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What is Brand Loyalty?

Updated on June 16, 2017
heidithorne profile image

Heidi Thorne is an author and business speaker with over 25 years of experience in sales, marketing, advertising and public relations.

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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:

  1. They wish to repeat or continue the positive experiences they receive from purchasing this brand.
  2. 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. As well, brand loyal customers are 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.

Disclaimer: Any examples used are for illustrative purposes only and do not suggest affiliation or endorsement. The author/publisher has used best efforts in preparation of this article. No representations or warranties for its contents, either expressed or implied, are offered or allowed and all parties disclaim any implied warranties of merchantability or fitness for your particular purpose. The advice, strategies and recommendations presented herein may not be suitable for you, your situation or business. Consult with a professional adviser where and when appropriate. The author/publisher shall not be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential, or other damages. So by reading and using this information, you accept this risk.

© 2013 Heidi Thorne

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  • heidithorne profile image
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    Heidi Thorne 4 years ago from Chicago Area

    So right, epbooks! Even though we literally have hundreds of restaurants in our area, we stick with a couple dozen because they've got that CRM machine working well. Have a fun weekend!

  • epbooks profile image

    Elizabeth Parker 4 years ago from Las Vegas, NV

    CRM is so important to keep customers. I know from experience if I walk into a store that I frequent (or restaurant) and know that it's good, I'll always return there.

  • heidithorne profile image
    Author

    Heidi Thorne 4 years ago from Chicago Area

    EJ Lambert... I'm reading your comment while at a Starbucks. Go figure! :)

  • EJ Lambert profile image

    EJ Lambert 4 years ago from Chicago, IL

    You and everyone else on the planet.

  • heidithorne profile image
    Author

    Heidi Thorne 4 years ago from Chicago Area

    EJ Lambert, Coke must just love you! Before I quit drinking soda some years ago, I thought Coke was a much better compliment, too. Now that I've dumped soda, I have a new addiction, oops that's brand loyalty, to Starbucks. Cheers! :)

  • EJ Lambert profile image

    EJ Lambert 4 years ago from Chicago, IL

    I'm very guilty of this. I've been a diehard Coke guy since I could crawl. Anytime I go to a restaurant with Pepsi products I settle for water. It's kind of childish but I've always felt Coke products better accent a meal that Pepsi does, so I've stayed loyal.

  • heidithorne profile image
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    Heidi Thorne 4 years ago from Chicago Area

    Thanks, rajan jolly, for stopping by! Glad you found it interesting and useful. Cheers!

  • rajan jolly profile image

    Rajan Singh Jolly 4 years ago from From Mumbai, presently in Jalandhar,INDIA.

    Very interesting read. quality and then service are 2 firm pillars for brand loyalty. Voted up and useful.

  • heidithorne profile image
    Author

    Heidi Thorne 4 years ago from Chicago Area

    Thanks so much, Prasetio30, for taking time to read, comment and vote! Yes, a lot of us have our favorites (Starbucks for me). Have a great day!

  • heidithorne profile image
    Author

    Heidi Thorne 4 years ago from Chicago Area

    Yes, billybuc, it is a difficult concept for individuals to understand. You are your brand!

    And, yes, brand loyalty can extend to the retailer, not just the product. In fact, I'll be talking about some of those issues in a following hub that expands on understanding brand loyalty.

    Thanks for chiming in!

  • prasetio30 profile image

    prasetio30 4 years ago from malang-indonesia

    Very informative hub. I know that people have favorite brand for kind of products. They must be selective in choosing products as the loyalty for the brand. Nice topic and thanks for sharing with us. Voted up :-)

    Prasetio

  • billybuc profile image

    Bill Holland 4 years ago from Olympia, WA

    Very interesting, Heidi. I try to tell other writers that they need to establish themselves as a brand and create brand loyalty....it's a hard concept for some to understand.

    Thanks for the information. There are certain products that I do buy because of brand loyalty...others because of store loyalty. :)

    Have a great weekend!