected loyalty is made almost laughable when you consider startups confidently projecting their “Customer Lifetime Value (LTV)” based on a single purchase, maybe two.
Even though common sense says this is entirely daft, it’s easy to see why it happens. When a startup looks at the cost of acquisition (CAC), it’s a hard number that says what it costs to attract a new customer. Chances are, whatever this CAC number is, it more than wipes out the unit profitability of any sale. But, since you’ll be about as popular as a fart in an elevator if you go around telling investors that it’ll permanently cost more to sell your products than you’ll ever make back in profits, there has to be some kind of mitigating number just laying around here somewhere….and, oh, here it is: LTV, AKA Customer Lifetime Value.
Yup, you guessed it. You project the lifetime expected value of the loyalty of a customer, and then you marry it to a projection that this loyalty will lower your CAC costs over time as more people become more loyal. And, just like magic, there’s now a point in the future where profits outweigh your costs. And, for some startups that scale successfully, this will be true. But since somewhere in the region of 90+% fail, it won’t be very many. (OK, so that was a bit of an overgeneralization, but you get the gist.)
Of course, this kind of magical thinking on loyalty is not at all limited to startups. Adidas had a famous mea culpa when it came to its foray into DTC online retail. Turns out the entire approach was predicated on assumptions of loyalty that turned out to be incorrect. As a result, instead of finding itself in a land of milk, honey, and profits, it found itself reliant upon discounting to attract customers back to the brand while ignoring the 60+% of sales that came from first-time Adidas buyers completely.
Equally, consider an average customer loyalty program. While these could, and likely should, be more imaginative in adding value to the lives of the people buying from the brand, it’s far more likely that the loyalty program will be little more than a volume-based discount or bribe.
This is something that’s always struck me as a bit bizarre. Why give discounts and bribes to the people who’ve shown they’re most likely to buy from you already anyway? I can’t speak for everyone, but I can confidently state that if I’m inclined to buy from a brand anyway, I’d much rather have things like excellent service, exclusivity, and after-sales care than a discount. I mean, don’t get me wrong. I’ll take the discount, and depending on the price point, it may be the key driver. It’s just not as generally valuable to me as other elements of the mix.
However, it’s in the B2B landscape where the whole arena of loyalty gets completely out of whack. I don’t think it’s exactly controversial to suggest that in many, perhaps most, B2B organizations, marketing is serially underfunded. As a result, B2B marketers are continuously having to make trade-offs. Do we spend money on top-of-funnel activities to ensure we have the awareness to build out our pipeline over time? Or do we spend money on lead generation and sales activation to support our sales teams with qualified leads immediately? We know we should be doing both, but we can only afford to do one.
With that as a background, the idea of loyalty becomes unduly attractive as a crutch. Especially if you’re in a situation where “we already serve 482 of the Fortune 500.” However, both the empirical data and my own experience suggest this assumption is dangerous.
The idea that you can cross-sell your way to growth from within your existing customer base is seductive but rarely plays out in reality. When I meet clients who hold this assumption, they almost always find themselves with the following symptoms:
They feel that a competitor is sucking all the oxygen out of the room, even though the competitor's product is inferior.
They feel that they’re not getting enough top-of-funnel interest, but they convert more than their fair share of the opportunities they do get.
They believe that their existing relationships should be driving a loyalty dividend; they just need to find the right message to activate it.
Truth is, this isn’t a messaging problem. It’s a strategic assumption problem. Instead of taking the view that existing relationships will make cross-selling somewhat easier if appropriately supported by a whole-funnel approach to marketing, the assumption is that customer loyalty will make cross-selling performance vastly easier without requiring us to focus on the top of the funnel at all.
Unfortunately, this fails to take a few things into account. First, just because someone is an existing customer doesn’t make them loyal. In fact, they might not enjoy doing business with you at all. Second, only a very small percentage of potential buyers are actively in the market for a new product at any given moment, and that includes your existing customers. And, finally, it’s dangerous to assume that a customer looking for a new product or solution isn’t going to do their due diligence first and will simply hand you their business because of “loyalty.”
2. Identifying a Category’s Negative Visual Space.
tl;dr: Doing a visual audit isn’t enough; you need to know why you’re doing it.
I’ve talked before about how not considering the existing visual landscape when designing an identity system is problematic. The major issue is that if you don’t consciously identify the things you need to avoid, then the forces of entropy will inevitably drive you to replicate them instead.
Unfortunately, because it’s much easier to fit in than to stand out, it takes more effort and conscious thought to do the standing out thing.
And it’s not just smaller branding shops where this issue rears its head. The Slack logo was designed by Michael Beirut of Pentagram fame, and it uses the same colors and basic quartered form that both Microsoft and Google already use. This is why there’s a very good chance you’ve mistaken the Slack icon on your phone for one of the myriad Google icons that all look the damn same.
This all came to a head for me this week with a LinkedIn post from James Greenfield, founder of Koto, pointing out the obvious problem of looking exactly like a much bigger competitor.
So, of course, I felt the need for a short-term dopamine hit and commented:
Preach. I would like to think every design agency will read this post and absorb it. But I fear that is unlikely. The willful ignorance of the visual landscape within which a brand will compete has become so prevalent that we must now view it as a feature rather than a bug when it comes to the practice of brand design. It's a crying shame, because it's so easy to do, and the effects of not doing it are potentially so value-destructive.
But, as is usually the case, once the dopamine rush of having-my-say-goddamnit wore off, it left me feeling a little hollow. For beating people up for doing something wrong is pointless unless you do something to help them get it right. So here goes. Here’s how I’d think about this task.
First. Lots of designers will say, “Of course, we do a visual audit.” To which my response is simple. Why? Because if you don’t know why, you’ll never know what to do with the audit, and it’s the doing something part that matters.
So, why are you doing it, and what are you looking for? All too often, junior designers are told to “do a visual audit” without further context, which inevitably leads to the work they do being contextless in turn. Which is why you typically end up with little more than hundreds of pages of neatly gridded pictures of competitor websites, signs, and ads.
In other words, it’s a complete waste of time that nobody pays any attention to and just gets buried on a cloud drive somewhere.
Instead, here’s an alternative brief: “We need to understand the negative visual space in the category. To do that, we need you to look at how competitors present themselves and identify common colors, common type usage, image styles, etc. What we really want to know are the common tropes and patterns so that if we were to take them away, we can see the space that’s left behind. Because that negative space is the space where we get to create something distinctive that will stand out.”
Then, after conducting the audit, you want to identify very simple principles. For example:
“The category is overwhelmingly blue and red, so we should avoid using blue and red unless we use a particularly bold or unexpected shade.”
Because people like mental shortcuts, when presenting the audit findings to your client, it’s often useful to name what you see. For example, you might analyze the landscape and say something like, “There are two dominant visual styles in this category. One, we’re labeling “DTCforZ” which leans heavily on pastel colors, serif type, graphically minimal layouts, and reportage-style imagery of younger consumers,” the other we call “Corporate-camouflage” which uses a sea of blue, is Helvetica dominant, relies on more decorative graphical elements, feels very small-c conservative, and utilizes a lot of stock photography.”
Then, go on to describe the negative space that’s left behind when we take “DTC-Z” and “Corporate Camouflage” away, and describe it overtly as the space in which you intend to play.
Then, make sure this becomes a core part of the brief and the principles against which you ask your client to judge the work when they’re making a selection. Using the audit ahead of time, before they see any design work, to prime them to expect something different from the category norms.
And that’s really all there is to it. It’s not a difficult task, and most already do a version of it. It’s just possible that you’re doing it without context, without coming to a conclusion, and without clearly articulating what you intend to do with what you find out.