Brand Loyalty vs. Repeated Purchases

Brand loyalty is the ultimate goal a company sets for a branded product. Brand loyalty is a consumer’s preference to buy a particular brand in a product category. It occurs because consumers perceive that the brand offers the right product features, images, or level of quality at the right price. This perception becomes the foundation for a new buying habit. Basically, consumers initially will make a trial purchase of the brand and, after satisfaction, tend to form habits and continue purchasing the same brand because the product is safe and familiar.

Brand loyalty is the strongest measure of a brand’s value, it can be demonstrated not only by repeated buying of a product or servic but also by a good word of mouth and advocation of a product or service. Even with the availability of other alternatives.

There are three main reasons why brand loyalty is important:

Higher Sales Volume – The average US company loses half of its customers every five years, equating to a 13% annual loss of customers. This statistic illustrates the challenges companies face when trying to grow in competitive environments. Achieving even 1% annual growth requires increasing sales to customers, both existing and new, by 14%. Reducing customer loss can dramatically improve business growth and brand loyalty, which leads to consistent and even greater sales since the same brand is purchased repeatedly.

Premium Pricing Ability – Studies show that as brand loyalty increases, consumers are less sensitive to price changes. Generally, they are willing to pay more for their preferred brand because they perceive some unique value in the brand that other alternatives do not provide. Additionally, brand loyalists buy less frequently on cents-off deals – these promotions only subsidize planned purchases.

Retain Rather than Seek – Brand loyalists are willing to search for their favorite brand and are less sensitive to competitive promotions. The result is lower costs for advertising, marketing and distribution. Specifically, it costs four to six times as much to attract a new customer as it does to retain an old one.

Unfortunately, the most commonly used approaches tend to equate loyalty with a frequency of repeat purchases. This type of quantitative tactic does not take into account customer motivations, which should not be overlooked. Without knowing why a customer makes multiple purchases, management is missing the critical key behind the actions and cannot adapt the product or marketing to respond to customer preferences. An opportunity to maximize sales is simply lost. The challenge becomes:

  • How to focus a marketing campaign on existing customers who are most likely to generate repeat business.
  • How to anticipate what goods and services these customers will want.
  • How to communicate with these premium customers cost-effectively.

The first step in maximizing sales and profits from your existing customer base is to identify which are your core brand-loyal customers and which are the price-sensitive, bargain-hunting, convenience customers. The distinction is important because different customer/loyalty types respond better to promotions targeted to their respective purchase motivations: e.g., coupons and discounts are far more effective in stimulating sales to the communication customers than the brand loyals.

In general, it is more cost-effective to focus major marketing efforts on the core brand-loyal customers for whom the products is filling a need or preference, because this group has the highest value and will be a more profitable source of repeat business. The bargain-hunters, in contrast, are more fickle and less likely to be profitable since their major draw is based on low price or convenience.

After identifying your brand loyals, the next step is to develop a long-term, ongoing relationship with them. Profits will naturally follow.

It is easier to reinforce behaviors than to change them and the sale is just the beginning of an opportunity to turn the purchaser into a loyalist.

  • Develop an unbeatable product – if you want to keep customers, make sure they can get what they want from your product.
  • Stand behind your product – if customers don’t trust the product, they won’t purchase it again.
  • Know your trophy customers and treat them best of all – remember the rule that 80% of sales will come from the top 20% of customers.
  • Become a customer service champion – seek to serve the customer and they will repeat-purchase…again and again!

Tag: Brand Loyalty

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