Brand Loyalty

What is Brand Loyalty?

Brand loyalty refers to the tendency of customers to buy, re-buy, and prefer the same brand of a product over other brands over a period of time. Brand-loyal customers prefer to buy from only one brand on a regular basis, although competitors offer the same products or services at competitive prices. In terms of brand loyalty, customers do not change their buying preferences towards other brands; they only buy from the same brand over and over again. This consumer behaviour helps organisations retain customer loyalty and preference. This means that brand loyalty and customer loyalty are related to each other.

Brand-loyal customers think that a certain brand is enough for them if it is providing better-quality products and services to them than any competitor, regardless of the price of the products. They might make fewer total purchases, but the total profit margin on their purchases is high in the long term.

Important Terms

In order to understand brand loyalty, let us define a few important terms:

Brand

A name, a symbol, or their combination that differentiates a product from its competitors is called a brand. Brand name is the vocal part of a brand and brand symbol is its visual part.

Branding

The process of creating a brand of a product is called branding. Branding is an intangible feature of a product. Branding helps a business differentiate a product from other products in the market. It adds value to the product and helps in advertising and promotion. Premium prices can be charged for branded products. Through branding, business firms create the personality of a product, which helps them make customers loyal.

Branding is also useful for customers. Branded goods can be easily identified. Brands are easy to remember and refer to, and customers can make repeat purchases. Customers trust brands.

Brand Ambassadors

Professional marketers that companies hire in order to serve as spokespersons for their products are called brand ambassadors. To provide better services, brand ambassadors need an already established online presence with a great audience network, deep knowledge of products and services, and high expertise in order to build customer loyalty.

Brand Loyalty Examples

The following are two major examples of business firms having high brand loyalty. These companies make big investments in creating brand loyalty by providing high-quality products and services to their customers. These companies charge high prices for their customers, but customers prefer their brands despite high prices, due to brand loyalty.

Apple

Apple is a tech giant that retains customers in high percentages in comparison to its competitors. Apple had a brand loyalty score of 92% in 2021. Apple is known as a famous brand loyalty firm, not only because of advanced technology and state-of-the-art designs but also due to their brand power, excellent customer service, and superior quality Apple products such as the iPhone and iPad.

Nike

Nike is one of the most famous sports brands in the world. Nike offers industry-leading membership programmes that provide four key features to its customers for brand loyalty:

• It provides exclusivity to its customers, such as by providing free access to exclusive tickets and product launches.
• Nike also builds community by offering free workout classes and training programmes.
• It also provides personalisation, such as anniversary, birthday, and other gifts, and gives personalised product recommendations to their customers.
• Nike provides a multichannel customer experience, including in-store, on-store, and mobile apps.

Features of Brand Loyalty

The following are the main features or characteristics of brand loyalty:

Perceived Brand Value

Customers perceive that the brand they prefer is better than those of other products in the market. They think that their preferred brand gives them a higher perceived value than other brands in the market.

Perceived Brand Trust

Customers also perceive that the price and quality of their preferred brand are justified, and in return, they have faith or trust in the brand. 

Perceived Brand Quality

Customers also perceive that their preferred brand has better quality than the alternative brands. Consistency in terms of quality is also important in creating perceived brand quality.

Emotional Connection

In brand loyalty, customers have an emotional connection with the brand they prefer. They feel happy, satisfied, and excited about the purchase of their favourite brands.

Resistance to Competition

Customers prefer a specific brand if they have a positive buying experience and are satisfied with their usage. That’s why; competitors’ offers do not attract those customers. Customers loyal to one brand are resistant to its competitors.

Good Word-of-Mouth

Brand loyalty creates free publicity for business firms through positive word-of-mouth communication by customers. Brand loyalists give positive reviews and promote their preferred brands through good word-of-mouth marketing in general. In this way, more customers will be attracted to the same brand. They do so because they are satisfied with their positive experience of the product.

Repeat Purchases

The above mentioned characteristics are important in encouraging repeat purchases. Customers purchase products of the same brand over and over again due to their loyalty with the brand.

Brand Loyalty and Price Elasticity of Demand

Price elasticity of demand (PED) is the degree of responsiveness of the quantity demanded of a product to a change in its price. In fact, the price elasticity of demand determines how sensitive or responsive the customers are to the price change. In cases of high brand loyalty, customers become less responsive to price changes, which means that the firm can increase the price of its product to increase total revenue and profits. This is illustrated by the following diagram.

In the above diagram, we have two graphs illustrating high brand loyalty and low brand loyalty. In the left graph, we have high brand loyalty, which makes the demand price inelastic. This means that a large percentage increase in the price of the product will lead to a small percentage decrease in the quantity demanded. As a result, total revenue will increase. So, firms with high brand loyalty can increase the price of their products to increase total revenue and profits. 

In the right graph, we have low brand loyalty, which makes the demand price elastic. This means that a small percentage increase in the price of the product will lead to a large percentage decrease in the quantity demanded. As a result, total revenue will decrease. So, firms with low brand loyalty cannot increase the price of their products, and hence they have to remain price competitive to win the market. 

Types of Brand Loyalty

The following are three main types of brand loyalty, which are explained as follows:

Heart-Loyal Customers

These types of customers follow their heart and are brand loyal due to the non-tangible benefits of their favourite brands, such as their impact on their local surroundings or a special cause. For these customers, their preferred brand is giving them some identity and honour. For example, if buying a brand can help the underprivileged in some way, they will stick to that brand. 

Head-Loyal Customers

These types of customers make rational choices related to a specific brand by considering the analytical reasoning behind loving a specific brand. They think about the value for their money. For example, customers buying generic medicines fall in this category because these medicines serve the same purpose and are cheaper.

Hand-Loyal Customers

These types of customers do not account for external factors such as the price of products. They only buy products from a specific brand out of habit. They don’t think much while buying a particular brand. Many customers who prefer some brands of cold drinks, toothpastes, or phones are hand-loyal customers.

Strategies to Build Brand Loyalty

The following are some strategies that brands can use to create a loyal customer base:

Out-Class Quality

The main strategy is to provide excellent quality to customers. No matter how much you have invested in marketing, if you don’t provide good quality, you can’t attract a large number of customers to buy your products. People prefer quality products regardless of their prices. When brands provide consistent quality, customers spread good word-of-mouth in their surroundings.

Customer Service

Firms should focus on customer service to be their favourite brand. For example, firms can provide information about upcoming products by making phone calls, using social media marketing, and providing 24/7 chat responses. By providing these services, the customers become brand loyal, which in turn generates big revenues.

Brand Ambassadors

Brands also have to use a strategy of making someone who has a large social circle, such as celebrities, their brand ambassadors, to attract a large audience. This audience is upper-class, which generates high returns, and only prefers to buy expensive products just to showcase their exclusive lifestyle. Brand ambassadors spread good word of mouth about your brand among people so that they change their preference for buying from other brands towards them.

Loyalty Programs

It is also a major strategy to attract customers to them by establishing loyalty programs. In these programs, brands start to appreciate their regular customers from time to time by giving rewards or extra discounts to keep their customers brand loyal. It is a less expensive way to gain existing customer retention rather than attract new customers. Starbucks Rewards is an example of a successful rewards program for building brand loyalty.

Creating a Community

Another strategy to build brand loyalty is by creating a community of like-minded customers who prefer your brand. This community building can be done by using social media. Once a community is created, it becomes easy for firms to communicate with them and create customer engagement in terms of their brands. Customers can interact with one another, give their customer feedback, and share their views in this community.

Conclusion

In conclusion, brand loyalty is a marketing strategy for retaining customers loyal to their brand in order to earn profit. Customers trust brands and they want to be associated with the brand they like and prefer. Through high brand loyalty, firms can make the demand for their products price inelastic, which means they become insulted from the price competition. They get the freedom to increase the price of their products to increase total revenue and profits.