How Brands Build Loyalty

Larry LightJune 28, 202222077 min

Brand loyalty is not dying. But, you would not know this if you are paying attention to the business press.

Recently, there have been many articles describing the impact of higher prices and lack of product availability on brand loyalty. These articles and opinions state that when consumers do not see their favorite brand due to supply chain issues or price increases, consumers buy some other brand. The conclusion is always that consumers are no longer loyal to their favorite brands. In most cases, the stories feature supporting data showing that consumers are shifting their buying behaviors to new brands or familiar but never purchased brands such as private label brands.

It is possible that by switching brands, consumers may find a new brand that they love. And, that would be great. However, assuming that a change in purchase due to difficult in-store circumstances is destroying brand loyalty is just not true.

The pundits, journalists and researchers seem to be overlooking some basic tenets of brand loyalty. Let’s look deeper into brand loyalty.

One: brand loyalty has two dimensions: behavioral and attitudinal. Behavioral loyalty refers to purchase frequency. Attitudinal loyalty refers to the emotional commitment a customer has for the brand. It is a mistake to look only at the behavioral aspect of brand loyalty, as it is possible to create frequent buying based on deals, lack of availability and/or price changes. Repeat purchase in and of itself is not brand loyalty. And, deal loyalty is not real loyalty. Attitudinal loyalty that is based on deep brand commitment, affects repurchase intentions, consumer willingness to recommend to others, and price tolerance. Repeat purchase based on attitudinal commitment to the brand is the true measure of brand loyalty. Focusing on behavioral loyalty alone is misleading.

Two: brand loyalty is not an on-off switch. Customers are not loyal or disloyal. Brand loyalty is a matter of degree. Customers are more loyal or less loyal. It is the degree of commitment to a customer’s preferred brand. As brand loyalty increases resistance to competitive brand marketing activities also increases. Switching to a new brand due to in-store issues may not generate a lot of loyalty towards the new brand. The new brand may be a stop-gap measure.

Three: in our data-driven world, marketers tend to look only at behavioral datasets. Any review of the marketing literature will reveal that loyalty is almost always defined behaviorally. Either brand loyalty will be defined as a share of requirements measure or as a pattern in choices often using an experimental design. Citing a correlation such as not-on-the-shelf relative to buy-another-brand is not the same as causality. Having to buy a different brand does not necessarily mean that the favored brand in no longer the favored brand.

So, in “Brand Loyalty Takes A Hit From Inflation,” The Wall Street Journal, cites two separate research studies, both focused on consumer behavior. One of these studies showed that if a favored brands were not on the shelf, the favored brand lost “share of wallet” – a share of requirements term the study uses for brand loyalty.  Share of wallet is a term for the percentage (“share”) of a consumer’s expenses (“of wallet”) that a consumer spends on a brand. There are some data showing correlations between share of wallet and brand loyalty. However, share of wallet is sometimes defined as a consumer’s purchase of a particular brand over a period of time.

For example, a consumer may stop at the same drive-thru for breakfast every day, increasing the frequency of usage. That frequency may be attributed to other things than brand loyalty such as being on the right side of the street, having a double drive-thru or breakfast promotional deals. Or, a person may commute frequently by plane to a city serviced by only one airline. That airline has a huge share of wallet from this traveler but it is not necessarily a reflection of brand loyalty. Brands do not own the consumer. Brands should not confuse repeat purchase with brand loyalty.

Four: sadly, The Wall Street Journal article associates “convenience” with brand loyalty. Convenience is not a good criteria for brand loyalty. No one wants inconvenience. All brands must be easy to choose, easy to use and provide ease of mind. Inconvenience is a cost that consumers factor into their assessments of brand worth. Being “convenient” is a generic definer.

Five: the era of exclusive brand loyalty (i.e., loyalty to one brand in a category) ended ages ago. We live in a world of multi-brand loyalty. People used to say, “This is my favorite exclusive brand.” Now, they have more than one brand to which they are loyal because they see more than one brand that is good quality and provides value. Consumers have a consideration set of brands to which they have varying degrees of loyalty. Consumers may find that their first choice brand is not available nor affordable but their second choice brand is available and affordable.

Six: it used to be that a loyal consumer would buy their first choice brand even if it meant shopping at a second store. But, right now, with the price of gasoline, no one is really interested in driving to a second store for their favorite brand when that brand is not on the shelf in the first store. Shopping around for a bag of laundry pods is just not affordable. The consumer will probably switch to an available brand. Data from Kroger, the large grocery chain, supports this: “More than 90% of consumers say they will buy another brand if their preferred choice” is not available. Assuming that this means brand loyalty is dying is a stretch. Consumers may still harbor attitudinal attachments to favorite brands.

Seven: at some point, price sensitivity pops up, no matter how loyal the consumer. Many favored brands thought they could pass along supply chain surcharges to the consumer. These brands recognized that a loyal consumer is less price sensitive. But, these favorite brands did not conduct price sensitivity research to learn just how much prices could be raised. These favorite brands did not consider that at some point the consumer will see the cost of the brand as too high for the brand experience. Instead of rewarding loyal consumers, brands took advantage of them by raising prices too high.

Today’s economic brand-business situation is similar to the early 1990’s. At that time, there was a lot of hand-wringing over the imminent death of brand loyalty. Step into the time machine and go back to April 2, 1993, a day of stock market infamy called Black Friday. On that day, Marlboro cigarettes announced that the brand (one of the world’s most popular and profitable, as The Economist pointed out) was losing smokers to cheaper brands. Of course, Marlboro’s stock tanked. But so did the stocks of other consumer goods. Polling and other market research showed that brands had raised prices creating huge price disparities between them and store brands. The Economist (June 5, 1993) described the situation as follows:

“Partly this is due to recession and to consumer-goods firms jacking up prices on many brands until there is a huge discrepancy with own-label rivals.  Last year Kraft was forced to slash prices when it began losing sales to own-label cheeses that were 45% cheaper. Last month P&G cut prices for the same reason on its two leading brands of nappies, Pampers and Luvs. Consumers have discovered that the quality of many own-labeled goods is just as high as that of established brands.”

Of course, since then, most of these branded consumer goods have not faded away. Nor have their cadres of brand loyalists. Brand loyalty did not disappear. And, it is not disappearing now.

As for the new brands consumers are now buying, these brands should be employing brand loyalty management techniques to convert category shoppers (those who are brand indifferent and see brands as parity) up the loyalty ladder to the point where they become “brand enthusiasts“. These loyal consumers have a propensity to account for a greater share of a brand’s overall profits. They are also less price sensitive and will actually pay more for a product up to a point. Creating and reinforcing brand loyal consumers is the only enduring basis of growth.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

What drives loyalty for your brand? The Blake Project’s brand equity measurement system is comprehensive, measuring each of the five drivers of customer brand insistence – awareness, relevant differentiation, value, accessibility and emotional connection – along with other factors such as brand vitality, brand loyalty, brand personality and brand associations. Contact us for more on brand equity measurement

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