Customer and brand loyalty can both encourage repeat business, but price can affect customer loyalty, whereas brand loyalty relies on trust.
Organizations should devise strategies to retain their existing customers, as they typically generate most profits from long-term patrons. Although customer and brand loyalty both drive customer retention, they differ in emotional connections, marketing approaches and profit margins. To increase retention, organizations should aim to boost both customer and brand loyalty.
What is customer loyalty?
Customer loyalty happens when customers make repeat purchases based on prices, discounts, rewards programs, service and overall CX. A person that shows customer loyalty to an organization doesn't necessarily have an emotional connection to that particular brand and may frequently shop from various brands in the same categories. Organizations like Walmart and Kohl's have high customer loyalty.
What is brand loyalty?
Brand loyalty happens when customers make long-term commitments to brands based on product quality, trustworthiness and values. A customer that shows brand loyalty to an organization typically feels an emotional connection to that brand based on the quality of its products or its mission statement. In fact, customers with brand loyalty often remain loyal even when competitors offer lower prices. Organizations like Apple and Tesla have high brand loyalty.
3 differences in customer loyalty vs. brand loyalty
Customer and brand loyalty differ primarily in their emotional connections, marketing approaches and profit margins.
1. Emotional connections
The emotional connection that drives customer loyalty differs from the connection for brand loyalty. Low prices, loyalty programs and quality CX foster customer loyalty because they make customers feel like organizations listen to and appreciate their needs. Many people shop with set budgets, so when organizations offer items for prices consumers can afford, they can become repeat customers.
Also, loyalty programs reward repeat customers with additional -- often personalized -- offers, which helps consumers feel as though organizations value their commitments.
Brand loyalty, on the other hand, is less transactional and more emotional. It stems from trust between customers and brands, rather than price. Customers may develop brand loyalty from the way they perceive an organization's reputation, product quality or mission statement.
For example, a customer who always buys the same brand of smartphone without considering potentially less expensive options represents brand loyalty. The customer trusts the brand's quality and reputation, and likely won't consider an alternative.
Additionally, a customer may always buy the same coffee brand because it publicly supports and donates to a charitable cause. In this case, the customer's brand loyalty stems from an emotional connection to the brand's moral actions.
2. Marketing approaches
Given that customer loyalty centers around price, whereas brand loyalty focuses on trust, these two retention strategies often rely on distinct marketing approaches. To build customer loyalty, marketers can focus ads on price and customer savings, which appeal to customers with set budgets. Additionally, marketers can use rewards programs to incentivize frequent purchases.
For brand loyalty, marketing teams should work to connect with customers on an emotional level. For instance, marketing teams could link their brand to an idea or mission that might appeal to customers. An electric car company may associate itself with innovation and sustainability, or a whole foods store with health and wellness. Customers trust brands that share their own morals and values, which can boost brand loyalty.
3. Profit margins
Many organizations with high customer loyalty have lower profit margins because they offer products at low prices. However, these organizations typically make large numbers of sales, which makes up for the low margin.
Conversely, many organizations with brand loyalty have higher profit margins because their customers respect the brand and its values over prices. These organizations can charge premium prices for products because loyal customers are willing to pay. However, some organizations with high brand loyalty may sell fewer products and services than organizations with high customer loyalty.
All organizations should devise strategies to maximize customer retention. Although some business models may favor customer loyalty, whereas others may lean more toward brand loyalty, organizations can benefit from either strategy.