Loyalty is dead! True or false? Part II

In nature, ecosystems are dynamic, and people in an ecosystem does not simply live peacefully side by side; they exist in symbiotic harmony. People benefit from, interact with, and feed from each other, and to survive, ecosystems adapt to change. Because of these characteristics, an ecosystem is the perfect metaphor for how to create substantial loyalty.

Successful loyalty is created through ecosystems

An ecosystem serves as a wide net with a purpose to capture and hold customers’ attention long enough for brand loyalty to develop and for repeat purchases to take place. Brands with a successful ecosystem enjoys a competitive advantage with perceived true value that creates a willingness to stay in the ecosystem. The ecosystem logic implies a paradigm shift in the way we approach loyalty and we are going from thinking “How can we win the customer back?” to thinking “How can we keep the customer within our ecosystem?”.

One of the most important implications of ecosystems in business is that it brings strong network effects into play. A classic example of network effects is the telephone, where the number of possible connections increases exponentially with the number of users: the bigger it gets, the more valuable it becomes. As ecosystems become more valuable as they grow, first mover advantages become more pronounced. Thus, it may not necessarily be enough to be the best, but also to be among the first. In that way, the stakes are higher now.

How is an ecosystem set-up in practice?

The ecosystem must be correctly designed to respond to what customers need, such as real value and simpler solutions in the moment, interactions with other customers, and possibilities to co-create. Lesson learnt is that successful loyalty leaders listen carefully to their customers and have had capabilities to capture and use insights when developing the ecosystem. Traditionally, customer insights have been based on historical behavior, but now we are moving into real-time predictions to differentiate the experience for customers depending on their situational needs.

Loyalty leaders have managed to choose a brand position and value propositions that are attractive, relevant, timely and competitive in the ecosystem for targeting customers. Some loyalty leaders also offer opportunities for customers to interact with other customers and partners of the ecosystem, and when this interaction takes place, engagement usually increases significantly. Stronger bonds between ecosystem members means stronger bonds to the brand, which creates increased willingness to stay in the ecosystem. This is the main objective when creating an ecosystem.

Loyalty rewards should enhance the total brand core experience

Loyalty leaders understand that loyalty is more than a purchase incentive program, more than CRM-communications, and more than a point-collecting program. The benefits that comes from being a loyal customer must be something that enhances the core experience of a company. This means that rewarding a customer with a movie ticket, when it is completely separated from the core customer experience, will decrease relevance and create confusion amongst your customers.

The tipping point for success or failure seems to be whether the loyalty strategy is an integrated part of the ongoing value creation delivered within the business model, or if it is executed as separate initiatives. In other words, loyalty is a way of thinking about customers’ entire experience aimed at creating an environment where customers want to forge deep and long-lasting relationships. Loyalty is based on a sense of trust and the expectation that brands have the capability to create value through personalized, meaningful and rewarding experiences. Hence, loyalty is an integrated part of the business model which shall consider all opportunities possible to influence customer experiences when using the brand.

Loyalty leaders already applies the logic of ecosystems

Apple, Spotify, Amazon, and Starbucks are shining examples of brands that have a functioning ecosystem in place. The common denominator for all these brands is their understanding of an ecosystem’s ability to attract and sustain customers that are loyal through first class experiences. Furthermore, these companies have integrated their loyalty mechanisms into their business model. By doing so, they have created a wide net that captures and holds customer attention long enough to develop loyalty and to establish desires to stay in their ecosystem for sustained and repeat purchases. Consequently, these companies think loyalty at every stage of the customer life cycle – not just when a customer makes a repeat purchase.

To sum it up, loyalty is not dead – it is more important now than ever! However, loyalty towards a specific brand is decreasing and shifting towards the experiences created by companies. Customers are looking for relevance, convenience, trust, positivity, and value for money. Ecosystems, when designed well, will provide customers with all of this.

Successful companies that use ecosystems

Apple, like Harley Davidson, has built up one of the most brand loyal customer bases globally. With nearly 2bn phones in circulation and a unique IOS, they have a distinctive brand and a loyal platform for growth. The Apple brand and value position’s clear focus is that they can change your life for the better, by enhancing it with innovation, technology, and unique customer experience. As an example, Apple uses branded stores that create an interoperability between its hardware devices such as computers, tablets, smartphones, music players, and watches that showcase capabilities such as video, music, photography, apps, and software. The Apple branded stores also leverage product knowledge and complementary services. The in-store experience includes one-on-one tutorials, product repairs, and workshops to provide an unparalleled customer experience and to increase customer satisfaction. Another example of a well-working ecosystem logic from Apple is the decision to open up the App Store to third party developers. Now thousands of developers are working on Apple’s platform, making it even more valuable.

The loyalty strategy is executed and improved continuously. Insights from customer interactions, data from iTunes and other sources are used to update the software, add value, and improve experiences to users.

Spotify is ranked as one of the top five customer-obsessed brands, because they continuously work to uncover and act upon evolving customer insights to improve the overall experience in the ecosystem. They embrace customers as partners by taking co-creation, collaboration and participation to entirely new levels. They also actively listen to their users by collecting customer data and leveraging it to improve recommendations, playlists and special offers for listeners. For example, Spotify creates a “Discover Weekly” playlist for each user based on what they’ve listened to recently. This allows Spotify to help its users discover and enjoy new music every week.

The element of community created by the partnership with Facebook is distinctive to Spotify and creates an asset that customers simply cannot receive anywhere else. Users are not just accessing public playlists created by other users but can actively engage with what their Facebook friends are listening to, sharing, and following on the Spotify platform.

Amazon is constantly investing in its massive logistics and delivery network, just to deliver packages a little earlier. With Amazon Prime (AP), Amazon addressed the users’ biggest pain point which was shipping costs. With an AP membership, users get free and fast shipping on purchases, as well as exclusive offers on a large collection of books, songs, and movies. Through launching AP, Amazon focused on the biggest pain of their best customers and then added to the program over time.

Charging their customers allows Amazon to offer instant gratification in the ecosystem. In this way they are investing in the customer, not the product. The free trial is a vital component here as well, so more users can experience the value when they use the product.

Starbucks is well known for the My Starbucks Rewards program, praised as one of the best mobile experiences. They are successful because that mobile experience is simple, easy to use and creates convenience for customers. With their mobile order feature frequent orders are queued up in the app. Through just one click, a drink will be waiting at the nearest Starbucks location in a matter of minutes. In addition, users are offered a reward mechanism; My Starbucks Rewards, members earn 2 Stars for every $1 they spend using the Starbucks App. Accumulated stars result in Star Rewards that can be redeemed for free food and drinks. With the program, Starbucks makes a daily habit more convenient and with the reward elements they not only improve customers’ daily lives, but also build loyalty.


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