What is Brand Loyalty and How to Earn It?

According to research by Frederick Reichheld of Bain & Company, boosting customer retention by 5% increases profits by 25% to 95%. Similarly, workplace expert Amy Gallo writes in the Harvard Business Review that earning a new customer is 5 to 25 times costlier than holding on to an existing one.

The relationship between brand loyalty and profitability is strong. Visionary leaders like Amazon’s Jeff Bezos and Tata Group’s Ratan Tata pioneered brand loyalty. Yet, it remains a neglected concept. 

Brand loyalty is critical to survive and thrive in today’s cut-throat marketplace. Even if your products and services are of a high standard, your business will not succeed if your brand does not command loyalty. 

What is Brand Loyalty? 

Brand loyalty refers to a customer’s preference for his or her favourite brand. It could be due to multiple factors such as the perception of better quality and service, emotional attachment, or excellent word-of-mouth recommendations. Brand loyalty ensures that a customer favours a particular brand over their competitors.

It is important to note that brand loyalty extends beyond monetary motivations. If a customer is truly loyal to a brand, he or she will select it over its competitors even if they have better offers.

Once a brand has earned loyalty, it needs to maintain and further improve its quality to retain the loyalty. This will lead to significant profit margins and is a much less expensive method for customer retention than offering discounts and low prices regularly.

What are the Characteristics of Brand Loyalty?  

Here are the key characteristics of brand loyalty:

1. Emotional Connection

Emotions are highly important for earning and maintaining loyalty.

A classic example is Zomato’s push notifications. These notifications are highly personalised and have a strong emotional appeal. 

For example, in one of their notifications, they wrote, “We would pick your smile if given the choice between biryani and your smile” followed by a watery-eyed emoji. 

Such a message will instantly resonate with a reader and create a memorable experience. 

Similarly, popular Indian ads have used lines like “Amul Doodh Peeta hai India” to create an emotional connection with the audience.

2. Perception

A brand’s loyal customers think it offers better quality and service than any other alternative. This perception of the brand’s superiority based on previous customer experience keeps the customers loyal.  

3. Trust

Customers show brand loyalty to a trustworthy brand. They trust the brand’s commitment to quality service and responsible behaviour.

A business website can use trust signals such as certifications, its client base, and the excellent reviews the brand has received to increase the customer’s loyalty. 

4. Customer Satisfaction

You may often go to the same coffee shop or restaurant despite having other options. This is not a coincidence.

As a customer, you have felt satisfaction which has developed into a lasting relationship. Thus, customer satisfaction is one of the key pillars of brand loyalty.

5. Resistance to Competition

Loyal customers stay committed to a brand even if competitors make attractive offers. Brand loyalty makes them reluctant to explore other options as they expect their favourite brand to meet all demands.

6. Positive Word-of-Mouth

Brand loyalty naturally leads to positive word-of-mouth recommendations. For example, if you had an excellent experience with a travel agency on a trip to Europe, you could recommend that agency to your acquaintances. 

The same happens in the digital realm. People can leave positive reviews about a company online and post comments, photos, and videos on social media. 

7. Repeat Purchases

Ultimately, brand loyalty is about making customers keep coming back to a brand. The characteristics we have discussed thus far ultimately promote repeat purchases. It boosts the income of a company and the cost of customer retention is much lower compared to that of acquiring a new customer.

Why is Brand Loyalty Important?

Here are the key reasons why brand loyalty is important:

1. Greater Customer Retention

It is expensive and time-consuming to get new customers. If you can earn the loyalty of your customers, they will stick with you even if your competitors use aggressive discounts and marketing. It ensures a stable revenue stream for your business which you can use to focus on expansion and innovation. 

2. Increased Customer Lifetime Value

Loyal customers are likely to increase their purchases and the average amount they spend on every purchase with time. In the long term, this leads to increased profitability for the business.

3. Reduced Marketing Costs

Since loyal customers are already committed to their favourite brand, very little marketing effort is required to retain them. Thus brand loyalty reduces the need for marketing. Instead, the marketing efforts can be concentrated on acquiring new customers.

4. Word-of-Mouth Marketing

Brand loyalty is one of the best ingredients for a good reputation. Loyal customers recommend their favourite brand to family, friends, colleagues, and other members of their social circle. Since the endorsement comes from a trusted source, word-of-mouth endorsements are often regarded as trustworthy.

5. Valuable Customer Insights

Loyal customers care about the brand. That’s why, they are likely to offer valuable suggestions and constructive criticism to make the brand and its products and services better. Equipped with such insights, a brand can make informed decisions to make their offerings more useful to their customers. 

6. Builds Brand Equity

Brand loyalty strengthens brand equity, which can result in better revenues and profits for the company. The enhanced reputation can also attract more investments and interest to a brand.

7. Resilience in Market Fluctuations

Crises can often lead to a sharp decline in a company’s revenue. In recent times, such economic downturns were seen during the COVID-19 pandemic and the global financial crisis of 2008.

In such challenging times, brand loyalty can be an invaluable source of stability and hope. As loyal customers keep turning to their favourite brands, the brands can use it to weather the storm.

8. Competitive Advantage

Extreme competition exists in almost every industry. In such a tough marketplace, brand loyalty lends market strength to a brand, and helps it beat the competition.

Examples of Brand Loyalty

Here are some of the major examples of brand loyalty:

1. Apple 

As per a Bloomberg Intelligence report published in October 2023, brand loyalty for iPhone stood at 93% compared to 80% for Android. 

Apple creates world-class products. But the loyalty to Apple also stems from factors such as highly-reputed customer service, an identity synonymous with innovation, and employee satisfaction.

When it comes to brand loyalty, the story which you tell your audience matters. And here too, Apple aced it. 

Apple launched the Think Different commercial in 1997 when it was going through a very tough time. It reframed its brand identity as a rebel and a non-conformist and gave a deeply human touch to the company. In a marketplace dominated by technical jargon, Apple stood for not just innovation and technology, but for the “Crazy Ones”.

With the benefit of hindsight, we can say that the strategy worked marvellously. Take a look at the Think Different commercial in Steve Jobs’ voice:

2. Nike

Nike has positioned itself as an aspirational brand in a league of its own. A classic example of Nike’s approach is their Air Jordan I “Banned” advertisement. You can see it below:

In recent years, Nike has focussed on the following pillars of brand loyalty:

• Omnichannel Experience: It focuses on rewarding customers for their in-store, on-site, and mobile app usage.
  
• Personalisation: Customers are rewarded for their uniqueness and made to feel special. It includes giving them gifts on birthdays and membership anniversaries.
  
• Exclusivity: Loyal customers get priority and exclusive access to products and events.
  
• Community: Fostering a sense of community with initiatives such as giving access to educational material and workout classes.

3. Starbucks

Not only does Starbucks provide an excellent ambience to its customers, but it is also renowned for its loyalty rewards program. From offering free drinks to personalised offers, it has used many strategies to create a loyal customer base. Here’s an example of an offer they had posted in the US:

What is the Brand Loyalty Pyramid?

Brand strategist David A. Aaker developed the brand loyalty pyramid to understand how brand loyalty is formed. It has 5 steps, with new customers starting at the bottom and the most loyal customers placed at the top.

As you can see, brand loyalty is divided into 5 categories:

Switchers: Switchers are not loyal to any brand. They don’t have any bias for or against a brand, and can easily switch from one brand to the other. Such behaviour is typical of new customers.

Satisfied or Habitual Buyers: Habitual buyers go to the same brand because of habit or convenience. But they are not loyal to the brand, and could easily switch to another brand.

Satisfied Buyers with Switching Costs: Buyers at this level are decently satisfied with their brand, but could switch to another brand if an attractive offer or alternative is available. 

Brand Likers: It is a critical stage where a customer is highly enthusiastic about a brand, and the enthusiasm is based on mostly emotions. However, the customer can switch to another competitor even at this stage.

Committed Buyers: Committed buyers are 100% loyal to their favourite brand. The brand resonates with the personal values of the customer. The brand must ensure that the buyers stay loyal by rewarding their support.

Types of Brand Loyalty 

Here are the 3 main types of brand loyalty:

1. Hard-Core Brand Loyalty

It represents the strongest form of brand loyalty. Hard-core brand loyal customers have highly positive feelings about their favourite brand. The most globally famous example of such a brand is Apple. 

The brand loyalty of Apple is cult-like. It is almost impossible to convince a loyal iPhone user about any alternative being superior to their favourite phone.

Take the case of cricket in India. It is a hugely popular sport and many fans treat their favourite players like Virat Kohli or Sachin Tendulkar like a God. It is an example of hard-core brand loyalty at a personal level. 

2. Split-Customer Brand Loyalty

Customers with split loyalty have a preference for the top 2 or 3 brands in an industry. For example, those who want to buy a smartphone may have a preference for top brands like Apple and Samsung. Since the number of competitors is low, there is a possibility that they can be turned into loyal customers of a particular brand.

3. Shifting-Customer Brand Loyalty

This type of customer exhibits a combination of hard-core and split loyalty. They could stick to one brand, and then switch to another. For example, a customer may be accustomed to a brand of sweets for some time, and then try another brand. After sticking to the 2nd brand for a while, they may try another brand.

How to Develop Brand Loyalty

Brands use methods such as scrutinising purchasing data and running marketing campaigns to earn brand loyalty. Here are some of the most important strategies for building brand loyalty:

1. Deliver a High-Quality Product or Service

The most fundamental aspect of brand loyalty is quality. 

You may have a big marketing budget and endorsements from the most famous celebrities, but if you don’t offer quality goods or services, you are not going to earn your customers’ loyalty.

First, you need to be proud of the quality of your products and services and guarantee they have the highest standards. You need to know about your customers and what they are looking for and deliver the same.

If you deliver the best-in-class quality, there will be a high chance of your customers becoming loyal and even doing free marketing for you via positive word-of-mouth.

2. Provide Exceptional Customer Service

Have you ever had the experience of interacting with a brand’s support staff and being rerouted or given vague responses to your queries? In such a case, you will not want to interact with the brand again.

To make your customers feel valued, it is important to provide them with excellent customer service. Good customer service does not come cheap: social media managers, 24/7 chat representatives, support-ticket staff, and phone operators are among the people you have to hire.

But offering good customer service is one of the best ways to deliver a good brand impression. Your customer service team must have thorough training so that customers find it easy to raise queries and provide criticism or feedback on your products or services.

3. Rope in Brand Ambassadors

A brand ambassador is a famous, recognisable figure with whom your customers can connect at a personal level. The brand takes advantage of the ambassador’s fame to earn brand loyalty. The brand ambassador you select will depend on the type of branding you want.

A famous example is the collaboration of Alia Bhatt and Aamir Khan as the brand ambassadors of PhonePe. Take a look at their commercials:

4. Launch a Loyalty Program

A loyalty program rewards a customer for their loyalty. This loyalty can be in terms of discounts, redemption points, or free goods and services. Though it means an extra expenditure, always remember that it costs you much less than you would have to spend to attract a new customer. 

A famous loyalty program in India is TimesPoints by media conglomerate The Times Group. The audience wins TimesPoints for the time they spend on Times Group’s media outlets such as The Times of India, The Economic Times, and Navbharat Times. These points can be redeemed while shopping on platforms such as Myntra, Amazon, and Shoppers Stop.

5. Create an Online Community

An online community helps you create a deeper and more personal connection with your customers. Since so much of sales and social interactions happen online, you can use your website and social media platforms to create an online community.

For example, if you are targeting a professional audience, you can explore LinkedIn post ideas since LinkedIn is popular among such people. It will also help you get insights from your customers which you can use to improve your product strategy.

How to Measure Brand Loyalty

Here are some common methods for measuring brand loyalty:

1. Check Net Promoter Score

To track the Net Promoter Score (NPS), you have to ask one simple question to your customers: how likely are they to recommend your brand, product, or service to a friend or colleague? Based on the results, the respondents are classified as promoters, passives, and detractors.

2. Evaluate the Customer Loyalty Index

The Customer Loyalty Index (CLI) measures the loyalty of customers based on questions about repeat purchases, the likelihood of recommending the brand to others and trying the brand’s other products or services. Since the questions are about potential future actions, the CLI should be combined with other metrics like NPS to get a comprehensive picture.

3. Track Repeat Purchases and Churn Rate

It is important to track the number of new customers, customers who are making repeat purchases, and those who have decided to sever ties with a brand. Customer retention software like Zendesk and Mixpanel help you judge at which stage customers are quitting your brand to select an alternative, and how many stay loyal.

What is the Relationship Between Brand Loyalty and Repeat Purchases?

Repeat purchases are at the heart of brand loyalty. However, these 2 concepts don’t necessarily mean the same thing. 

Repeat purchase describes the buying of a good and/or service from the same brand repeatedly. It can be due to a lack of options, a desire for convenience, or a lack of knowledge about other options in the market. Brand loyalty could also be a reason, but not necessarily.

Brand loyalty, on the other hand, is a much deeper concept. It is about a positive perception of the brand, the trust customers put in it, and the emotional attachment they feel to it. 

Once a brand has earned the loyalty of its customers, it need not fear its competitors even if they offer discounts or opt for aggressive marketing tactics. Rather, the loyal customers themselves will speak on behalf of the brand in various social settings.

Now let us delve into the relationship between brand loyalty and repeat purchases.

Repeatedly buying from a particular brand is a potential sign of brand loyalty. In particular, if other brands also offer a similar product and/or service, it could mean that a brand has successfully won the trust of its customers.

Moreover, brand loyalty naturally results in repeat purchases. It is the most visible result of brand loyalty.

However, you need to note that repeat purchases don’t necessarily mean that a customer is loyal to a particular brand. If the customers are not loyal, they may switch to a rival brand in the future. Repeat purchases could be a short-term action whereas brand loyalty is inherently long-term.

Therefore, it is best to track both brand loyalty and repeat purchases to create the best strategies for your business.

What is the Difference Between Brand Loyalty and Customer Loyalty?

Customer loyalty is a transactional and commercial concept whereas brand loyalty is a psychological one.

Customer loyalty revolves around a customer’s spending. For example, Flipkart offers rewards in the form of SuperCoins to customers with Plus, Plus Premium, and VIP membership. 

To earn SuperCoins, customers have to make transactions of a minimum of Rs. 100, and they can earn up to 50 SuperCoins in a single order. These SuperCoins can be redeemed on Flipkart and partner platforms such as Myntra and Cleartrip.

Thus Flipkart’s SuperCoin strategy is based on providing transactional benefits to customers. Thus, customer loyalty is also called transactional loyalty.

On the other hand, brand loyalty focuses on the perception of a brand. The key question is: What do customers think and feel about your brand? It goes beyond the price of your products and/or services. Brand loyalty is also impacted by the quality of your customer service, and the satisfaction people get from your products.

Here’s a summary of the difference between brand loyalty and customer loyalty:

Brand Loyalty	Customer Loyalty
Commitment to the same brand despite alternatives	Sticking to a brand due to monetary reasons
Price does not affect loyalty	Price is the main reason for loyalty
Good quality of products and services is the key factor	Prices, discounts, cashback, and promos are the key factors
High retention	Low retention

When Does a Business Lose Brand Loyalty?

It takes a lot of hard work to build brand loyalty. Once you have won it, you must do everything possible to retain it. 

Here are 3 pitfalls you must avoid to ensure you maintain brand loyalty:

1. Losing Reputation and Trust 

A brand must not lose trust and reputation in the eyes of its audience. Since brand loyalty is a psychological concept, loyal customers will be emotionally hurt if they feel betrayed by their favourite brand. Therefore, to retain your brand loyalty, you must never lose your customer’s trust.

2. Neglecting Customer Feedback

Your customers not only have opinions about your brand and your offerings but are also likely to share them across social media platforms and via word-of-mouth. With a studious approach, research the customer feedback and engage with it. It helps improve your services and makes the customer feel that their voice matters.

3. Not Staying Up-To-Date With Market Trends

It is important to stay updated about the latest market trends. If there are trends in your industry which your competitors are following but you are not, you could see an erosion in your loyalty. Further, you could follow a trend and then become a leader in it. 

For example, sustainability is an important issue for many customers. With this in mind, Zomato launched a feature called Food Rescue. CEO Deepinder Goyal explained that despite strong measures, over 4 lakh food orders get cancelled on Zomato every month. 

Under Food Rescue, nearby customers can get the cancelled order in perfect condition at an affordable price. By launching this policy, Zomato has presented itself as a leader in sustainable food delivery and further bolstered its brand image. Such moves can potentially increase the customers’ loyalty towards a brand.

Why Businesses Often Neglect Brand Loyalty: Customer Capitalism vs. Shareholder Primacy

The importance of brand loyalty is important. Yet, many companies ignore it. Why?

A Harvard Business Review (HBR) article has answered this question in terms of a clash between shareholder primacy and customer capitalism.

The article argues that companies have a short-sighted approach where they prioritise quarterly earnings over customer relationships. This approach is due to financial disclosure rules and corporate accounting practices. Post-1970, the problem was further compounded by Milton Friedman’s emphasis on maximising shareholder value.

Much later, in 2010, Professor Roger Martin advocated “The Age Of Customer Capitalism”. Martin argued that Friedman was not wrong, but his doctrine had been misused. Instead, Martin argued that the best way to maximise shareholder value was to put customers first. 

This preference for customer primacy can be seen in the business models of the world’s biggest brands like Amazon, Google, and Apple. One of the business leaders who was ahead of his time regarding customer relationships is Amazon founder Jeff Bezos. Here’s a 1999 interview where he argues there is “never any misalignment between customer interest and shareholder interest”:

To conclude, brand loyalty is a highly complex topic which you must appreciate and understand. As per business loyalty expert Rob Markey, loyalty leaders increase their revenues 2.5 times as fast as their competitors. From offering high-quality products or services to exceptional customer service, you must always make your customers feel valued and respected to maximise your brand loyalty.

Frequently Asked Questions

1. What is the importance of brand loyalty?

Brand loyalty is very important for earning profits. It costs much less to retain an existing customer than to earn a new one. Your revenue will erode if you lose brand loyalty.

2. How is brand loyalty measured?

Brand loyalty is measured by using metrics such as net promoter score, customer lifetime index, number of repeat purchases, and churn rate.

3. What are some common examples of brand loyalty?

The loyalty which brands like Apple and Nike command among their customers is a common example of brand loyalty.

4. How does pricing affect brand loyalty?

Brand loyalty is based on emotions and trust. Price is not the decisive factor in deciding loyalty. Once you earn brand loyalty, your customers will prefer you regardless of pricing.