Brand Loyalty Programs
Helen Strong
Brand Loyalty Programs: Purpose
Before investing in the creation and promotion of a brand loyalty program, marketers need to assess whether their target market will respond to the concept and elements of the program. And since all industries are not created equal, they need to discover exactly which elements will induce consumers to participate in the program and increase their level of loyalty to the brand or organization.
Brand Loyalty Programs: Structure and Description
Billions of money have been invested worldwide in building customer satisfaction levels, which have been shown to be related to brand loyalty. The work of Bae (2012) concludes that “firms can choose a certain level of customer loyalty by indirectly controlling their investments in satisfaction.” However, the equation is not all that simple. Bae also concludes that “managers can identify which customer, firm and industry characteristics influence the relationship between customer satisfaction and customer loyalty so that they can formulate appropriate marketing strategies.”
One of the investments available to marketing managers is design and implementation of brand loyalty programs. A sustained and deliberate attempt is made to encourage the consumer to engage with the brand (i.e., to interact with brand promotions, buy, and continue buying the products in question).
When the consumer identifies a need, his or her search will be on, to find the product that best fulfills that need. The brand loyalty corridor represents several stages of commitment to brands as the consumer finalizes his or her portfolio of acceptable brands (Figure 8.1).
Figure 8.1 Brand loyalty corridor
In most markets, a multitude of brands are available for choice. Through a process of trial and error, the consumer whittles down the brands that remain on the buying list. To trace the journey, the researcher needs to understand the underlying motivations that generate selection of brands and the way in which loyalty is built up in the consumers’ psyche (refer to the brand resonance model and its implementation).
Brand Loyalty Programs: Strategic Considerations
The obvious question is whether there is sufficient sales leverage to be created through implementation of consumer loyalty schemes. Bae has shown that industry competitiveness and the type of product are more likely to determine the success or otherwise of loyalty programs. Another implication is that there are going to be decreasing returns with increasing levels of investment. Marketing managers need to know when the incremental gains stop.
It has been shown that brand loyalty can impact on market share growth by growing the pool of consumers. This in turn increases the potential for word-of-mouth recommendations. In some instances, a high level of brand loyalty has been associated with facilitation of line extensions—because consumers are familiar with and like the brand, they are more likely to notice and try new products that are linked to it. In this way the return on investment (ROI) on marketing spend could be increased as the market penetration is more rapid and there is an increased likelihood of adoption of the new product.
Brand Loyalty Programs: Implementation
All the questions raised under the brand resonance ladder apply here. However additional research needs to take place to establish whether loyalty programs will work in your particular industry.
1. First look at the degree of competitiveness of the industry. In highly competitive industries, loyalty programs are less likely to be effective.
2. Find the factors that consumers use to select your category of product.
3. Then test how your product rates on those factors.
4. The components of the loyalty program also need testing.
2. Find the factors that consumers use to select your category of product.
3. Then test how your product rates on those factors.
4. The components of the loyalty program also need testing.
○ Is there alignment of the program, your target market, and their buying patterns?
○ Are the benefits obvious, exciting, relevant, and attainable?
○ Does the point or benefit acquisition process engage consumers?
○ Does the program generate additional opportunities to interact with the brand?
○ Is purchase of the brand or its line extensions encouraged through the program?
○ What are the costs associated with the design, launch, and operation of the loyalty program?
Brand Loyalty Programs: Conclusions
The benefits of building brand loyalty fluctuate with the industry and life cycle of the product being marketed. Whilst it seems intuitive that brand loyalty is a desirable attribute to foster in one’s target market, the costs need to be calculated. As with all investments, marketers need to perform the research to test whether there is a high probability of loyalty actually leveraging sales beyond the cost of developing the loyalty platform.
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