Overview

Regular and continuous purchase by consumers who reject substitutes or competitive brands. Represents the essential hard core of customers who must be retained. Sales promotion schemes by rivals can undermine brand loyalty. Depends on habit buying. Advertising has to maintain sales as well as increase them. Loyal customers often encouraged when they see ads for their favorite brand.

Brand loyalty exists when a consumer deliberately and consistently chooses one product brand more often than competing brands. Almost any consumer may develop brand loyalty after evaluating several alternative choices and determining the most preferred brand based upon both objective and subjective criteria.

The reasons for such allegiance may relate directly to the brand’s physical characteristics, such as size, weight, color, style, etc., or they may stem from factors such as price, availability, the perceived risk of switching to another brand, the perceived brand image, or some combination.

To a large extent, brand loyalty seems to be brand-specific and consumer-specific in that not all brands enjoy a loyal consumer following and some consumers tend to be more brand loyal prone than others. Nonetheless, it is to the marketer’s advatage to cultivate brand loyalty wherever possible.

Examples

The potent impact of brand loyalty was felt in 1985 when the Coca-Cola Company dropped its 99-year-old formula in favor of the “New” Coke. Although many consumers welcomed the change and many were indifferent, a large number of faithful Coke drinkers clearly communicated to Coca-Cola that no substitute would suffice. In effect, brand loyalty was great enough to force Coca-Cola to reintroduce the original brand as “Coca-Cola Classic.”

Certain product characteristics seem to be associated with high brand loyalty more so than with lower loyalty brands. Brands that have clearly distinguishable, superior, and salient product attributes seem to have more loyal consumers than competing brands.

With other product attributes held constant, the brand with the lower price, higher quality, or better performance will often have the brand loyalty edge.

Other brand loyal product characteristics seem to be less rational. Brands such as Coca-Cola, Ivory soap and Crest toothpaste have loyal consumers largely because these brands were established early in many consumer’s lives.

To switch brands as an adult would break the nostalgic link with one’s past. Thus the sentimental value of the brand is maintained through continued loyalty.

Brands that are highly visible and are differentiated largely on an image-basis may also enjoy a following of brand loyal consumers if the brand’s image is congruent with either the consumer’s own self-image or the image the consumer wishes to project. A number of alcohol, cosmetic, and clothing brands seem to fall in this category.

Benefits

A strong following of brand loyal customers is the single most valuable asset any marketing organization can ever hope to obtain. Consequently, the development and maintenance of such a customer base should be a high-priority objective.

The benefits of brand loyalty are numerous.

1. First, a loyal customer base reduces marketing costs. It has been estimated, for example, that it costs approximately six times as much to initially attract a customer as to retain an existing customer.
2. Second, as customers become brand loyal there is a tendency for them to deemphasize the importance of price. And, of course, less price sensitivity translates into higher margins.
3. Third, brand loyal customers play a key role in securing and maintaining distribution to the extent that they demand and expect brand availability from channel members.
4. Last, planning throughout the organization is enhanced in that sales volume among loyal customers is less volatile than among disloyal consumers who tend to be more susceptible to the short-term marketing efforts of competitors.

Implementation

Brand loyalty may be thought of as the “ideal” consequence of a series of steps or stages through which the consumer progresses as he becomes more familiar with the brand. These stages include:

1. initial awareness of the brand,
2. evaluation of the brand’s need-satisfying potential,
3. initial trial purchase of the brand,
4. brand satisfaction and confirmation of the brand choice,
5. repeat purchases of the brand, and
6. brand loyalty.

Brand loyalty may be cultivated to the extent that marketing efforts positively influence the consumer in each stage, thus allowing for the smooth transition to the next stage.

Differentiating the brand from competitive offerings and frequently communicating brand differences increases awareness and enhances the consumer’s evaluation of the brand if the differences are meaningful to the consumer.

For low-involvement products with few distinguishable attributes between brands, simple maintenance-type advertising to remind the consumer that the advertised brand is “a leading brand” may be the most effective strategy.

Consumer-oriented sales promotions such as cents-off coupons, free samples, and premiums are useful in stimulating trial purchases and encouraging brand switching. The amount of the coupon or other incentive should be great enough to offset the degree of risk the consumer faces in trying an “unproven” brand, but not so great as to eliminate the purchase commitment necessary for the consumer to personally justify the purchase decision at a later date.

The most potent strategy to boost satisfaction with the brand is to ensure that the brand’s performance meets consumer expectations and that the consumer receives the benefits touted in pre-purchase communications. Reinforcement messages that remind the consumer of the benefits he or she received is another possible approach.

Free services or merchandise, quantity discounts, and other customer relationship incentives may be useful in encouraging repeat purchases which help to habitualize the purchase process and may dull the consumer’s awareness of competitive offerings.

Adequate distribution is critical in encouraging repeat purchases as well, because with many consumers – especially younger ones – online store loyalty often supersedes brand loyalty.

Evaluation

It is useful to periodically measure the degree of consumer loyalty toward the brand in order to evaluate the effectiveness of the brand’s marketing efforts vis-a-vis those of competing brands. There are over 50 approaches to brand loyalty measurement with an apparent trade-off between validity and ease of administration.

Some measures treat brand loyalty as a dichotomous variable (i.e. either a consumer is brand loyal or he is not) while other measures recognize brand loyalty as a continuous variable with several degrees of brand loyalty possible.

Some so called brand loyalty measures more correctly measure repeat purchase behavior with little attention given to the attitudinal aspects of genuine loyalty.

Some of the simpler measurements involve asking consumers which brand they purchase most frequently, whether they would switch brands for an X% price discount, or whether they would purchase another brand or shop elsewhere if their preferred brand were temporarily out of stock.

Analyses of consumer panel diaries often determine brand loyal consumers to be those who purchase one brand disproportionately more than competing brands or those who exhibit a discernible and biased pattern in their sequence of purchases.

For example, a consumer might be classified as loyal if 60% of his purchases were for Brand A or if he purchased Brand A three consecutive times during the period.

An attitudinal-based measure of brand loyalty might utilize a loyalty scale with which consumers would be asked to indicate the extent to which they agree or disagree with a series of statements concerning purchase preferences, purchase intentions, importance of price, and the like.

Each consumer’s brand loyalty score might then be computed by summing the points assigned to the ratings from each statement. For example, five points might be scored if the consumer “strongly agreed” to the statement, “I like Brand X,” whereas only one point would be scored if he “strongly disagreed.”

Conclusion

Given the numerous and sometimes questionable approaches with which brand loyalty has been measured, it is difficult to draw sweeping conclusions about the concept. Moreover, research suggests that brand loyalty tends to be product-specific and consumer-specific which further limits one’s ability to generalize.

While some of the product characteristics of brand loyalty were discussed, research that has attempted to identify the characteristics of brand loyal consumers has been less than encouraging. It is clear however that brand loyalty does exist and that successful organizations are those that develop and nurture a brand loyal following of customers.

Applications to Small Business

Relative to the larger manufacturer, the small business manufacturer is often in an advantageous position in that he is likely to be “in touch” with his customers, often has fewer volume constraints, and is often more flexible in his ability to react to changing local market conditions.

However, the small manufacturer may also have to cope with higher cost structures and may not be able to ride out prolonged economic downturns and/or competitive threats. Fortunately, these advantages and disadvantages all suggest the appropriateness of a market niching strategy which the small manufacturer may be more effectively able to pursue than his larger counterpart.

By serving well-defined niches, of course, the likelihood of high customer satisfaction is enhanced – thereby leading to increased brand loyalty. So, a potent competitive weapon for the small business manufacturer is the development of a substantial brand loyal core of customers within each market niche served.