Brand loyalty: what customers want in exchange for their loyalty.
Every time our friend Mark goes to the grocery store he buys the same milk from the same brand. He doesn’t care about cheaper prices or different brands existing in the milk’s market. It seems like all the others available brands’ strategies are totally useless. Although brilliantly, designed these strategies seem to have lost their power of attraction on him. There is no packaging, discount or add that works and can convince Mark to buy a different branded milk and you know why? Because when Mark was a child, he used to leave out the same branded milk he still buys today and cookies, for Santa Claus on Christmas Eve, thinking were his favourite.
How can we define clients as Mark and above all, what can be done to make all our customers behave like Mark?
There is no doubt in the fact that Mark is a loyal customer and neither in the fact that every company ardently desires to have customers like him.
This article explores all most important aspects concerned the Brand Loyalty asset, an extremely powerful factor for business. Its purpose is to offer an explanation of what is and which are the factors that can predict it. Also, this article discusses about the strategies that can encourage it and all the effects and benefits for a business.
Not by chance loyalty is one of most often considered metric when assessing company’ performance.
As we will see, whit the objective of build brand loyalty you first need to understand what your customers want in exchange of their loyalty.
Chapter 1: What is Brand Loyalty
A loyal client is someone that re-purchase from the same brand but not always a client who re-purchase is a loyal customer.
Is extremely important to be able to recognise when we are facing with loyalty or just re-purchase.
In fact, brand Loyalty is much more than a customer repetition of a purchase.
First, the reasons whereby someone re-purchase from the same brand are different.
Studies shown that customers think that a consistently good experience with the brand is the main reason to re-purchase, but they also think other mainly reasons are convenience, easy payment process and price.
According to Harvard Business School professor Gerald Zaltman, there’re deeper psychological reasonings as to why an individual will purchase and re-purchase products from one brand.
He states that 95% of our purchase decision-making takes place in the subconscious mind. Humans don’t know what subconsciously drives their decision and think to take rational decision most of times. That’s why marketers must necessary unearth that emotional content, to build brand that meet also their internal desires, feelings and needs.
Surely an unsatisfied customer doesn’t re-purchase the same branded product, unless without the possibility to don’t do that. This happen for example when markets don’t offer any other suitable solution with the economic status of the unsatisfied customers. In that cases, the high customers re-purchase levels from the same brand, is not a manifestation of true Brand Loyalty. As soon as a new product from another company will be able to better satisfy customers need, these customers will turn to competitor without thinking twice.
So, the insurance of a good experience which let customers satisfied surely affects in incisive manner on brand loyalty, but that’s not all.
True brand loyalty exists when customers have positive belief and behaviour toward a brand and then exhibited these through repurchase behaviour. It’s an emotional attachment arise from experiences within the brand, which have repeatedly produced satisfaction in the costumer. As we have seen in the example of Mark, the reason because he is so attached with that particular milk brand is not rational but emotional, is a positive and nostalgic association.
Then, satisfaction is the principal factor jointly with emotion attachment, let’s better see what it is.
The emotional attachment is composed by feelings of love, connection and affection towards the brand. Is possible to explain this love as a passion for corporate’ activity, this connection as a mirroring in the values and characteristics of the brand identity and this affect as a customer’s accumulation of pleasing experiences. High levels of emotional attachment are responsible of long-term relationship with brand.
Brands can have the power to engage consumers and make them feel emotionally attached. We are talking about empathy! If a company is not able to build this connection with its customers will never build a really strong brand loyalty.
That’s why is not enough to run some customer loyalty programs such as points, miles or special discounts, focused on growing and retaining existing customers through incentives. These strategies are created and developed to give customers rational reasons to be a repeat customer and don’t buy from competitors. Substantially these are retention strategies and sometimes can be very useful, but they don’t take into consideration customers psychology.
Chapter 2: How to have an idea of your brand loyalty level
Measuring and tracking the level of our customer loyalty is necessary to discover how well we are working on building brand loyalty and where we must focus our efforts. To understand the level of Brand loyalty is necessary to record and analyse various important metric. These are:
- Satisfaction: studiers agree to define satisfaction as a feeling derived from a comparison between expectations, past experiences and current product’s experience. Customer satisfaction is an hard metric to be measured because is pretty subjective since an experience could be perceived significantly different between one person to another. However, there are some trustable satisfaction scales used by researchers to measure satisfaction in consumers by observing three key factors:
- overall satisfaction over time,
- distance between the product performance and customer expectations,
- distance between products’ perceived performance and the ideal performance.
Is essential to improve and constantly take care of customers experiences with products and brand. We’ll discuss below, in the next chapter, some tips to improve customers satisfaction.
- Customer lifetime value: CLV is an estimate of each customer loyalty improvement over their entire life. It can demonstrate if your customers are becoming more loyal over time showing how valuable will be for the company. Easy alternative ways for the calculation are the following:
- CLV= ((AMT x AOV) x AGM) x ALT
AMT- Average Number of Monthly Transactions
AOV- Average Order Volume
AGM- Average Gross Margin
ALT- Average Customer Lifespan in months
- CLV= Average revenue of an order/ Average number of orders made by customer within the period
- Repeat purchase rate: is the percentage of customers who have re-purchase from your company. It’s appropriate to discover if they are loyal customers or actually just repeat customers without attachment with the brand, according to marketing author Philip Kotler, it’s possible to identify four status of loyalty:
- Hard-core Loyals: customers who buy only one brand all the time.
- Split Loyals: customers who buy two or three brands.
- Shifting Loyals: customers who moving from one brand to another.
- Switchers; customers with no loyalty
- Net promoter score: is a percentage that shown how likely are customers to be branding ambassador, namely to recommend the brand to other people. Can be calculated collecting customers’ answers about how likely they would recommend the brand to friends or colleagues in a 0-10 scale. Depending on the answer we can group them in:
- Promoters: (score 9-10) really happy customers who will keep re-purchasing from the brand and recommend it to other.
- Passives: (score 7-8) customers with positive thinking about the brand but exposed to potential competitor’s offer. Improbable to be brand ambassador.
- Detractors: (score 0-6) customers with un-positive or negative feeling through the brand. They will not recommend the brand or even worst they could discredit it.
Chapter 3: What is necessary for your corporate to create brand loyalty
Every company, of any size, would like to have loyal customers who love company’s brand identity, the products and services offered and who would never need to seek for a better solution from competitors.
That’s because brands with strong loyalty from customers are extremely advantaged in the market, having a competitive level that can seriously cause difficult for brands with low or inexistent loyalty.
Even if the products and services of brands with low or inexistent loyalty are just as good as or better, and as cheap as or cheaper than products and services of brands with strong loyalty, costumers tend to prefer product they have used before or familiar brand because of the highly advertising.
This makes it a difficult task for small and medium business entities to enter and conquer markets, making customers choosing and trying their products. So how could a new or established company create and increase brand loyalty?
In order to ensure loyalty from customers is certainly essential, as well as having the right product, understanding how to manage brand loyalty factors presented above. In that way a good operative strategy can be created making possible to attract customers attention and creating loyalty in brand, even leveraging on dissatisfaction of whom at first appearance could seems a loyal customer of competitor ’brand and then turns out to be a simple repeat customer.
In fact, it’s extremely important don’t forget during the building of our own brand loyalty to question about if customers are loyal or just simple repeat customers. As we saw, sometimes switch costs or the lack of a better product in the market designed for customer’ needs, could help in retention of customers, making easier for brands that customers will buy from them again but without a real pleasure to do that. That’s way is important to always work on maintain customers loyalty even if they are showing the higher level of loyalty.
What we can do to build the foundation of brand loyalty and improve it over the time is improve customers satisfaction and unearth emotional content and keep it always on control. Let’s see how we can do that.
Improve customers satisfaction:
The experience within a brand goes through a continuum confirmation or disconfirmation of the previous experiences with it.
- Ensure high quality experience: first step to ensure a good experience making users satisfied is providing a product that effectively solve customers’ needs and problems. Clearly, the higher the product’ performance is, the higher the level of customers ‘satisfaction will be. Surely, is not possible that every companies provides the best product in the market, but at least these should make sure to do the best that can be done with the owned resources.
- Ensure an experience consistent with the expectation: all the components of your product and the active made to make customers buy it, create customers expectation of its quality level. Price, advertising, aesthetic aspects etc, all contribute to generate an idea of the experience with the product. Let the final experience be consistent with customers expectations. People appreciate when brand communicate a truthful message and get frustrated when this doesn’t happen.
- Create interaction with your customers: customers who are more engaged with a brand are more likely to be more loyal. If they choose to continue engaging with you it’s because of how your brand makes them feel or how they feel engaging with your brand. Involving them could be also a precious resource to understand what they want from you, for example asking them to give feedback or opinion about your business. This could help you identify your weaknesses and your strengths understanding where who need to focalise your effort to improve your product performance and make also customers feel that you care about them.
- Consider creating loyalty programs: think about the possibility to create and develop a loyalty strategy to improve loyalty in clients. Giving some vantages such as money saving, rewards earning or rewards receiving, you can give to your customers rational reasons to continue buying from you instead from competitors. Felling the potential lost of a vantage, customers are inclined to follow the strategy.
- Give value: never forgot that. Your brand must give value both to the users and both to the company. Understand if your customers really receive value and specially if they really perceive it because otherwise, is like there’s not value at all.
Create uniqueness that touches customers emotions.
Humans develop feelings and emotional attachments to several objects such as gifts and brands. These emotional connections are similar to human to human relationship, presenting the same basic properties even if less powerful.
As well as ensuring satisfaction is necessary to appeal to the emotions of customers creating deep positive connections with them. This emotional connection reflects how a customer feels about the brand.
Are they feeling important or disregarded? Do they feel happy and comfy within the use of your brand? They could feel happy or nostalgic because brand can have the power to arise positive feeling or they could feel frustrated and angry because they don’t feel considered and heard enough.
Is extremely important to understand how brand makes them feel because only high level of positive feeling can ensure loyal customers. The mission is to connect with them, solve their needs, realize their problems and make them feel regarded, heard and understood.
This deep positive connection can be created only knowing them, their personal stories, values and backgrounds. That’s why is not possible using one approach that fits all but you need to define your brand personas. Based on the brand is necessary to identify the ideal profiles of the people are likely to become your loyal customers. Then you need to research and find their expressed and un-expressed needs.
Creating a personas makes also easier to find your realistic potential loyal customer and understand their reasons to purchase and re-purchase from your brand.
When customers see the efforts made to give them the best possible product and service, they start to appreciate your business and to support your brand. This also happen when they recognise that their needs are
Chapter 4: Brand loyalty as a business success metric
At this point, the time has come to see how Brand loyalty has a direct impact on business financial performance.
Surveys shown how senior marketing managers are firmly convinced that brand loyalty is very useful metric. In a survey of nearly 200 senior marketing managers, 68 percent responded that they found it a prominent and helpful business performance measurement.
The benefits derived from high level of brand loyalty are different. First, brand loyalty ensures cost saving and increases profit. Depending on what industry your company is customer acquisition is from 5 to 25 times more expensive than retaining who is already a customer. According to Frederick Reichheld increasing customer retention rates by 5% increases profits by 25% to 95%. The reasons are simple. Customers who re-purchase tend to buy more over time and longer-term customers are less sensitive to price increases, also there is a decree of operating cost to serve them.
Customers retention can also allow to gather valuable data about your customers. In this way is possible to offer personalised experience or run targeted marketing campaigns increasing sales and customers engagement with the brand.
Another important benefit is that loyal customers are brand ambassadors. A study shown that 77% of customers who have had a positive experience with a company tell they shared with someone. This shows how brand loyalty a great way of generating positive word of mouth communication. In contrast, a Harvard Business Review study found that 48% of customers who had negative experiences with a company told 10 or more people.
We have seen through this article what is brand loyalty and what are the elements that compose it. Creating loyalty helps in building a strong customer base helping your business push past its competitors. Companies with strong brand loyalty gain the competitive advantage necessary to succeed in the marketplace. This is possible by guaranteeing quality, satisfaction and creating strong emotional customer bond with the brand. Loyalty doesn’t come by chance but is the result of hard work and a whole lot of passion of giving customers everything they need and is important to them.