Ever tried to put a number on how much a loyal customer is worth to your firm? David Aaker has and here are the results of his assessment of brand loyalty from his book, Building Strong Brands:
- Increasing brand loyalty by only 5% resulted in 85% more profit at a major bank.
- Increasing brand loyalty by only 5% increased profits by 50% at an insurance business.
- A 5% increase in brand loyalty generated 30% more profits at an auto parts firm.
- A single lost customer for Club Med costs $2400 in 1990 – now more than $12,000.
Wow – those are some impressive numbers! What would your firm look like with 85% MORE customers without increasing your marketing expenses by just increasing brand loyalty by a small percentage?
Let’s start by discussing what a brand is.
What is a brand?
Despite many misconceptions, a brand is much more than the brand name, logo, or even its packaging. Instead, a brand embodies everything consumers think and feel about the brand including elements such as quality, performance, value, trust, and other reputational factors. I like to think of a brand like one of the holograms you see at Disney parks. The value lies far beyond just the substance to encompass the emotions and ideas we have about the complete image we see in front of us.
Below is a graphic showing the many elements that go into building a brand. Building brand loyalty relies on the alignment of the brand with the values, needs, wants, and aesthetics that the target market uses to make brand purchase decisions. In a later section, we’ll discuss a specific brand, Apple’s Mac, and how their efforts to build brand loyalty resulted in the ability of the company to charge a premium for its product, enhanced the company’s ability to introduce new products that were immediately successful, and gain a reputation as an industry leader in the technology space.
You build a brand through a deep understanding of your target market and what they value when making purchase decisions. The next step is to consistently emphasize your product’s fit with the elements valued by your target market. For instance, when Disney supported gay rights against an onslaught from the Florida governor, thus earning his ire and starting on a long road where the two clashed at every turn, including threats of building a prison next to their Florida parks.
While it’s tempting to see Disney as a bulwark supporting diversity and human rights, that’s not what’s in their DNA. In fact, Disney’s founder, Walt Disney, was a notorious anti-semite and racist. But, the company understands that a significant portion of its target market values diversity so the company supports diversity by standing up to DeSantis’s don’t say gay policies, using the first black character to play Arial, and other efforts to support human rights.
And, the resulting brand loyalty to the Disney franchise, from parks to movies, is high. Later in this post, we’ll discuss some tactics Disney uses to build brand loyalty.
This isn’t an accident. Increasingly, evidence from across the globe shows that consumers buy from companies that share their values, even showing a willingness to pay a premium for these brands.
Steps to increase brand loyalty
Brand loyalty means more than just getting customers to return or make purchases in the future, which, by itself, supports your market performance. It takes a more personal relationship with the brand that involves emotional connections to the brand. The rewards from brand loyalty go beyond simple repeat purchases to defending the brand against detractors and helping to spread positive messages about the brand by contributing positive reviews, creating user-generated content, and recommending the brand to others.
Think about the Apple products and you can understand the value of brand loyalty.
Not, I own a Mac or even I love my Mac, but I AM a Mac! The impact of the simple replacement of a verb has dramatic results in your marketing strategy. Brand identification not only builds strong loyalty to the brand but encourages users to become brand cheerleaders — advocating and defending the brand and celebrating its dominance over the competition.
Brand loyalty and social media success
It turns out the steps necessary to increase brand loyalty are the same concepts forming the backbone of social media marketing – creating valuable customer relationships, increasing engagement with customers, and rewarding customers for their loyalty.
Sure, you can hope the customer loyalty program created by your marketing department will help keep customers coming back, but there’s a real limit to how much these programs can do, especially since so many brands offer a similar program. Customer loyalty programs are passive and inclusive, while customer relationships are more involved.
1. Harness the power of peer-to-peer relationships
Even before social networks spawned from the minds of Mark Zuckerberg and his colleagues, marketers knew that customer relationships used the power of peer interaction and engagement to bind consumers to brands. Look no further than MUDs (Multi-User D) like World of Warcraft to see how peer engagement drives fierce loyalty; generating massive profitability through monthly access fees, auxiliary items, and books, magazines, and other fan media outlets.
Brand loyalty generates positive word of mouth supporting the brand that encourages other prospective customers to take the leap needed to make a purchase.
2. Increase engagement
First, you have to create a brand personality – people have relationships with people not so much with inanimate objects. They only have relationships with things that reflect a human personality – otherwise, they might like the brand and even be loyal to it, but they won’t have a relationship with the brand.
To create customer engagement:
- You have to respect customers and treat them like a friend.
- You have to develop a voice; that personifies the organization with its leadership and employees to disclose something of a firm’s personality.
- You have to give them things they value.
- You have to work as a team with your customers.
- You have to empathize with your customers.
- You have to listen to your customers.
These actions create engagement and drive trusting relationships.
3. Reward Your Customers
Give customers a REASON to be loyal. It’s not enough to provide quality products and functional benefits, you have to give customers emotional and self-expressive benefits – things that make them feel good about themselves and about using your brand.
Look at the success of the Dove Campaign for Real Beauty which sold millions of Dove products by making women feel good about their bodies – telling them they don’t have to look like a fashion model.
Or look at what happened to Pepsi when it took the money they normally spend on Super Bowl advertising and let the community suggest local charitable projects that deserve the money. Using a voting system, they distributed the money to charities that resonated with their market.
American Express is another example of a company spending millions to generate passion. In this case, they’re spending money to help small businesses – sponsoring Small Business Saturday on the day after Black Friday to urge Americans to Shop Small to support small and locally-owned businesses. The company also maintains a website bringing advice from experts to help small businesses maximize their potential and sponsors events for small businesses to learn how to run their businesses more effectively and offers vehicles to help them support each other through partnerships.
Passion is what draws people to these brand communities. And, the selflessness of companies sponsoring the communities draws folks in and makes them customers.
Brand identification and the construction of self
We use the people and things we surround ourselves with as a way of defining who we are. Look around you right now and you’ll see elements reflecting your construction of self — photos of your family, maybe a potted plant, or a few treasured possessions. The clothes you wear, how you style your hair, and whether you have facial hair (and if you’re a woman with facial hair that’s a different story) define who you are to both yourself and the outside world.
Look at Penelope, from Criminal Minds. She surrounds herself with quirky clothes, those pens topped with silk flowers or novelty figures, and little stuffed things. It defines her as a highly intelligent, socially-awkward Geek.
I did a study on the construction of self where I interviewed people who’d lost everything in a fire — no, I wasn’t one of those insensitive reporters interviewing folks in front of their smoldering home. What we found is that these people felt totally invisible, like they didn’t exist immediately after the loss. The ones who build a new “self” recovered over a few months, while those who were too devastated to reconstruct themselves didn’t. In one case, the person withered away and died a few months after the fire.
That’s how important our image of ourselves is. For some, losing everything was actually cathartic as it allowed the person to construct a different “self” than what they’d been before since they were no longer tied to the things that made them who they were. This is why couples destroy mementos of themselves as a couple when they split and children get rid of their toys when they reach an age where they consider themselves adults (so beware of the adult hanging on to their toys because they’re telling you they haven’t grown up yet).
So, what does the construction of self have to do with marketing?
The construction of self is a major force determining what we buy. Brand identification relies on the firm creating a distinct brand personality that consumers want to incorporate in constructing themselves. Brand identification then drives loyalty and word of mouth.
Creating a brand personality
1. Use celebrities
This creates a halo effect where the personality of the individual transfers to the brand. Use Kim Kardashian as your spokesperson and you create a personality that is attractive, affluent, popular, and carefree. Use Bill Gates and your brand personality is intelligent, successful, and compassionate.
2. Use symbols
Symbols also create a brand personality. That’s why insurance companies use images like the Rock of Gibraltar and it implies strength and solidity for a product that’s pretty intangible.
3. Use advertising messaging
And this is where Apple comes in. They’ve used their messaging (as well as other marketing elements such as product development) to create an image of risk-taking, innovation, coolness, and independence. Their famous commercial 1984 commercial introducing the new Macintosh firmly established the image of the company as a rebel.
Brand personality = brand identification
If you’ve established a brand personality that resonates with consumers, they’ll identify with it, support it, defend it, spread the word about it, and celebrate its achievements; developing a customer relationship that’s difficult to break.
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Thanks for sharing your thoughts, Dionne.