Dr. Yuping Liu-Thompkins is one of the world’s leading academic researchers on customer loyalty and the Founder of the Loyalty Science Lab at Old Dominion University.
For most marketers it may be the most puzzling question they face.
Do they plow more money into demand capture, hoping to grow market share by going after ready-to-buy consumers, or do they place more of a bet on existing high value customers in the hope of increasing their spending even more?
That debate has gone on for decades. It’s still going on. Just consider the latest provocation from the renowned Marketing Science Professor Bryron Sharp in a recent Ad Age podcast interview1 where he says “… the real world doesn’t fit with armchair theories. And so things like massively investing in your existing customer base and hoping that you’ll get lots more out of it turns out to be wrong.”
Is it wrong though? If he’s right, upwards of about $14 billion (US) in worldwide loyalty spending2 is going to waste.
Sharp, who wrote the popular myth-busting book “How Brands Grow”, would prefer that marketers direct their dollars toward converting [in his words] “very light, infrequent customers”, getting them to buy “a little bit more often”. His reasoning is that most frequent brand users are already spending up to their limit. And most consumers have a repertoire of favourite brands, he says, making them natural born switchers. In fact, he once notoriously quipped, “If you want loyalty, buy a dog.”
Sharp’s debatable view that current customers are not the best source of sales growth is only true if a brand has succeeded in capturing all of their spending. The whole point of loyalty programs, however, is to get those customers to consolidate their spending, thereby increasing “share of wallet”.
The other factor to consider is that customer relationships are never static. Loyalty is an elastic measure which expands and contracts based on the quality and consistency of the customer experience. In a category where all choices are pretty much the same, it’s certainly true that customers will have no hesitation in switching brands. Best offer usually wins. But if a brand gives those customers more than expected – makes it worthwhile for them to buy again and again – treats them with the respect they deserve – goes out of their way to help them – rewards them for their trust – they will be far more open to buying more, more often, over a longer period. Or so the theory goes.
The challenge for marketers of course – and this is why it remains an open and contentious debate – is that proving return on loyalty is dependent on measuring it accurately. And therein lies the problem. There is not one single accepted measure of true loyalty, not even NPS, mainly because no one can seem to agree on even a standard definition of loyalty. Nor is it easy to know whether an investment in loyalty pays off. Are you truly driving incremental sales, or would customers have spent that money anyway (as Sharp would have us believe)?
In the mass marketing world of Byron Sharp all that really matters is mental availability: Is the brand top of mind when it’s time to make a buying decision? Whereas a loyalty marketer would argue that all that matters is the depth of emotional commitment to the brand: Is the customer prepared to go out of their way to buy the brand? The ultimate (and rarest) manifestation of loyalty is an unwillingness to consider substitutes. But in reality loyalty exists on a continuum. It is a stratified measure, meaning there are different types of loyalty. Loyalty is a conditional state of mind, prone to volatility.
Considering the massive body of academic literature on loyalty, you would think that this loyalty puzzle would have been resolved long ago. But much of this existing research is too abstruse for the average overworked marketing practitioner. And there remain many unanswered questions that require a lot more rigorous research. Which is why Dr. Yuping Liu-Thompkins founded the Loyalty Science Lab within the Strome College of Business at Old Dominion University in 2020. Its mission is to close the gap between the scientific side of loyalty and its real world application. In other words, to help solve the loyalty puzzle.
Dr. Liu-Thompkins is a highly accomplished researcher in the field of brand and customer loyalty. Her work has been published in many of the top marketing and advertising journals. She’s earned numerous honours and awards – given countless conference presentations and talks – serves on the review boards of several prominent journals – and is an Associate Editor for the Journal of Advertising. In short, she is better positioned than almost anyone to help solve the loyalty puzzle.
I started by asking Dr. Liu-Thompkins what made her start the Loyalty Science Lab.
YL: Loyalty research actually has been around for quite a while and there are plenty of academic researchers that actually engage in loyalty-related research, right? So when I say loyalty, it’s a broad area, not just, just loyalty programs, but it’s broadly brand loyalty, customer experience and all of that. So we do have a lot of researchers working in that area. But the problem is that we publish in a very small circle in terms of academic journals. And so most of the research is, you know, these journals are read only by other academics that does research in the area.
And the problem with that is a lot of the practical insight, even though all of the papers, if you flip to the end of it, there is a managerial implication section, but nobody from the managerial area reads a lot of that. So I think part of that idea of starting the Loyalty Science Lab is to kind of foster more of that collaboration. I personally have worked with businesses even before I started the Loyalty Science Lab and I found that kind of collaboration to be really helpful because I gain insight with what businesses are seeing from their practical standpoint. And then at the same time, you know, the business can get a new angle of looking at a question with some rigor, with some theoretical component to it, understanding, for example consumer psychology and so forth.
So I personally feel like I have benefited a lot from it. And I wanted to bring that to be a bigger model where we can bring out academic research on loyalty, you know, to the practice, uh, to the industry, and then at the same time to also be a channel to funnel in some of the questions, you know, to say this is what’s relevant right now. We need more knowledge in this particular area. Researchers, let’s try to do something about that, right?
And so, that’s kind of the initial thought of it. I would say the starting point is probably just business in general or business research in general. But after doing some, I guess you could, say a very cursory market analysis, we looked at what is available out there. So we find that there are plenty of centers already kind of focused specifically on retail, for example, some focus on sales, there are also some focus on business analytics. And loyalty is really like one piece that’s really missing. There’s nobody actually really kind of focused on that specific niche.
SS: Well, I couldn’t agree more on two levels. One is the divide that exists between the academic world and, I’m going to call it the real world, but the practical world of going to work every day. So that for sure, um, there needs to be a translator and to bring those insights and facts that the practitioner actually needs in order to continually demonstrate the business case for what they’re doing. So that’s absolutely true. And the fragmentation is another area I completely agree with. So I just stumbled upon, you know, your Science Lab accidentally trolling Medium one day and I thought, oh, this is helpful. So congrats on that.