The Demise of Brand Loyalty: A Myth or a Reality

Author: Attiso Bhowmick University of Agricultural Sciences (UAS), Bangalore

A Myth or an Incumbent Necessity?

While the exculpatory zeitgeist of the credulous conjecture on the importance of brand loyalty has obligated all major brands to secure loyal customers for competitive differentiation, the truth about its revenue subsistence functions may either be an inflated theory or an undervalued key business metric. As price loyalty becomes more dominant in the highly fragmented contemporary markets, brand loyalty has indeed assumed a backseat in a few instances. However, there is a plethora of empirical evidence that growing reliance on price promotions is a transient phenomenon, incapable of earning the revenue benefits that come with brand loyalty. In this diverse evidence of anecdotal and empirical perspectives, this short article delves deep into the factuality of the current existence of brand loyalty.

What Drives Brand Loyalty?

Brand loyalty had always influenced consumer behaviors and has helped to strategize the perfect marketing mix for the multifarious products of a company. Consumers have become more rational and are seldom influenced by the price competitiveness offered by some brands. Despite the inherent technological complexity of contemporary marketing with fragmented retail, loyalty programs have found widespread acceptance from consumers, as indicated by empirical surveys. A perspicuous method is to ascertain the relevancy of brand loyalty which can be plausibly derived from consumer statistics observed over time. One of the keys is determining the parameters driving the retail loyalty programs. One such report published by KPMG International highlights the principal reasons for this rising trend. The graph below demonstrates graphically the results of the survey sampled from a homogeneous pool of metropolitan respondents.

The data shown offers some valuable insights. The biggest incentive for customers to remain loyal to a brand is good product quality. Value for money is also the second most important parameter. It must be noted that value for money is a different concept than pricing. A consumer is willing to pay a higher sum if he or he is convinced about the getting its worth in the products purchased. Pricing advantages

are merely the numerically lower prices, irrespective of the quality that it affords. Therefore, pricing factors are one of the lowest attributes that drive brand loyalty programs. Pricing advantages offer a company customer loyalty, not brand loyalty. Customer loyalty forces the company to keep lower profit margins and limits the marketing campaigns to only price incentives. On the other hand, brand loyalty diversifies the marketing portfolio to a product-based and innovation-based approach. This rational reasoning is not just an invention of logic or a carefully constructed bias based on cherry-picked data, but a reality that has driven the psychology of the consumers.

Who are the Most Loyal Ones?

When the relevance of brand loyalty has been confirmed and backed by empirical evidence, it raises an important question: what section of the demographics drives this? Surveys across a heterogeneous group of respondents show us a clearer picture. The following graphs show the demographic statistics related to the drivers of brand loyalty.

The baby boomer generation has been shown to have the highest percentage of brand loyalty and the Gen Z has the lowest. It can be made out from the data that the Gen Z population is one of the most disloyal consumers as far as brands are concerned. However, this is not something that might muffle the popularity of Gen Z as they have the lowest purchasing power among all the demographics. The baby boomers possess the highest earning potential and economic purchasing power among all the demographics. They also surprisingly are the largest owners of small businesses. The survey shows that baby boomers have the highest probability to express brand loyalty. Thus, we can safely conclude that the correct demographics have always preferred brand loyalty over price loyalty. The price sensitivity of the market is caused primarily by gen Z and millennials because they are still young with comparatively lesser wealth and earning potential. Once they transition to a higher earning potential demographic, they will also be equally likely to show a higher inclination toward brand loyalty. Personalized marketing campaigns that directly juxtapose with the belief system of the millennials and Gen Z have been shown to increase brand loyalty too.

Final Thoughts

It is very important to comprehend the value, ethics, and implementing elements concerning brand loyalty. This has tremendous benefits in multifarious sectors like healthcare, FMCG goods, e-commerce platforms, financial services, real estate markets, electronics, and the apparel industry. Companies that have successfully implemented strategies to gain brand loyalty has reported to have higher repurchase ratio, upsell ratios, and customer lifetime value and customer engagement scores in their surveys. However, all the efforts to establish a brand value and reinforce brand loyalty can become fruitless when the brand is not adequately marketed and appropriate customer communications are lacking to substantiate and minimize the number of touchpoints in a customer’s purchase journey. While this brief discourse may have settled the debate on whether the demise of brand loyalty is a myth or a reality, its actual impact and implementation still lie in uncharted territory in individual business scenarios.