A Brand For Life
Why customer loyalty is worth fighting for
Loyalty is a particularly positive and highly valued character trait in our personal environment. We expect good friends, our beloved partners, and our family to stand by us and support us even in difficult times.
This is exactly what companies wish from their customers too. Product or brand loyalty is a difficult goal to achieve, but one that is worth fighting for. After all, loyal customers are consistent customers who buy a company’s products again. For them, buying a product is more than simply fulfilling their needs; they are genuinely convinced by the product and the purchase gives them a good feeling. And even if they experience temporary unavailability of the product or a slight price increase, the loyal customers will not switch. In addition, loyal customers are drivers of word-of-mouth promotions, providing companies with new buyers and driving new sales without costly marketing campaigns. ¹
Ok, we get it, loyalty is important. But for some companies, customer loyalty is harder to achieve than for others. Particularly in the following industries, brand loyalty appears to be low: ²
- Alcoholic beverages
- Snack brands
- Soft drinks
- Cereals
- Personal electronics (e.g. USB flash drive, toaster, hair dryer)
There are several factors complicating the establishment of brand loyalty.
Short shelf-life
Many low-loyalty products are consumables, meaning that their purpose is to be used up by consumers within a certain time frame. As such products will diminish sooner or later, and it is already clear at the time of purchase that we will not own them forever, our concerns about trying out a new product from another brand are relatively low.
High competition
Simple math can explain why high competition is a reason for low customer loyalty. Imagine you are standing in the supermarket and there are 10 different detergents in front of you, all trying to convince you with their marketing promises. The probability that you will reach for a product other than your standard detergent is higher than with only 2 different detergents on the shelf.
Low switching costs
Certain types of products require consumers to engage with them to truly understand the item. Insurance contracts are examples of such complex products. When signing a contract, we invest the time and mental capacity to deal with the terms and conditions. Since the effort to familiarize ourselves with a new contract later is very high, we will hesitate to seek a new provider. With items like toasters, on the other hand, the use is simple and self-explanatory. Here we have few barriers to switching to a new product.
Price is THE distinguishing factor
Companies that win their customers mainly through low prices, discounts, or extensive promotions will quickly lose buyers if they discover price advantages from competitors. Smartphone brands like Apple or online retailers like Amazon³, on the other hand, know how to win over their customers with additional product features like fast availability, excellent quality, and reliable service.
But surely there must be ways for the disadvantaged industries to increase customer loyalty?
- Induce a loyalty program ⁴
Hotels, airlines, and delivery services have perfected this principle. They have increased their customer loyalty through certain programs, and the principle is often simple. With every booking, customers can collect points and when they reach a certain number, they receive a reward, which can be, for example, a free breakfast or an upgrade to the flight. The customer feels valued and if he is indifferent between 2 providers, he is more likely to choose the company with the loyalty program. - Upselling or cross-selling ⁵
Upselling and cross-selling, coupled with smart marketing initiatives, are other methods to retain customers. Perhaps a new, improved feature of the original product can persuade customers to buy again? Of course, this must be advertised in a clearly visible and understandable way, e.g. on the packaging. Or are there related products whose joint use creates a significant advantage for users? Such initiatives create additional value for the customer and bind him to the brand. - Connect with the customers
The essence is that companies better understand what customers value, how they feel delighted, and what makes a product extraordinary to them. In short, customers should be induced to establish a long-term relationship with the product. Therefore, the product needs to evoke more than just satisfaction. It needs to evoke emotions such as joy, relief, or happiness. One way to solve this is to embed the product in a broader context and create a whole experience.
banbutsu and D[AI]TA, a technology company to aggregate and process data, want to transform the ordinary household task of doing laundry into a sustainable, time-efficient, and enjoyable experience. Data intelligence integrated into a common washing machine will determine the right amount and type of detergent, the suitable program, and the necessary amount of water. This saves energy, limits detergent overdosing, and makes clothes last longer. And before running out of detergent, the washer automatically orders a new one delivered to the customers’ home. In sum, consumers can fully rely on their intelligent washing companion and must only deal with the bothersome task of doing laundry to a minimum. Such a washing experience evokes emotions to build lasting customer-product connections. Consumers don’t want to miss the gained time and mental space for new projects and activities and will automatically turn from e.g. one-time detergent buyers to long-term customers.
Establishing relationships with customers based on a full experience that evokes positive emotions is a win-win solution for both seller and buyer.
