Predicting Customer and Brand Loyalty with Brand Keys

September 16, 2010

Predicting Customer Loyalty Predicting Customer Loyalty

Do brands Do brands really really need predictive metrics? need predictive metrics?

2© Brand Keys, Inc. 2010

Just ask GM…Just ask GM…


Was GM…Was GM…

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• making faulty cars?A gorgeous, fun-to-drive, well-equipped sedan (Regal) built with the quality of its German competitors… -- Jalopnik

GM will increase its ad spending by 3% to 5% this year. Kantar Media, an ad tracker owned by WPP PLC, says GM spent $2.2 billion on advertising in the U.S. in 2009. GM disputes that amount but declined to provide figures. – Wall Street Journal

GM was highest in owner loyalty for the ninth straight year in the R.L. Polk & Co. Automotive Loyalty Award - the only award in the industry based on consumer loyalty. – GM Website

© Brand Keys, Inc. 2010

• not spending enough money on marketing?

• failing to ask consumers about loyalty?

http://online.wsj.com/public/quotes/main.html?type=djn&symbol=WPPGY

GM forgot the consumer GM forgot the consumer doesn’t only shop, she doesn’t only shop, she dreams . . . dreams . . .



Brands success is the degree to which the brand meets or exceeds what consumers want, need and expect in the category—both emotionally and rationally.

Brands that do that, have equity.

Brands that don’t, have problems.


Evaluate Brands = what already Evaluate Brands = what already exists (present)exists (present)

Against Ideal = what Against Ideal = what consumers wish existed consumers wish existed (future) (future)

How do you create How do you create brand success?brand success?

And implement . . . And implement . . .

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Where should we take the

brand?

How should we do it?

Category Idealand

Brand Performance

Hierarchy of Attributes,

Benefits and Values


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A consumer-centric view of the category in which the brand competes, letting it

understand how consumers view, compare, and choose among category

options.

The Ideal


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Brands are evaluated against the consumer’s Ideal of what matters most!

What’s most important to me is . . .

I expect . . .


The leader in predictive brand equity, loyalty, and engagement metrics since 1984; an independent global boutique.

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Who Is Brand KeysWho Is Brand Keys

Brand Keys specializes in brand equity and engagement metrics that serve as the most accurate benchmark available for brand architecture, tracking and strategic communications studies.

Our metrics are predictive of future in-market behavior and correlate highly with positive behavior, sales, and profitability.

We use metrics grounded in psychology, allowing us to understand both the emotional and rational factors which bond consumers to brands.

We can accurately measure the impact that any media/marketing initiatives will have on future in-market behavior.

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Who Is Brand Keys?Who Is Brand Keys?



And we’ve got the numbers And we’ve got the numbers to prove it…to prove it…

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Correlation of Brand Keys Loyalty Metrics to Brand Imagery: Ralph LaurenCorrelation of Brand Keys Loyalty Metrics to Brand Imagery: Ralph Lauren


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Correlation of Brand Keys Loyalty Metrics to Actual Purchases: Dove SoapCorrelation of Brand Keys Loyalty Metrics to Actual Purchases: Dove Soap


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Correlation of Brand Keys Loyalty Metrics to Actual Purchases: Kate SpadeCorrelation of Brand Keys Loyalty Metrics to Actual Purchases: Kate SpadeHoliday Shopping 2008Holiday Shopping 2008


Dr. Robert PassikoffNamed a

“2007 ARF Research Innovator”

Amy Shea, EVP,Recipient of

2008 ARF “Great Mind” Award in Innovation

Published and Recognized Published and Recognized Brand Loyalty Engagement ExpertsBrand Loyalty Engagement Experts


Leigh Benatar, EVP,Recipient of

2010 ARF “Great Mind” Award in Innovation

Read The ARF’s First Opinion Research Review on the Brand Keys Engagement Method at www.brandkeys.com

Independent Validation:Independent Validation:


Some of Brand Keys ClientsSome of Brand Keys Clients


Independent Validation:Independent Validation:

Brand Keys Metrics Correlate Brand Keys Metrics Correlate with Sales/Profitabilitywith Sales/Profitability

An independent business equity valuation firm examined the correlation between Brand Keys brand equity metrics and company value.

They selected 10 categories from the Brand Keys Customer Loyalty & Engagement Index and conducted correlations against our rankings.

The company value metrics used were Total Enterprise Value (TEV= market capitalization + outstanding debt), EBITDA (free cash flow) and Revenue. These three metrics were converted to two ratios: TEV/EBITDA and TEV/Rev for comparison to the Brand Keys equity metrics.

The correlations ranged from a low of .830 to a high of .901 between company value and Brand Keys equity rankings which, further confirms the ability of Brand Keys assessments to predict impact on future purchase behavior with extraordinary accuracy, as well as operating on a cross-category basis.


• 18-65 years old• 60% phone interviews; 20% in-person

for cell phone only, 20% online• Self-classify for category and brand

• Male/Female

• Annual survey (2010 is 14th year)• 71 categories (518 brands)• 33,500 consumer interviews • Drawn from the 9 US Census regions

Brand Keys Customer LoyaltyBrand Keys Customer LoyaltyEngagement IndexEngagement Index


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•Brand Keys Customer Loyalty Engagement* Index (CLEI)

•Brandweek Loyalty Leaders List

•Sports Fan Loyalty Index

•Women’s Wear Daily Fashion Brand Index

* A Brand Keys behavior-based definition: The consequence of any marketing or

communication effort that results in an increased level of brand equity for the

product or service.

SyndicatedSyndicated


Factor Analysis +

Regression Analysis+

Causal Path Modeling

FUSINGIndirect Emotional

Inquiry Psychological Jungian-based PersonificationQuestionnaire

Direct InquiryCategory

Attributes, Benefits & Values

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70%

30%

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Customized ApplicationsCustomized Applications

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Ideal

2. Predictive Category Dynamics

3. Brand Health and Brand Planning

4. Media Optimization

5. Communication Testing

6. Research Optimization

1. Brand and Brand Equity


vs.

The Starbucks Loyalty StoryThe Starbucks Loyalty Story


100

110

120

130

140

Location & Value Quality & Taste Service & Surroundings

Variety & Selection

118

125

129

110

Ideal

Loyalty Drivers – Order of Importance

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Highest Lowest

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1. Loyalty Drivers in order of importance.2. Percent contribution to future purchase/loyalty.3. Customer Expectation level for each Driver.

Low =Table Stakes

High =Differentiator

2Percent of Contribution

#1: How do consumers view the category?

#2: What is the hierarchy of contribution to loyalty?

#3: Where’s the opportunity for greatest differentiation?

STRATEGYSTRATEGYHow Do They Buy in the Category?How Do They Buy in the Category?

2006 Ideal Coffee Provider2006 Ideal Coffee Provider


TACTICSTACTICSPercent-Contribution of Individual ABVs Percent-Contribution of Individual ABVs Driver #2: Service & Surroundings (28%) Driver #2: Service & Surroundings (28%)


Loyalty Drivers – Order of ImportanceHighest Lowest

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2006 Customer Loyalty Engagement 2006 Customer Loyalty Engagement Index:Index:CoffeeCoffee

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Starbucks dominates in the driver with strongest customer expectations.



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As customers articulate the increasing importance of Service and Surroundings at the start of ‘07, Starbucks loses it strength to Dunkin’ Donuts.



What Happened?What Happened?


Text of Starbucks MemoFrom: Howard Schultz

Sent: Wednesday, February 14, 2007 10:39 AM PST

Subject: The commoditization of the Starbucks Experience as you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. . . .

March 3, 2007

TALKING BUSINESSGive Me a Double Shot of Starbucks Nostalgia

By JOE NOCERA

Last week, this Mr. Schultz was on vivid display when an internal memo he wrote to his top executives was leaked to Starbucksgossip.com. . . . He pointed, for instance, to the company’s decision some years ago to install automatic espresso machines, which, he wrote, “solved a major problem in terms of speed and service,” but also made buying a cup of Starbucks coffee a more antiseptic experience. . . .

Robert Passikoff, president of the brand consultant Brand Keys, said that Starbucks had taken its eye off the brand. “In trying to migrate from a coffee brand to a lifestyle brand, there has been a certain brand dilution.” He agreed that the “whole European coffeehouse experience” was no longer how people thought about Starbucks, to the company’s detriment.


http://starbucksgossip.com/


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Service and Surroundings are most important to customers at the start of ’08; Starbucks continues to struggle in the category they largely shaped.

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YearBrand Equity

IndexBrand Keys Rankings In-Market Realities

2006

109 Dunkin’ # 2Dunkin’ institutes new

strategy

113 Starbucks # 1Starbucks is a thriving

brand

2007

115 Dunkin’ # 1Dunkin’ 11% system

wide sales. 5.2% same-store sales

109 Starbucks # 2Starbucks share price

43%

2008

115 Dunkin’ # 1Dunkin’ Restaurant

Marketer of the year. Same-store sales 7%

107 Starbucks # 3Starbucks closes 1,000

stores

2009

118 Dunkin’ # 1Dunkin’ opens 1,500th

store

106 Starbucks # 3Starbucks to close 600

stores. Same-store sales 5%

In-Market ValidationIn-Market Validation

What is Starbucks Doing?What is Starbucks Doing?


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Introducing New Varieties …Introducing New Varieties …


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Offering Coupons …Offering Coupons …


Advertising …Advertising …


And Finally…And Finally…


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To create loyalty, first find out To create loyalty, first find out what makes it happen . . .what makes it happen . . .


then implement the right then implement the right strategy, using the right strategy, using the right

tactics! tactics!

A blind pig may find truffles, but it helps to know that they grow under oak trees.

—David Ogilvy (1911–1992)

Thank You!Thank You!

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Thank you for your attention.

Robert PassikoffPresident, Brand Keys, Inc.

212-532-6028 [email protected]

www.brandkeys.com

Amy SheaEVP, Brand Keys, Inc.

212-532-6028 [email protected]

Predicting Customer and Brand Loyalty with Brand Keys

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