Digital loyalty

The internet’s ability to democratize our everyday interactions has transformed the way companies create loyalty by lowering the cost of transaction and increasing the frequency of interaction. But this increase in frequency means customers are enabled to try new options or purchase products based on a personalized set of needs. They’re able to discuss a brand among an online community, often trusting unknown users more than a brand they’ve used for years without issue. The conversations themselves accelerate as bloggers and news media, through competition for eyeballs, push to get more information out faster. The consumption of all this content means that most consumers spend a large portion of their time researching potential purchases. It’s said that many purchasers of airline tickets spend more time searching for deals than they do in the air.

Brands are then competing for smaller and smaller increments of people’s time (how many seconds did you give the email promotion you received this morning?). Yet, with access to this data, these increments of attention can become transactions in their own right. We see simple clicks becoming micro-purchases where the transaction is merely consumer attention. As brands begin to understand how to read and analyze this data they can begin to see patterns that translate into, and create an image of, individual users. There are an increasing number of companies who are designing services around thisanalysis.

When you convert data about a transaction into information about a person, a brand begins to understand how to better create a sense of loyalty.

The music industry is the most challenged with understanding how their data leads to creating a better level of loyalty. Music’s availability online means that there is no financial incentive for a fan to purchase the music. Whatever they are looking for is available to them for free. Electing to pay for something that is available for free clearly requires high levels of brand loyalty. As a response to this, the music business is now refocused on telling the story of an artist. The artists become the vehicle for the promotion of their own mythology. The selection of which artist to highlight is based on the analysis of available user data. This is exemplified in the correlation between Justin Bieber’s immenseTwitter popularity and the high volume of his sales. People aren’t paying for the music itself, they are paying for the value of participating in Bieber’s life. His fans are choosing to pay for product that is otherwise free and thereby adding greater value to that product. Their purchase is a vote to other consumers saying that the product is “popular”. This encourages other consumers to elect to pay for the product and gather the added-value to the overall experience. This conversation loop represents a new form of brand loyalty online. Taking advantage of both the power of storytelling (which, unlike product isn’t democratizable) and the effects of internet word-of-mouth.

So while our world is one where the increased frequency of interaction and the lowered cost of transaction seems to create consumer fickleness, we now know that these same tools can be used to generate greater amounts of loyalty. Because a single transaction is cheap, we have come to understand that cheap transactions can combine with a story and thereby generate more valuable transactions. We’ve learned that what story to tell can be understood through available user data patterns. And we’ve learned that by the connection between loyalty, story and transaction, brands are able to build long-term, revenue-generating connections around an experience.

(This is from a post I wrote on the Wolff Olins blog)