I’ve written before about how silly loyalty ladders are. I’ve been asked, aren’t they harmless, just showing the heterogeneity within any brand’s customer base or market (from non buyers to highly loyals) ?
Here is what is wrong with loyalty (conversion) ladders:
The ratios of non-buyers, to light buyers, to medium, to heavy, are perfectly predictable (by the NBD-Dirichlet). So they are set. If a brand gains in share/sales, the ratios all move in a predictable way.
All loyalty ladders do is show these ratios – but they imply that you can change the ratios through particular strategies. This is wrong, they will only change if you increase or decrease in market share.
– Loyalty ladders imply that you should target particular levels of the ladder. This is wrong.
– Loyalty ladders imply that some brands are stronger or weaker – when really they are reporting brand size.
– Loyalty ladders are a waste of money spent on market research and reporting. Most of the tiny changes and differences they report are sampling (and other) error.
– Loyalty ladders imply that awareness is a “once off battle”, that once someone is aware they always notice, recognise, recall your brand – this is nonsense.
– Loyalty ladders imply that 100% loyals are a brand’s most valuable customers, whereas far more volume comes from heavy category buyers who buy a number of brands.
– AND REALLY IMPORTANTLY…..Loyalty ladders distract marketers from the real issue which is how to grow penetration (reach all sorts of category buyers).