2.1.5 Brand loyalty
Loyalty is a direct measure of how willing customers are to stick to a brand. Therefore Aaker argues the price premium as the basic indicator for brand loyalty and the single best measurement of brand equity. Loyal customers prevent entry of potential competitors and lower the treat of substitutes. Next to that loyalty facilitates in time so it is possible to respond to market innovations and to create to protection shield against price fighters. Hence, Aaker defines brand loyalty as a core dimension in the brand equity model (Aaker, 1996:319-323).
The importance of loyalty is also recognized and correlated to brand equity by Kapferer. Strong brands can only be strong if they have a solid supply of loyal customers. Where the financial brand value is a function of brand equity, loyalty decreases the risk of expected future returns. Loyal customers spend more and their spending could easily increase over time as a result of loyalty programs. Compared to prospect / non-customers, loyal customers are 5 times less costly to contact (Kapferer, 2007:203).
Loyalty is often measured as repeating sequence of purchase. Keller argues that repeat buying does not necessarily address high customer loyalty, nor does a high level of customer satisfaction. Customers can purchase repeatedly and feel very satisfied without demonstrating intrinsic loyalty to the product, brand or organization. Nonetheless repeatedly buying is part of brand loyalty. Loyalty demands deeper attitudinal attachments that fully satisfy customer needs, it’s beyond having a positive attitude to the brand (Keller, 2007:71&88).
Love and Gelbert argue that strong brands consistently win two moments of truth and that they will earn a special place in the mind of customers. The first moment of truth occurs when the customer chooses the brand above the competition. The second moment of truth occurs when the customer experiences the brand and the brand promise is congruent with the brand experience. Hence loyalty is directly linked to value of trust earned by credibility as a result of the moments of truth. Therefore trust can be seen as a simple foundation of loyalty programs (as quoted in Kotler & Pfoertsch, 2006:VI).
Aaker defines five loyalty segments which guide companies to develop their strategic and tactical market insight (Aaker, 2002:22-23);
- Price switchers
- Passively loyal customers
- Fence sitters
- Committed customers
Organizations should enhance loyalty of the fence sitters, the ones who have no brand preference between two or more brands, and the committed customers. Brand awareness, perceived brand quality, a well managed brand identity and behavioural brand loyalty programs could leverage brand loyalty among these groups (Aaker, 2002:22-23). The latter has also been addressed by Kapferer who argues that behavioural loyalty programs create an emotional connection between the brand and customers (Kapferer, 2007:86).