Brand loyalty

Brand loyalty is defined as positive feelings towards a brand and dedication to purchase the same product or service repeatedly now and in the future from the same brand, regardless of a competitor’s actions or changes in the environment. It can also be demonstrated with other behaviours such as positive word of mouth advocacy. Brand loyalty is where an individual buys products from the same manufacturer repeatedly rather than from other suppliers.[1] Businesses whose value rests in a large part on their brand loyalty are said to use the loyalty business model.

Definition

A brand is seen as an idea or concept, not a product.[2] This concept of a brand displays imagery and symbolism for a product or range of products. Brands can have the power to engage consumers and make them feel emotionally attached.[2] Consumer’s beliefs and attitudes make up brand images, and these affect how they will view brands they come into contact with [3]). Brand experience occurs when consumers shop for or search for, and consume products.[4] Holistic experiences such as sense, relation, acting and feeling occur when one comes into contact with brands. The stronger and more relational these senses are to the individual, the more for likely repeat purchase behaviour will occur. After contact has been made, psychological reasoning will occur, followed by a buy or not-buy decision. This can result in repeat purchase behaviour, thus incurring the beginning of brand loyalty.[5] Brand loyalty is not limited to repeat purchase behaviour, as there is deeper psychological reasoning as to why an individual will continuously re-purchase products from one brand. Brand loyalty can be shortly defined as the ‘behavioural willingness to consistently maintain relations with a particular brand’ [6] In a survey of nearly 200 senior marketing managers, 68 percent responded that they found the "loyalty" metric very useful.[7]

True brand loyalty occurs when consumers are willing to pay higher prices for a certain brand, go out of their way for the brand, or think highly of it.[8]

Purpose

Brand loyalty, in marketing, consists of a consumer's commitment to repurchase or otherwise continue using the brand and can be demonstrated by repeated buying of a product or service, or other positive behaviors such as word of mouth advocacy.[9]

Examples of brand loyalty promotions

Why is brand loyalty essential?

Brand loyalty in marketing, consists of a consumer’s devotion, bond, and commitment to repurchase and continue to use a brands product or service over time, regardless of changes with competitors pricing or changes in the external environment. Brand loyalty reflects a customer's commitment to remain in a relationship for a long period of time with a brand (So, Andrew & Yap, 2013).

A critical factor of building brand loyalty is developing a connection or relationship between the consumer and the brand. When an emotional relationship is created between the consumer and the brand this leads to a strong bond and a competitive advantage for that particular brand. Loyalty consists of both attitudinal and behavioural components. Attitudinal loyalty relates to the customers willingness to purchase product or service from the brand at any reasonable cost. Behavioural loyalty is the re-purchasing. Both behavioral and attitudinal components are important. One example is that a consumer displays behavioural loyalty by buying Coke when there are few alternatives available and attitudinal loyalty when they will not buy an alternative brand when Coke is not available. The attitudinal component is psychological, this leads to the behavioural action of repeat purchase. It is the attitudinal loyalty that drives most loyalty behaviour and ensures loyalty over time not just with one purchase. “Brand loyalty is desired by firms because retention of existing customers is less costly than obtaining new ones. Firms profit from having loyal customers” (Melnyk & Bijmolt, 2015).

Benefits

Brand loyalty has shown to profit firms by saving them a lot of money. Benefits associated with loyal consumers include:

Generally speaking, brand loyalty will increase profit over time as firms do not have to spend as much time and money on maintaining relationships or marketing to existing consumers. Loyal long-term customers spend more money with a firm.

Construction

Brand loyalty is more than simple repurchasing. Customers may repurchase a brand due to situational constraints (such as vendor lock-in), a lack of viable alternatives, or out of convenience.[10] Such loyalty is referred to as "spurious loyalty".

A recent study showed that customer loyalty is affected by customer satisfaction, but the association differs based on customer switching costs (procedural, relational, and financial). True brand loyalty exists when customers have a high relative attitude toward the brand which is then exhibited through repurchase behavior.[9] This type of loyalty can be a great asset to the firm: customers are willing to pay higher prices, they may cost less to serve, and can bring new customers to the firm. [11] [12] For example, if Joe has brand loyalty to Company A he will purchase Company A's products even if Company B's are cheaper and/or of a higher quality. From the point of view of many marketers, loyalty to the brand — in terms of consumer usage — is a key factor. However, companies often ensure that they are not spending resources to retain loyal but unprofitable customers. [13]

Usage rate

Most important is usually the 'rate' of usage, to which the Pareto 80-20 Rule applies. Kotler's 'heavy users' are likely to be disproportionately important to the brand (typically, 20 percent of users accounting for 80 percent of usage — and of suppliers' profit). As a result, suppliers often segment their customers into 'heavy', 'medium' and 'light' users; as far as they can, they target 'heavy users'. However, research shows that heavy users of a brand are not always the most profitable for a company.[13]

Loyalty

A second dimension, is whether the customer is committed to the brand. Philip Kotler, again, defines four patterns of behaviour:

  1. Hard-core Loyals - who buy the brand all the time.
  2. Split Loyals - loyal to two or three brands.
  3. Shifting Loyals - moving from one brand to another.
  4. Switchers - with no loyalty (possibly 'deal prone', constantly looking for bargains or 'vanity prone', looking for something different). Again, research shows that customer commitment is a more nuanced a fine-grained construct than what was previously thought. Specifically, customer commitment has five dimensions, and some commitment dimensions (forced commitment may even negatively impact customer loyalty).

Psychological Reasoning

Humans are attracted to certain brands due to each individual psychological make up. Cognitive responses can be matched with brand personalities. Brand personalities are broken down into 5 categories of traits: sincerity, ruggedness, competence, sophistication and excitement.[14] Consumers are usually drawn to brands because the brand will strongly convey one of these traits, and that trait will resonate in the individual consumers mind. These traits are matched to the five psychological factors that the consumers are influenced by. These are the perception, learning, motivation, and beliefs and attitudes.[14] In relation to brand loyalty, the most important factors are beliefs and attitudes. A belief that one might hold can be based on real knowledge, faith or opinion and have the ability to carry an emotional charge.[14] Consumers use these beliefs to form a brand image in their minds, and marketers try to either change or enhance people’s beliefs to draw them to their brand.[14] Marketers can advertise messages such as ‘no added sugar’ and then if this statement resonates in the consumers mind, they will believe that this brands beliefs matches theirs [14] Beliefs that consumers hold against brands can also be false, as word of mouth, false advertising and so forth can create false impressions. Marketers will try to counteract these negative beliefs so the consumer feels like they hold similar beliefs as the brand. Attitudes can be based on brand salience and accessibility.[15] Consumers make constant evaluations on every aspect of their lives and these make up attitudes.[14] Ones attitude is usually difficult to change, so marketers try to fit their brands and products into categorical attitudes.[14] Each time a consumer makes contact with a brand (through advertising and promotion), they reflect on their attitudes to make judgements and decisions about that particular brand.[16] If a person’s attitude coincides with what a brand is trying to convey, the consumer will put the brand into a ‘liking’ category in their mind. The consumer will then be more likely to increase involvement with this brand, and because attitudes are difficult to change, the chances of brand loyalty occurring are increased.

Other advertising techniques such as comparative advertising have shown to increase the brand attitudes one might have.[17] When a brand praises a competitor, rather than using a negative comparison, consumers are shown to have more positive brand attitudes, therefore drawing them to the brand.[17] Brands may advertise themselves in ways that have nothing to do with their product, but using emotional influences that they know the average consumer will engage with. For example, using religion, world peace, love, death, children and many more symbols that humans can feel sentimental about will attract consumers to their brand [2] Through advertising, marketers are beginning to focus more on implicit emotional messages, rather than the actual content or information about their brand.[18] Consumers take notice of campaigns, and a wave effect can occur, due to the relational sense of the campaign to the common persons emotions. Once an emotional hold has taken force, consumers are more likely to be able to recall the brand than consumers who have been subject to a large amount of content information.[19] Because of this increased level of recall, brand loyalty is more likely to occur, as the brand name is resonating in the consumers mind due to a feeling of emotional attachment.[2] Furthermore, consumers are willing to pay more for a product that has a brand name that resonates with them emotionally [20]

High VS Low Involvement Consumers Buying decisions from consumers can be dependent on their level of involvement with the product or brand. Brand loyalty can stem from whether the consumer is highly or lowly involved with the brand. High involvement consumers interact with brands and products that are important to them, are risky or expensive and products that people who are important to the consumer have strong opinions on.[14] High Involvement consumers will usually progress through complex buying behaviour to decide whether they want to purchase a product whose brand greatly differs from others. This involves gaining knowledge of the product, specifications and attributes, and furthermore creating attitudes that lead to the buyer’s decision.[14] Similarly, dissonance-reducing buying behaviour occurs in the same situation, but instead with brands they see little differences between.[14] This process consists of consumers finding purchase convenience, attractive pricing, and shopping around. High involvement consumers search for more product attributes and engage in more product related activities, such as searching for more information on a product and researching the brands background.[21] This engagement makes consumers aware and knowledgeable of the brands attributes, so therefore they can shape behavioural brand loyalty, as the consumer feels that they know the brand well.[21]

Low involvement consumers take on the habitual buying behaviour or variety seeking behaviour.[14] These processes occur when a consumer is purchasing fast moving goods and requires a low product involvement level.[14] Habitual behaviour occurs when the consumer doesn’t see large differences between brands; so therefore don’t search for information. Consumers usually purchase on the basis of advertising or promotion creating familiarity.[14] The attitudes formed by being exposed to advertisements and promotions are what can cause brand loyalty to occur [22] The limited amount of information processing and lack of cognitive work done to assess each brand can mean that these consumers stick with a brand simply because it is less work.[21] Low involvement consumers are using short-cut evaluations so a known brand name that they haven’t thought deep enough to find faults in will be an easy buy-decision for them. Habitual buying behaviour behaviour can result in brand loyalty subconsciously. The consumer isn’t actively aware they want to purchase repeatedly from a particular brand, it is just in their habitual nature to do so.[14] Alternatively, low involvement consumers who are using variety seeking behaviour see differences between brands and tend to do a lot of switching.[14] To attempt to persuade these consumers into habitual buying behaviour, marketers will try to dominate shelf space, cut prices or introduce new products.[14] If a low involvement consumer continues to use variety-seeking behaviour, brand loyalty is unlikely to be established.

Factors influencing brand loyalty

It has been suggested that loyalty includes some degree of pre-dispositional commitment toward a brand. Brand loyalty is viewed as multidimensional construct. It is determined by several distinct psychological processes and it entails multivariate measurements. Customers' perceived value, brand trust, customers' satisfaction, repeat purchase behavior, and commitment are found to be the key influencing factors of brand loyalty. Commitment and repeated purchase behavior are considered as necessary conditions for brand loyalty followed by perceived value, satisfaction, and brand trust.[23] Fred Reichheld,[24] One of the most influential writers on brand loyalty, claimed that enhancing customer loyalty could have dramatic effects on profitability. However, new research shows that the association between customer loyalty and financial outcomes such as firm profitability and stock-market outcomes is not as straightforward as was once believed.[25] Many firms may overspend on customer loyalty, and then do not reap the intended benefits. Among the benefits from brand loyalty — specifically, longer tenure or staying as a customer for longer — was said to be lower sensitivity to price. This claim had not been empirically tested until recently. Recent research[26] found evidence that longer-term customers were indeed less sensitive to price increases. Byron Sharp showed empirically that behaviour affects attitudinal response not the other way round. Longer term customers are less sensitive because it is harder for them to completely stop using the brand.[27]

The ability of an organization to attract and retain customers is vital to its success. Customer loyalty requires a strong appetite by the customer for a product. Marketing tools such as integrated marketing communications (IMC) and branding can be used in ways to increase perceived attraction between the consumer and the brand. These tools are used to boost emotional response and attachment to the brand, as well as to influence feelings the customer has for a brand, both are important for congruency and a relationship, this in turn leads to the development of brand loyalty. Relationship development and maintenance can also be achieved through the use of loyalty programs or a celebrity endorser. These can help to increase a bond between a brand and a consumer (Pauwels-delassus & Mogos Descotes, 2013).

IMC is defined as “integrating a variety of convincing messages across various forms to communicate with and develop relationships with customers”. (Lazarevic, 2012). IMC can be used to convey the brand image, increase awareness, build brand equity, and achieve shared values between the consumer and the brand.

IMC and brand loyalty IMC and branding are both relevant marketing tools for increasing the brand loyalty of consumers. The decisions made around communications and branding should be based on solid and factual market research about the consumers. If the brand or the IMC do not seem to be relevant to the target market, consumers will not pay attention. An example of this is that high customization, creativity and a more direct voice is recommended for messages directed towards generation Y consumers as generation Y want to be treated differently from the rest of the market and marketers should acknowledge this (Schivinski & Dabrowski, 2015).

Loyalty programs help to reward and encourage customers, which is a necessary factor for customers to want to repurchase. The consumer should feel a connection with the brand to want repeat purchase and portray other brand loyalty behaviours such as positive word of mouth. “A loyalty program is an integrated system of marketing actions that aims to make member customers more loyal to a brand” (Melnyk & Bijmolt, 2015). The main goal of a loyalty program is to create or enhance customer loyalty towards a brand whilst being sustained even after a loyalty program is discontinued. Thus, to an extent a loyalty program motivates customers to change their behavior (Melnyk & Bijmolt, 2015).

The reason for marketers to use such tactics as a loyalty program is to increase likelihood of repeat purchase and retrieve vital information about the spending habits of the consumer. Loyalty programs that enhance the consumer’s opinion about how much the firm can offer them may be essential for building a relationship. Even though these programs can cost a lot of money, they help to create a relationship between the brand and the consumer (Melnyk & Bijmolt, 2015). An example of a loyalty program is a simple point system. Frequent customers earn points or dollars, which transform into freebies, discounts, rewards or special treatment of some sort, customers work toward a specific amount of points to redeem their benefit (Grace & Chia-Chi, 2009).

Celebrity endorsers moderate the relationship between the consumer and the brand by personifying the brand to match the perceptions of the consumer themself. Using a celebrity endorser can facilitate a relationship built between consumers and a brand because endorsers can represent similarities between themselves and the consumer, and themselves and the brand. Celebrities are used to make marketing tactics more convincing and marketing communications more effective (Lazarevic, 2012). An example is that a celebrity may be influential to a generation Y consumer because that generation views them as likeable, real and beautiful. In order for celebrity endorsers to effectively reach the audience, they must connect and identify with the audience (Liljander, Gummerus & Söderlund, 2015). The use of a popular celebrity endorser could personalize the brand for the consumer and create the relationship between the consumer and the brand. To ensure endorsement is successful the celebrity should match the brand and the consumer (Ludin & Cheng, 2014). The effect of using a celebrity endorser that consumers look up to and want to emulate can lead to increased congruency between the values of the consumers and the brand, and improve the relationship between the two.

Industrial markets

In industrial markets, organizations regard the 'heavy users' as 'major accounts' to be handled by senior sales personnel and even managers; whereas the 'light users' may be handled by the general salesforce or by a dealer.

Portfolios of brands

Andrew Ehrenberg, then of the London Business School said that consumers buy 'portfolios of brands'. They switch regularly between brands, often because they simply want a change. Thus, 'brand penetration' or 'brand share' reflects only a statistical chance that the majority of customers will buy that brand next time as part of a portfolio of brands they favour. It does not guarantee that they will stay loyal.

Influencing the statistical probabilities facing a consumer choosing from a portfolio of preferred brands, which is required in this context, is a very different role for a brand manager; compared with the — much simpler — one traditionally described of recruiting and holding dedicated customers. The concept also emphasises the need for managing continuity.

Issues

When brands are well established and have a decent following of consumers, problems may arise such as slips in product quality, safety of products and lack of customer care. These problems can be detrimental to a brand that has become too confident as they can be publicly exposed and reputations can be ruined. On the contrary, many brands continue to get away with scandals, and it does not affect their image in any great way.[2] For example, the Coca Cola brand has been involved in scandals including murders in Colombia linked to Coca Cola, crimes in India and various health dangers.[2] The power that this brand holds is the fact that Coca Cola is the top in its field and has a hold over competitors. The reputation of such a massive organisation is hard to dent with the powerful distribution rights and funds to create some of the best ad campaigns.[28]

Cautions

One of the most prominent features of many markets is their overall stability — or marketing inertia. Thus, in their essential characteristics they change very slowly, often over decades — sometimes centuries — rather than over months.

This stability has two very important implications. The first is that those who are clear brand leaders are especially well placed in relation to their competitors and should want to further the inertia which lies behind that stable position. This, however, still demands a continuing pattern of minor changes to keep up with the marginal changes in consumer taste (which may be minor to the theorist but will still be crucial in terms of those consumers' purchasing patterns as markets do not favour the over-complacent). These minor investments are a small price to pay for the long term profits which brand leaders usually enjoy.

The second, and more important, is that someone who wishes to overturn this stability and change the market (or significantly change one's position in it), massive investments must be expected to be made in order to succeed. Even though stability is the natural state of markets, sudden changes can still occur, and the environment must be constantly scanned for signs of these.

See also

References

  1. ↑ American Marketing Association Dictionary. Retrieved 2011-07-09. The Marketing Accountability Standards Board (MASB) endorses this definition as part of its ongoing Common Language: Marketing Activities and Metrics Project.
  2. 1 2 3 4 5 6 ("TV Choice", 2010)
  3. ↑ (Kotler, Burton, Deans, Brown & Armstrong, 2013
  4. ↑ (Kim & Ah Yu, 2016)
  5. ↑ (Douglas, 06)
  6. ↑ (Aaker, as cited by Kim & Ah Yu, 2016).
  7. ↑ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0-13-705829-2. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language: Marketing Activities and Metrics Project.
  8. ↑ "What is brand loyalty?". Market Business News. July 2015.
  9. 1 2 Dick, Alan S.; Basu, Kunal (1994). "Customer Loyalty: Toward an Integrated Conceptual Framework". Journal of the Academy of Marketing Science. 22 (2): 99–113. doi:10.1177/0092070394222001.
  10. ↑ Jones, Michael A.; Mothersbaugh, David L.; Beatty, Sharon E. (2002). "Why Customers Stay: Measuring the Underlying Dimensions of Services Switching Costs and Managing Their Differential Strategic Outcomes". Journal of Business Research. 55: 441–50. doi:10.1016/s0148-2963(00)00168-5.
  11. ↑ Reichheld, Frederick F.; Earl, Jr. Sasser (1990). "Zero Defections: Quality Comes to Services". Harvard Business Review: 105–11.
  12. ↑ Reichheld, Frederick F (1993). "Loyalty-Based Management". Harvard Business Review. 71 (2): 64–73.
  13. 1 2 Reinartz, Werner J.; Kumar, Vita (2003). "The impact of customer relationship characteristics on profitable lifetime duration". Journal of marketing. 67 (1): 77–99. doi:10.1509/jmkg.67.1.77.18589.
  14. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 (Kotler et al, 2013)
  15. ↑ (Posavac, Sanbonmatsu, Seo & Iacobucci, 2014)
  16. ↑ (Posavac, 2014)
  17. 1 2 (Posavac et al, 2014)
  18. ↑ (Heath, Brandt & Nairn, 2006)
  19. ↑ (Heath et al, 2006)
  20. ↑ ("TV Choice", 2010).
  21. 1 2 3 (Eryigit, 2013)
  22. ↑ (Eryigit, 2013).
  23. ↑ Punniyamoorthy, M; Mohan Raj, Prasanna (2007). "An empirical model for brand loyalty measurement". Journal of Targeting, Measurement and Analysis for Marketing. 15 (4): 222–233. doi:10.1057/palgrave.jt.5750044.
  24. ↑ Reichheld, F. The Loyalty Effect 1996
  25. ↑ Reinartz, Werner; Viswanathan, Kumar (2002). "The mismanagement of customer loyalty". Harvard business review. 80 (7): 86–95.
  26. ↑ Dawes, J. "The Effect of Service Price Increases on Customer Retention: The Moderating Role of Customer Tenure and Relationship Breadth". Journal of Service Research. 11: 2009.
  27. ↑ Byron Sharp. How Brands Grow.
  28. ↑ ("TV Choice, 2013)
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