How Does Brand Loyalty Work From the Generation to The Effects?

Brand loyalty is the favor given by a consumer in order to buy a specific brand in a particular product category. Consumer who give a type of preference for a brand, have the following mindset: “I am committed to this brand’, “I am willing to pay a higher price for this brand over other brands” and “I will recommend this brand to other” ‘ (Giddens, 2002). A good loyalty can lead to various and numerous benefits such as an improved market share, lower marketing cost and improved opportunities for brand extension (Martin Evans, 2006).

The amount of money that consumers will spend on various brands in different product categories would change from one customer to another one but one thing that remains constant is that each brand evokes a set of positive feelings for the consumer such as confident, young, stylish etc. As a consequence of this, nowadays it is vital for the brand to do more than just satisfy a need or service. It must create and be able to maintain an emotional connection with its customers. By inducing positive feelings among them, the customers will keep coming back for more (Isakovich, 2008).

The research question in this essay will be: how does brand loyalty work from the generation to the effects?

THEORY

Brand loyalty definition

The concept of brand loyalty has been defined in several different ways during the past years. However few of them are more often used as good definitions of brand loyalty.

Wilkie (1994) defined brand loyalty as “…a favorable attitude toward, and a consistent purchase of, a particular brand”. This definition suggests that consumers are loyal, if both the attitude but also the behavior are favorable. Ferland and Wolfe have portrayed brand loyalty as a consumer’s decision, expressed either by intention or behavior, in order to repurchase a precise brand among the competitors. This type of decision can occurs both on conscious or as unconscious basis. It happens when the consumer receive the message that a specific brand can offer the right product features, image, or quality for the right price.

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Jacoby and Chestnut (1978) proposed a more complex and deep definition of brand loyalty, arguing that brand loyalty is “…a biased, behavioral response, expressed over time, by some decision making unit, with respect to one or more brands out of set of such brands, and is a function of psychological processes”. As a last definition, Oliver (1997) stated that loyalty to a brand is “…a deeply held commitment to repurchase or patronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts that have the potential to cause switching behavior”.

Those definitions are different, but they all have in common that the concept of brand loyalty is not inevitably the actual action of purchasing, but the intention to make a purchase. The definitions also argued about the idea of attitude, saying that loyalty must include a favorable attitude toward the brand, and that a repetition of purchase is also needed in order to gain brand loyalty.

The key factors influencing brand loyalty

The classical process of brand loyalty generation is that firstly, the consumer will make a “test purchase” of a particular product from a given brand. Then, the product have to meet the customer’s expectations, and make him or her satisfied, if that is the case the consumer will often buy this same product. Now that the customer have an image of the brand which is considered a safe and good quality, this customer is more ready to buy the product again or even other product from the same brand. The loyal customer are committed to a brand, ready to pay a more expensive price for a particular brand over others, and willing to recommend the given brand to other people (Giddens & Hofmann, 2002).

Kevin Stirtz (2008) proposed six steps in order to create brand-loyal customers.

The first step involves what the customers want in general by questions as: how do they want to be served? What is their objective? What are they trying to accomplish? And so on.

The second step is about how communicate to your customers, what should be their expectations towards the brand. Companies should also focus on their core competencies, what they do better than their competitors in order to deliver outstanding products in a given area.

The third step is creating an easy way of communication between the company and its customers, in order to let them provide a feedback in an easy way. Companies can be creative to find many different ways to get customer feedback, and of course make the customers know about those ways.

The fourth step is almost related to the third one, because it is listening to what your customers say. It means not only the uses of the customer feedback but also all the others ways that people uses to talk about brand through Internet for instance.

The fifth step is the direct continuation of the fourth one, it is the reaction and the action based on these customer feedback and suggestions.

Finally the last step is the repetition, indeed this whole process has to be repeated constantly in order to be successful and generate higher levels of loyalty.

Effects of brand loyalty

Following Giddens and Hofmann’s (2002) statement about brand loyalty, there are three main points which summarize how brand loyalty is important for companies. The first reason is that the companies who have good brand loyalty are more able to enjoy high sales volumes. Giddens and Hofmann explained in their study that every year the average company loose around 13% of its customer. That is the reason why the situation is so competitive and challenging nowadays. But if a company is able to reduce this customer loss, it business can be improved and your level of brand loyalty increasing.

The second reason explaining how brand loyalty is important is a premium pricing ability. Indeed Giddens and Hofmann evoke the fact that if a company increases the level of brand loyalty, the consumers will become less “price sensitive”. Actually if the product offered by this company gives the impression to customers that it offers them some special and unique value, then those customers will be ready to prefer your brand even if they have to pay higher price. The value that this brand offers them is not provided by their competitors.

Finally the third reason stated is about the product search. Giddens and Hofmann explain that the loyal customers are ready to look for your brand in a range of product, and they also are less sensitive to the competitors. This point results for the company, the realization of marketing savings, lower distribution and advertisings costs.

Another theory supports this third and last point. Aaker (1991) states that a loyal customer is less vulnerable and sensitive to competitive actions, which means that some competitors can become disheartened from using their money to attract customers already satisfied.

Knox and Denison (2000) argue that customers with a high brand loyalty level, use a bigger part of their budget to buy from their favorite brand than customers who used to alternate between different brands. Actually Mattila (2001) even proved that the loyal customers are more able to “forget” or not complain about a failure or a mistake in service occur, and that those loyal customers are more resistant to premium prices.

Kotler’s and Oliver’s models

Philip Kotler (1997) defined different patterns of behavior. Indeed not every consumer will have exactly the same usage rate and the same commitment to the product using. These different behaviors are divided into four distinct patterns of behavior:

• Hard-core loyal
• Split loyal
• Shifting loyal
• Switchers

The strongest of these four, is the hard-core loyal customer which is buying from the same brand in every occasion occurred. The split loyal customer is a customer which has split feelings between different brands and is why buying from two or three brands. Shifting from one brand to another defines the customer as shifting loyal whereas switchers could be defined as not being loyal, where they always look for deal prone, bargains or just something different.

Oliver’s (1997) book suggests a different approach, based on a four stage loyalty model, stating that loyalty will be based on belief, affect, intentions and action. These four points will occurs at different times, but not simultaneously.

Following Oliver’s statement, the first phase occurring of loyalty is the cognitive loyalty. This phase is the more superficial and weak one, because it is only based on brand characteristics that the consumer has in his beliefs. But those beliefs are maybe based on indirect knowledge, or just the past experience with this brand. This phase is very superficial and easy to lose for the brand, because if the satisfaction is not provided, this loyalty may be lost. In case of the contrary, the satisfaction is provided by the brand and it became a consumer’s experience, which will lead to move to the second phase.

This second loyalty phase is called affective loyalty. It is based on the feelings and emotions of the consumer. In his past experiences, the consumer builds an opinion and a relationship toward the product, which is based on the satisfaction after using this brand. It is now much harder to make him change his minds about the brand features, because opinions are deeper than only information.

The third phase of the Oliver model is called conative loyalty

In this phase, the consumer already got satisfaction with this brand during several past experiences. With this high satisfaction, the consumer is much more engaged to this brand. This engagement will lead him to the intention to purchase again the same brand in his future.

Finally, the fourth phase is called action loyalty. It is considered in Oliver book as the more strong loyalty form. Indeed in this phase the consumers move from intent to repurchase the brand (conative loyalty) to actions. The more the consumer will repeat purchase of this brand, the more the loyalty will become deep towards this particular brand. In this case the consumer is ready to use time and money to look for that brand.