The American Marketing Association defines brand loyalty as: 1.) "The situation in which a consumer generally buys the same manufacturer-originated product or service repeatedly over time rather than buying from multiple suppliers within the category" (sales promotion definition). 2.) "The degree to which a consumer consistently purchases the same brand within a product class" (consumer behavior definition).
Aside from a consumer's ability to repurchase a brand, true brand loyalty exists when a.) the customer is committed to the brand, and b.) the customers have a high relative attitude toward the brand, which is then exhibited through repurchase behavior. For example, if Joe has brand loyalty to Company A, he will purchase Company A's products even if Company B's products are cheaper and/or of a higher quality.
Brand loyalty is viewed as a multidimensional construct, determined by several distinct psychological processes, such as the customers' perceived value, brand trust, satisfaction, repeat purchase behavior, and commitment. Commitment and repeated purchase behavior are considered as necessary conditions for brand loyalty, followed by perceived value, satisfaction, and brand trust.
Philip Kotler defines four customer-types that exhibit similar patterns of behavior:
- a) Hardcore Loyals, who buy the brand all the time
- b) Split Loyals, loyal to two or three brands
- c) Shifting Loyals, moving from one brand to another
- d) Switchers, with no loyalty (possibly "deal-prone," constantly looking for bargains, or "vanity prone," looking for something different).
Benefits of Brand Loyalty
The benefits of brand loyalty are longer tenure (or staying a customer for longer), and lower sensitivity to price. Recent research found evidence that longer-term customers were indeed less sensitive to price increases.
According to Andrew Ehrenberg, 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. It does not guarantee that they will stay loyal.
By creating promotions and loyalty programs that encourage the consumer to take some sort of action, companies are building brand loyalty by offering more than just an advertisement. Offering incentives like big prizes creates an environment in which customers see the advertiser as more than just the advertiser. Individuals are far more likely to come back to a company that uses interesting promotions or loyalty programs than a company with a static message of "buy our brand because we're the best."
Popular Loyalty Programs
Below are some of the most popular Loyalty Programs that are currently being used by major companies as a means of engaging their customers beyond traditional advertising.
Sweepstakes and Advergames
- Branded digital games that engage consumers with prize incentives
- Skill tests and user-generated promotions such as video and photo contests
Social Media Applications and Management
- Develop promotions and offers within social media channels
- Ongoing management and maintenance of brand Facebook pages and other social media
Customer Rewards Programs
- Online points programs – earn prizes for incremental purchase behavior (e.g., JetBlue's TrueBlue and American Airlines's AAdvantage (Figure 1) frequet flyer programs)
- My Coke Rewards, Pepsi Stuff, and the Marriott Rewards loyalty programs
- Promotional auctions – bid for prizes with points earned from incremental purchase behavior
- Manage overall subscription databases – national and/or segmented by market
- Design, develop, and publish email blasts
- Develop templates specific offers and promotions / delivery
Text Messaging / Mobile Apps / Desktop Apps and Widgets
- SMS Promotions
- iPhone apps
- Branded web apps