What Is Brand Loyalty?
No business can survive without a reliable stream of customers. Among the many factors that cause customers to buy and buy again is brand loyalty. But what is brand loyalty?
Brand loyalty is a customer's automatic and continued purchase of a particular brand name product or service. This choice becomes automatic typically after repeated positive experiences with the organization and its offerings.
Price factors and limited selection are often ignored by brand loyal customers. They ignore these factors for two reasons:
- They wish to repeat or continue the positive experiences they receive from purchasing this brand.
- They wish to reduce the risk and fear of the unknown they experience when trying competing brands.
Whether they continue to purchase seeking positive outcomes or to remove fear and risk, the benefits to the organization include lowering the cost of sales and marketing and building consistent revenue streams.
Benefits of Developing Brand Loyal Customers
Recruiting new customers can be costly! That suggests developing brand loyal customers who continue to buy year after year is a priority for businesses from a cost standpoint.
Customers who can be relied upon to continue to make purchases in the future can help ensure a sustainable cash flow. Brand loyal customers are also more likely to share their experiences with a brand and refer others to buy, making them a secondary sales force. Since most people associate with those who are similar in values and tastes to themselves, this sharing and referring can help an organization build a large base of ideally suited customers and sales.
Example: Motorcycle manufacturer Harley-Davidson has one of the highest levels of brand loyalty. So loyal is their customer base that these customers are willing to pay to wear promotional products bearing their logo and brand name.
Especially in today's online connected world, customer sharing on social media and websites about their positive experiences with brands can also help build public relations value for an organization. Strong brands attract media attention and opportunities.
Costs of Developing Customer Brand Loyalty
The actual cost of retaining loyal customers can vary from business to business and industry to industry. However, those costs frequently include:
- Customer Relationship Management (CRM) software and systems which track transactions and interactions with customers. These systems usually include lead and follow-up functions to assist sales personnel.
- Special promotions, discounts or reward programs.
- Events only open to customers.
- Promotional giveaways and gifts.
- Dedicated sales and service personnel to handle customer care.
- Priority order entry and handling either by phone or online.
- Extended payment terms or financing options.
Even if these costs are lower than that of acquiring new customers, care must be taken when developing CRM systems and perks so that costs are controlled and appropriate for various purchasing levels. Businesses often make the mistake of offering service and perks to customers who don't deserve them, ballooning costs and depleting profits with little additional revenue gain.
Preferences Do Not Always Create Purchases
In surveys, many customers will express a preference for various brands. However, when it comes to the actual purchase, they will buy something else. Why does this happen? Doesn't a preference create brand loyalty?
Surveys often eliminate the element of price and focus on other aspects such as taste, feel, and packaging. So while survey participants will "prefer" the product being surveyed, they will not purchase it when their hard earned dollars are on the line.
In tough economic times, this scenario becomes even more dramatic since consumers will quickly abandon their preferred brands in favor of lower priced brands, store brands, or even unbranded generic products.
To counter this brand exodus, an organization may create a lower priced brand to appeal to more budget conscious consumers. While this strategy may help protect an organization's market share, it can also cannibalize the higher priced brand and damage a premium brand's status and appeal.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2013 Heidi Thorne