What is 'Brand Loyalty'

Brand loyalty is a pattern of consumer behavior where consumers become committed to brands and make repeat purchases from the same brands over time. Loyal customers consistently purchase products from their preferred brands, regardless of convenience or price. Companies often use different marketing strategies to cultivate loyal customer, including loyalty programs (i.e. rewards programs) or trials and incentives (such as samples and free gifts).

BREAKING DOWN 'Brand Loyalty'

Companies that successfully cultivate loyal customers sometimes work with brand ambassadors, consumers who market the brand and communicate with it positively about it among their friends both online and in real time. This is free word-of-mouth marketing for the company and is often an effective way of building brand loyalty.

In a competitive marketplace, brands need to maintain continuous meaningful engagement in order to identify consumer needs and expectations. Brands are most successful when they address emotional values that are important to their target customers. When the value identification is correct, it leads to more customer engagement and higher numbers of repeat customers. High repeat customer rates lead to higher profits for brands.

Consumer Trends

Companies strive to deliver what consumers want by discovering the gap between their brands and customer ideals. If a product is less than ideal, customers may move on to a different brand. Product innovation is important for brand loyalty, but it is not enough to create a product or a series of products that offer solutions to consumer needs. Ongoing research is needed to find out not only how customers use the branded products but what features are missing. When brands don't pay attention to user trends, they lose their competitive edge. Eastman Kodak Co. (NYSE: KODK) and Sears Holdings Corporation (NASDAQ: SHLD) are examples of former, as these companies were leading brands that are no longer significant players in their fields in 2016. These brands lost a significant market share because they did not respond to consumer trends.

The Internet Factor

The internet plays a huge role in shaping consumer trends and presents an ongoing challenge for brands. In the internet age, most consumers do not have loyalty to any given brand. Instead, consumers can easily access a plethora of information online to help them make buying decisions based on a variety of factors. Some online retailers like Amazon.com Inc. (NASDAQ: AMZN) have user reviews on the product listing page so that consumers can learn about product features and get brand recommendations from other users. With the wealth of information available, some people switch brands simply to experience different features. In the smartphone and tablet market, for example, many consumers try products from several different brands instead of remaining loyal to any one brand of device.

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