Loyalty Strategy

Insight: Should you become an “ecosystem brand?”

More brands are following the Amazon model of trying to build customer loyalty by becoming everything to everyone. The open question: does casting such a wide net really builds brand loyalty, or are these brands stretching the brand definition so far that it becomes meaningless, making the relationship more transactional and mercenary? It’s an important point as the Amazon effect continues to find consumer brands in a variety of sectors struggling with how to maintain loyalty. Let’s look at the question.

By Rick Ferguson

Marketing Week raises the question, using Amazon, Apple, Facebook, Google, Microsoft, and other Silicon Valley behemoths as an example of how building “brand ecosystems” has become the marketing equivalent of film production companies building “shared cinematic universes” of films populated by recurring characters and storylines. The idea is that, by extending your brand into as wide a variety of product and service lines as possible, you can become so ingrained in your customers’ lives that brand loyalty becomes second nature.

Brands build ecosystems through different means; Amazon does it through acquisitions and its Prime loyalty offerings, while Apple and Microsoft do it through connecting their respective products and services to their core operating system. It’s the modern equivalent of General Electric, which once touched consumer lives by building everything from light bulbs to toasters to aircraft engines.

Amazon, as it is in so many things, is the prime (pun intended) example of the modern version of this trend: with its recent acquisition of Whole Foods in the US, the company has extended its brand into a wide variety of household spending categories including grocery, apparel, electronics, and entertainment. With its Prime loyalty program as the connecting tissue between these services, the theory goes, Amazon will remain top of mind with customers who begin to develop a real and lasting relationship with the brand.

Not everyone buys this theory, however. Money quote from Marketing Week:

“While Amazon excels in offering convenience across its ecosystem, that does not necessarily mean the business has built real brand affinity, says Trinity Mirror group marketing director Zoe Harris. ‘Amazon is a convenience brand. You’re not loyal to Amazon, you’re loyal to the convenience it provides and if someone can do that convenience better or cheaper, I think people would switch quite quickly, which is different to a genuine brand where you have an emotional relationship. I think there’s a difference between brand diversification and this idea of ecosystem brands.”

There are actually two questions at work here: one, does an ecosystem approach to business growth build brand loyalty; and two, if not, does it matter, so long as the business is growing? Harris seems to imply that it does matter, as a lack of true brand loyalty to Amazon leaves the company vulnerable to competition. My guess, however, is that Amazon isn’t much worried about it. Amazon’s brand promise is “convenience”- and as long as every brand extension fulfills that promise, customers will keep coming back. Whether or not those customers feel the warm and fuzzies for Jeff Bezos is, at best, an academic question.

The Marketing Week piece continues to describe two other examples of brand ecosystems: Marriott, which through acquisition of Starwood now boasts 30 hotel brands in 127 countries, provides hotel sub-brands for every price point and traveler type; Virgin, meanwhile, offers a wide and seemingly disconnected array of products and services united by a strong umbrella brand.

What unites these two companies in their approach to building their own brand ecosystems? Their respective loyalty programs. As Marketing Week points out, Marriott’s linkage of their three separate loyalty programs – a prelude to the single, unified program coming sometime in 2018 – allows them a platform to build strong relationships with their customers across all 30 sub-brands. Virgin, likewise, is able to leverage its Virgin Red loyalty program to build relationships with customers regardless of their entry point to the brand. Money quote #2:

“A similar connected approach is being taken at Virgin. Leveraging the potential of an ecosystem spanning five core sectors and 60 million customers, Virgin is tapping into the rich data collected through its connected loyalty programme Virgin Red to create personalised experiences across every touchpoint in the ecosystem. This means that a Virgin Media and Virgin Active member, who is also using Virgin Trains regularly, would receive different personalised rewards to someone who is only a Virgin Media customer. Virgin Red also uses application programme interfaces (APIs) to recognise and serve exclusive content to users. So for example, if Virgin Money wants to offer a limited edition credit card to its top spenders this can seamlessly be delivered through the Virgin Red app.”

Amazon, of course, is a third example of a brand ecosystem supported by a connecting loyalty program. The important takeaway here is that merely extending your brand into every nook and cranny of your customers’ lives is no guarantee that you’ll build strong relationships with them – in that sense, Harris is correct. It’s Amazon Prime that functions as the relationship secret sauce, just as Marriott’s and Virgin’s respective programs are theirs. These programs provide a platform for reward and recognition, a circulatory system via which customer data and insight flow through the organization, and a trusted channel via which customers receive personalized and relevant communications.

That, my friends, is how you build a brand ecosystem. It isn’t the size of your portfolio that counts – it’s the positive impact you have on your customers’ lives, every day.

Rick Ferguson is Editor in Chief of the Wise Marketer Group.

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