What Is Brand Loyalty?

Brand loyalty is the positive association consumers attach to a particular product or brand. Customers that exhibit brand loyalty are devoted to a product or service, which is demonstrated by their repeat purchases despite competitor's efforts to lure them away. Corporations invest significant amounts of money on customer service and marketing to create and maintain brand loyalty for an established product. Coca-Cola Company is an example of an iconic brand that has resulted in customers demonstrating brand loyalty over the years despite Pepsi's products and marketing efforts.

Key Takeaways

  • Brand loyalty is demonstrated by repeat purchases of a product even when the consumer has choices of competing alternatives.
  • Marketing campaigns are designed to nurture brand loyalty.
  • Brand loyalty can evaporate when consumer trends change, but the product doesn't.

How Brand Loyalty Works

Loyal customers are the ones who will purchase the same brand regardless of convenience or price. These loyal customers have found a product that meets their needs, and they're not interested in experimenting with another brand.

Most established brand name products exist in a highly competitive market overwhelmed with new and old competing products, many of them barely distinguishable. As a result, companies employ many tactics to create and maintain brand loyalty. They spend their advertising budgets on messages targeted at the segment of the market that includes their loyal customers and like-minded people who could become loyal customers.

Brand Loyalty Campaigns

Marketing departments follow consumer buying trends closely and work to build relationships with their customers through active customer service. Consumer trends are the habits and behaviors exhibited by consumers regularly and over time. Some trends are static, but most trends evolve over time. Companies collect and analyze data on customer spending habits to better understand how to market their product. Marketers track changes in trends and create a corresponding marketing campaign to help the company acquire and keep the brand's loyal customers.

Brand Ambassadors

Companies hire brand ambassadors to be spokespersons for their products. Brand ambassadors are chosen for their appeal to the target market. They can be an effective way of disseminating positive word of mouth. A brand loyalty campaign is most successful when it addresses the attributes that are crucial to its segment of the market. A Subaru will keep your kids safe. A Lincoln will make you as cool as Mathew McConaughey.

When a company ignores consumer trends, they lose brand-loyal customers.

How to Lose Brand Loyalty

Continuous monitoring and research are needed to measure the utility of products and identify modifications that will offer additional consumer benefits and increase brand loyalty. Utility is an economic measure of the level of satisfaction consumers derive from a product or service.

When a company ignores consumer trends, they might lose brand-loyal customers, which could lead to forfeiting potential profits and eroding the company's market share. Many large corporations, which once had a monopolistic advantage, such as Blockbuster, failed because their product was misaligned with their customers' changing needs. To assume that a product will always meet the needs of the consumers is a certainty for failure.  

Brand Loyalty and the Internet

Before the internet, the most common way to build brand loyalty was through the interaction of a salesperson and a customer. Today, the internet provides access to thousands of consumer products and services without the salesperson as the intermediary. Consumers, empowered to conduct independent research and compare competitors' offerings, can make informed choices and are less committed to specific brands.

Real-World Example of Brand Loyalty

Apple Inc. (AAPL) has nearly 2 billion iPhone customers, many of whom are loyal to the brand. Each year, the iPhone has new upgrades, and consumers rush to the stores to buy the latest version. Apple's reputation for innovative products and excellent service has helped to create a loyal customer following that's extremely unlikely to switch to a competitor.

As the company rolls out more fee-based services, including Apple TV and gaming, the company is likely to add to its share of wallet, meaning more revenue per client. As consumers get hooked on new shows and other services, they'll gladly upgrade to the latest iPhone or tablet when needed. Through innovative products and new services, Apple can further cement the brand loyalty of their existing clients and attract new ones as well.