Thesis: Brand Loyalty

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Brand Loyalty

In the continuously competitive global business environment, doubled nowadays by the current economic and global crisis, the need for customer and brand loyalty and successful instruments and practices in this area has become more important than ever. The idea from which this paper starts is that "mere one percent increase in customer loyalty can translate to lifetime revenue in the billions of dollars." Indeed, this assertion can be proved not only from the immediate sale of a product owned by the company, but by all successive auxiliary sale that the company is likely to make on behalf of that product, exactly because of the customer loyalty. This includes post-sale services, future products sales (or maybe even from other product portfolios), as well as repair services or sales of parts.

Basically, a client that does not switch to a new product is a loyal client. Tony O'Reilly, former CEO at H.J. Heinz, explained brand or customer loyalty in these plastic terms: "my acid test...is whether a housewife, intending to buy Heinz tomato ketchup in the store, finding it to be out of stock, will walk out of the store to buy it elsewhere." This example properly connects customer and brand loyalty not only with the incentive to buy the same product from the same company for a long period of time, but also the rejection of the idea of potentially buying another similar product from a different company, in cases such as the one described previously.

In marketing terms, increased customer and brand loyalty translates to much more than this. With increased customer loyalty, the organization can also count on increased customer retention, which basically means that customers are less likely to change companies in search of other products (much similar to customer loyalty). At the same time, this means that the company will be able to base its activities on a stable base of consumers and that it will need to invest less in attracting new ones. Further more, it can predict its development over a medium and long-term period based on this stable number of loyal customers.

Nevertheless, customer loyalty is not always equivalent to customer retention or, in other words, one does not necessarily lead to the other. Customer retention is sometimes determined by "inertia or indifference or being held hostage to long-term contracts," to give only a few examples of other factors that blend in with customer loyalty to influence customer retention.

One of the essential means by which customer loyalty can be improved is probably by increasing the customer experience. This notion is significantly vast, but it can be split and discussed in different bits. Improving customer experience ranges anywhere from improving services to putting in additional features so as to make the product more elegant, increase its technical performances or its ergonomics. If one thinks of the automotive industry, for example, a relevant one in what the customer loyalty is concerned, increasing the customer experience will mean introducing new technologies and devices to increase the comfort of the driver in the car. It will also mean adding new engine facilities and improving the technical performances of the vehicle.

Someone driving a Mercedes, for example, will be driving a Mercedes for a long period of time exactly because this is the type of car than can offer a constantly increasing customer experience for the user. By this, we mean that the Mercedes owner can always expect the company to invest in ensuring that the customer experience is always at the same high levels. Things such as elegance and technological credibility are instruments by which the customer experience is increased and which directly impact customer loyalty.

With other types of products, customer loyalty can be developed with the use of economic or financial incentives. The spectrum here is again reasonably vast. First of all, let's consider the cosmetics industry. Brand loyalty here can sometimes be consolidated or increased by giving out free samples, a practice initiated by Avon and continued by most of the other competitors on this market. The idea here is in fact to introduce the existing client to the larger portfolio of products, thereby exposing him or her to a wider range of such products and consolidating the customer loyalty.

As an example, the customer may be using a certain face cream that the company sells on the market. Giving out, at every purchase of that product, samples of body cream and hand lotions can induce the consumer's behavior and propose to him or her new products under the same brand. If the experience with the face cream has been a positive one, then the client is also likely to expand his preferences to incorporate the new products as well. This is an excellent way to increase customer loyalty by adding several new products to the ones that the client is already using.

The cosmetics industry, however, is a case on its own, because of the sensitivity of the products it proposes on the market. Brand loyalty in this case is sometimes simply induced by prolonged use of a certain product. The fact that you are using the same face cream for a long period of time will make you less likely to change it with another brand, because you're probably less willing to experiment with the effects of different other lotions on your face and skin.

Another example comes from the airline industry, where the frequent flyer miles provide an incentive for the client to use the same airline, gather points and benefit from the offers that the respective airline has for its miles, usually a free flight after a number of miles are gathered. The client will thus have the perception that his flights with that respective airline company have been relatively cheaper than with another company and he will also have the incentive of using the same company over and over.

P. Kotler, however, points out towards the fact that this can easily turn into disloyalty program, such as when the airline company forces the client to use the miles in a certain period of time, usually very short. This type of marketing tactics is likely to deter the client from flying the same airline because of what he will psychologically perceive as unwanted pressure, as well as because of the simple improbability that a client would fly twice in two months, unless he is a business client.

The same Kotler classifies brand users according different degrees of loyalty into four different categories: the hard core loyalists, the soft core loyalists, the shifting loyalists and the switchers. The hard core loyalist is usually a customer who is loyal only to one brand. This would be the case of the Harley Davidson user, for example, who is one of the most unlikely customers to switch brands, mainly because riding a Harley Davidson is similar to a lifestyle even more than a simple motorcycle hobby.

The soft core loyalists are usually those that shift between 2 and 4 brands, while the shifting loyalists are those that tend to be loyal to one brand, but occasionally shift to other ones, especially when conditions impose it, such as, following the example with Heinz, when they do not manage to obtain their product or it is out of stock.

Some of the strong means of building and maintaining brand and customer loyalty refer to some of the basics principles of marketing. The first is differentiation, which is an instrument that sets a company apart from the others on the market. This instrument is essential in the phase of building brand loyalty, but it is just as important in consolidating or maintaining customer and brand loyalty. One needs to remember that the market, especially with the current economic crisis, is extremely volatile and customers tend to move around in choice of cheaper products at a better quality. With this in mind, differentiating a company's products or services from others on the market will turn into a competitive advantage and make the company's clients less likely to study other alternatives on the market.

Customization is another tool that goes hand in hand with the concept of differentiation as an important mean by which brand loyalty can be increased. Customization refers however more to matching the products and services to fit the exact needs and requirements of the clients. This is obviously very important, because the client will perceive this type of policy as client-oriented, which will usually encourage him to stay on with the company that adopts such policies rather than move to a company that is more centered on forming the market itself.

Finally, marketing is obviously an essential tool in building and maintaining customer loyalty, as "marketing always has an effect." There are several aspects worth mentioning here. First of all, marketing goes hand in hand with communication, which means that the existing clients will always be informed about the products and services the company offers, which will help them properly choose among the… [END OF PREVIEW]

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