When you think about brand loyalty, it’s probably the big brands that spring to mind.
And people can certainly get very passionate about loyalty to their favourite brands..
Take the recent spat between M&S and Aldi (yes, we’re talking caterpillar cakes here). Thousands of shoppers took to social media to defend their brand.
Marks & Snitches more like. #FreeCuthbert
— Aldi Stores UK (@AldiUK) April 16, 2021
This Tweet, for example, gained over 1,000 impassioned replies, from both Cuthbert and Colin supporters.
But what does brand loyalty mean for smaller businesses and why does it matter? We all recognise that some customers are more loyal than others…but is customer loyalty the same as brand loyalty?
What is brand loyalty?
Let’s start with the official definition. The Oxford Dictionary of Marketing states that brand loyalty is
I think what that means is
You might argue that having a good product or service at a fair price is enough to build brand loyalty. But what’s to stop your customers being seduced by a competitor with an equally good offering?
Why customers who are loyal to a brand are unwilling to switch
When buyers become loyal, they’re usually making some sort of emotional connection with that brand.
Direct Line’s recent “We’re on it” marketing campaign is a good example. They use the concept of superheroes rushing to people’s aid – which we associate with the feeling of panic we get when something big goes wrong. But the superhero always gets beaten to it by the cool, calm, expert response from Direct Line.
These emotional connections can be subtle, but strong, and are more difficult to break than you might think.
Often, people become loyal to brands whose traits resonate with their own. If they consider themselves to be a sophisticated individual, then they’ll tend to lean towards brands that ooze sophistication. People who value sincerity will like brands that are authentic. And so on.
There’s also an element of familiarity (or maybe it’s apathy?) in brand loyalty. I’ve bought the same brand of running shoes for more than 15 years; partly because they’re comfortable, partly because I “like” the brand, and partly because I can’t be bothered to find an alternative.
Measuring brand loyalty
Repeat purchases are the easiest and most common way of measuring brand loyalty, but you can’t rely on this alone.
People might appear to be brand loyal but not be. For example:
- They could be purchasing from more than one brand simultaneously
- Their choices might be limited, “forcing” them to choose that particular brand
- They’re enticed by a special offer
True brand loyalty might be better described as:
They are the people who, if their favourite newspaper has sold out, won’t buy an alternative.
Loyal customers will also be willing to pay more for their preferred brands. How many of us pay a premium for branded products in the supermarket, even though we know that the ‘own brand’ versions might be exactly the same product?
Customers will also advocate for their brand. They’ll leave you glowing reviews, or defend you in a spat over even the tiniest issues. Like caterpillar cake design.
Why is brand loyalty important?
Customer Lifetime Value
There’s an old adage that it’s cheaper to retain customers than acquire new ones.
This is often true, however it isn’t always helpful to consider the value of a customer purely in terms of costs, although this might be easier to measure.
It’s much better to consider the Customer Lifetime Value (CLV), which is a simple equation:
Customer value (average purchase value x frequency)
Customer lifespan (number of years they remain a customer)
Let’s take a business with a turnover of £1million which comes, very conveniently, from 1,000 customers…
- The customers’ average purchase value is £1,000 and they purchase once a year, so the business’ turnover is £1m.
- The lifespan of each customer is four years.
- So each customer has a Customer Lifetime Value (CLV) of £4,000.
- This four-year lifespan means that, each year, the business loses quarter of its customers (the “churn” rate). So the business needs 250 new customers each year to maintain the status quo.
|Baseline brand loyalty|
|Customer lifespan||4 years|
|Customer Lifetime Value (CLV)||£4,000|
|New customers acquired/year||250|
With me so far? Good.
Now let’s see what happens when we increase its brand loyalty…
- Customers hang around for longer. If the lifespan is increased from four to five years, then that gives each customer a CLV of £5,000.
- This increases turnover to £1,200,000.
- The annual “churn” rate lowers. The business now only needs to acquire 200 new customers to stand still. If it maintains its current acquisition rate of 250 new customers per year, turnover increases to £1,250,000.
- Brand loyalty can support premium pricing. If the business can charge 10% more, the CLV goes up to £5,500. Turnover goes up to £1,375,000.
|Baseline brand loyalty||Increased brand loyalty|
|Customer lifespan||4 years||5 years|
|Customer Lifetime Value (CLV)||£4,000||£5,000|
|New customers acquired/year||250||250|
|% increase in revenue||37.5%|
In this example, improving brand loyalty has increased revenue by 37.5%.
You can see how a relatively small improvement in loyalty can have significant benefits for your bottom line.
Brand loyalty also gives you a significant competitive advantage.
The obvious reason for this is that your loyal customers will be purchasing from you and not a competitor.
But there are other advantages too. If you have strong brand loyalty from your customers then competitors are less likely to think about starting a price war or, if they do, will be less likely to succeed.
And brand loyalty can be a barrier to new businesses entering your market. Building brand loyalty can take time; time that a new start-up rival will also need to invest. Creating barriers to entry helps protect your business longer-term by making it harder for new competitors to catch you up.
Opportunities to up-sell and cross-sell
Finally, customers who are loyal to your brand will be more open to buying other offerings from the same stable.
If they’ve purchased replacement windows from you, they’ll be more inclined to come to you when they need to replace their front door.
If they’re on a £2,000-a-month retainer then brand loyalty will make it easier to upsell to them and increase that figure.
Do you have to be a big business to have brand loyalty?
No. Any business can achieve brand loyalty and enjoy the benefits.
Think about the smaller businesses you use. Your local coffee shop. The builder who did your extension. Your brand and web designers 😉
Among these will be small businesses to which you feel an emotional attachment. Who you would hate to see go under. Who you recommend to your friends and colleagues.
How to achieve brand loyalty
So, how can you build brand loyalty for your business?
Here are five ideas to help you strengthen brand loyalty among your customers.
1. Know your audience
People are more inclined to be loyal to brands which resonate with their own identity or aspirations. Research and fully understand your customer personas. Make this the backbone of all your marketing activity.
2. Project the right image, consistently
Make sure your brand identity is well defined and right for your audience and what you want to achieve. Make sure your brand identity is 100% consistent across all your marketing activity, sharing those brand values regularly.
3. Engage with your customers emotionally
You might think that this is all a bit…well, wanky. That your customers just want a good product at the right price, not all of this emotional connection rubbish. But even in that response there’s an emotional connection, one that Ronseal made such good use of in their “Does exactly what it says on the tin” campaign.
4. Be authentic and transparent
If you want to create that emotional attachment to your brand, then you can’t put on a front, people will see through it. Your brand values need to run all the way through your business to the very core, and not just be a veneer – when you scratch away at a veneer you quickly discover what’s below the surface.
5. Deliver on your promises
Brand loyalty can make customers more forgiving, but it doesn’t work miracles. It won’t protect you if you consistently fail to deliver on your promises.
Do you need our help building your brand loyalty?
Your brand identity is at the core of creating brand loyalty. We help businesses find and maintain a brand identity which works hard for them; one that attracts their ideal prospects and turns them into loyal customers.
Find out how we can help your business enjoy the benefits of brand loyalty.