The Marketing Strategy of Catching the Second Wave : The Retention Challenge

The rapidly changing consumer environment in large emerging markets presents brands with a new challenge and you need a good marketing strategy for  : How to retain customers when the competition gets more intense, when consumers become more knowledgeable and feel safer trying out lesser known brands, and when a wave of second-time buyers makes keeping existing customers an equal challenge to winning new customers?

Classic brand loyalty programs are a combination of rewards and recognition. The objective is to retain existing customers to ensure they continue to purchase the company´s products or services. But how do you execute such a strategy in large emerging markets where consumers are much less loyal, where they profit from a growing number of choices and where they tend to trade up quickly, while raising their expectations? What motivates consumers to stay with their current brand? Does the cultural background make a big difference in how customers define loyalty? There are many questions, but one thing is certain: In a fluid environment like the BRICs, product and brand managers need to know their customers very well. They need to stay as close to them as possible, engage them through the most effective channels and deliver the brand experience in full.

Volkswagen in China is a good example of how important – and pressing – the retention challenge has become. VW managed to gain slightly more than a 50 percent market share after the company entered the Chinese market in the 1980s. After a major setback following the opening of the local market in the wake of China´s WTO entry, Volkswagen´s market share shortly dropped below 20 percent. But the German company has managed to stay No. 1 in China, even though there is a growing number of buyers who want to trade up, and even though there is a significant tendency to experiment with new brands. While brand loyalty in Western car markets can reach around 80 percent, it is only approximately 10 percent in China. People just want to try new brands and trade up with their next purchase.

China´s car market is approaching a level where 1 out of 3 customers are for the first time re-purchasing a car. That makes retention a major challenge. VW has not only managed to dramatically broaden its model portfolio to offer customers a migration within its own range of offerings. The company also initiated a retention strategy in order to keep customers within their group cosmos. Key elements of this marketing strategy include the definition of a consolidated approach of what the key expectations of customers and retention drivers are, an after-sales CRM strategy, a solid screen for the most effective CRM implementation partners and a clear understanding of consumption motifs.

In one of the recent issues of their “Global Consumer Insurance Survey” EY suggested it was “Time for insurers in India to rethink their relationships.” Among the main findings was the impression that customer loyalty on the Subcontinent was “fickle” and very much dependent on “price points, customer service and innovative product offerings.” According to the survey, only one in five Indian consumers described themselves as very loyal to their favorite insurance brands. Some of the key advice given in the survey was the importance of better understanding customers, who are surprisingly well aware of their needs and have a strong need for personal interaction – which is held in much higher esteem in the BRICs than in the West. The good news about this finding is the fact that intense personal interaction conducted before the actual purchase decision makes it possible to increase loyalty even before consumers become customers.

A Cross-Cultural Loyalty Study that examined the attitudes of consumers in three developed (Australia, Canada and the U.S.) and three developing (Brazil, China, India) countries revealed that in emerging markets consumers are three times more likely to define themselves as “expecting special service”, perks and privileges.

One aspect that shouldn´t be underestimated is the growing role of mobile services in delivering more customer gratification and loyalty. The Brand Keys Customer Loyalty Engagement Index found that loyalty is primarily driven by emotional engagement. The highest-ranking brands displayed high levels of emotional engagement as well as the ability to deliver on consumers´ expectations. The brands that fell on the index were mostly those that had either not fulfilled customer expectations or failed to do so by mobile. Vivo, South America´s largest mobile phone service provider, is a telling example. Vivo, with more than 60 million users, created an app with Brazil´s national soccer team. Fans can watch live games, check out team rosters and standings, and can read exclusive content like interviews with coaches and their soccer heroes.

There is yet another factor that should not be underestimated. It is the aspiration of shoppers, who are the first and best-educated generation in their families, to fulfill their dreams. Consumers in emerging markets are much more likely to look for aspirational benefits. Brands that help customers to dream and indulge in great moments have therefore higher chances of success.

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