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What makes customers loyal to a brand? Is it the name and the guarantee it offers? Or is it the value their products bring in exchange for the price customers pay?

In hyper-competitive markets where customer loyalty and brand loyalty are critical to the growth, survival, and success of modern enterprises, it’s important to understand why customers are or are not loyal to brands. Especially in this age where the brand-consumer paradigm has shifted dramatically, and consumers’ demands and expectations have evolved significantly.

Why Loyalty Matters

Business pundits have long preached that retaining a loyal clientele costs less than attracting new customers. Several surveys and reports on customer loyalty and brand loyalty validate this. The cost of acquiring new customers? 5x higher than retaining existing ones.

Existing customers are big spenders, shelling out 31% more than newly acquired customers. They are also 50% more likely to purchase a new product from their favorite brands. A 5% increase in customer retention can drive up to 25-95% more revenue.

During disruptive events, like the recent global health crisis, customer loyalty can carry brands through. Such is the impact of a loyal client base. But what makes customers loyal to a brand, exactly?

What Makes Customers Loyal to a Brand: Beyond The Name

Consumers often go for more popular brands and are more likely to become loyal and trusting of their products. Among the reasons why customers are loyal to brands with established names is because they feel its products meet their needs.

That said, 60% of adult American consumers now place a premium on values, environmental footprint, and social impact when making a purchase. Now, this is crucial.

81% of consumers want a relationship with a brand. But more importantly, they want to be identified with brands that share similar values and goals, do social good, and contribute to causes such as environmental protection and social justice.

A recent consumer study reveals that 97% of consumers are loyalists to at least one brand. That’s a new all-time high, a big jump from 90% just two years prior. While a brand name is essential in building loyalty, consumers now also look into what the name represents.

The Drivers of Customer Loyalty

Discounts and Free Products

Any consumer loves to get discounts and free products on a regular basis in exchange for their loyalty. According to a consumer survey, discounts (44%) and free products (26%) are the main reasons for consumers to participate in loyalty programs in 2021.

Yet while research confirms the enduring importance of “hard value,” it is just one component – and not the most important factor – in building true loyalty.

True, discounts and freebies attract consumers to join reward-based loyalty programs. Still, customers – including brand loyalists – tend to leave a brand if a competitor offers better alternatives or a better customer experience. 1 in 3 customers abandon a brand they have loved after just a single negative experience.

What makes customers loyal to a brand? Slashed prices and free products are huge motivators. But since bargain hunters are the least loyal customers, brands and marketers need to understand that the bigger question is, “what makes them stick?”

Values and Empathy

As mentioned earlier, consumers are more discerning with brands and go to great lengths to determine if they have similar values, goals, and perspectives. Nearly 70% of consumers prefer buying from brands that are socially conscious and support noble causes.

On top of that, customers demand that brands go beyond rhetoric and walk their talk when it comes to values and issues. 90% of consumers expect companies to clearly demonstrate their values and 66% expect brands to demonstrate empathy.

When brands demonstrate their values publicly, this will resonate with their consumers and engender loyalty.

Community/Exclusive Memberships

People are social animals in general, and have this innate desire to come together and interact with other people who share the same affinity for a brand. They take pleasure in becoming a part of a like-minded community, particularly if that community is organized by the brands themselves.

What makes customers loyal to a brand that offers communities and exclusive memberships? For one, being part of an exclusive club of select consumers entails perks not offered to regular customers, providing members a better experience from the brand. These benefits include exclusive communications, earlier access to new products, invitations to launches and events, more hands-on service and more.

When brands give customers a sense of belonging, they help drive connections and form relationships that are impossible to do at an individual level. When customers have their communities, it helps fuel short- and long-term marketing impact and value, and ultimately, drives brand loyalty among customers.

Data and Personalization: Keys To Loyalty

Businesses need to deliver personalized experiences to customers to further cultivate loyalty. In fact, they expect it. 84% of consumers say personalization is key to winning their business.

What makes customers loyal to brands that offer personalization? For one, personalization helps build trust between brands and customers. It clearly demonstrates that brands do value them through powerful, relevant, and meaningful conversations, recommendations, and experiences. Businesses that don’t offer personalized communications risk losing up to 44% of their customer base.

Consumers want more in terms of personalization, as well. According to a study, 31% of customers demand brands deliver more personalized experiences than currently offered. Only 22% say they are satisfied with the current level of personalization. To increase satisfaction, enterprises need to leverage customer data to create and provide customers with personally relevant experiences.

However, consumers have become sensitive when it comes to sharing their information. 81% of people say that the risks of data collection outweigh the benefits. 69% say they would stop transacting with a brand if data usage became too invasive.

If personalization is key to customer loyalty and brand loyalty and consumer data fuels personalization, then brands are in a very tough spot, as consumers and regulators make it harder to obtain and use the kinds of data traditionally available.

Zero-Party Data: The Future of Brand Loyalty

The good news is brands can do something about it. They can leverage zero-party data tools to capture information straight from their customers. Brands must increasingly empower customers to choose the types of data they share, thus improving the quality of the data. while ensuring compliance with regulations, as customers proactively share the information.

When customers give their data willingly, brands and consumers create a partnership that enables the delivery of relevant offers and resonant experiences.

What makes customers loyal to a brand? When companies give customers exactly what they want in exchange for their data. Zero-party data enables this. Brands have a direct line to their customers and know what motivates them and how to reward them for their loyalty.

A true reciprocal value exchange empowers consumers while providing brands with the data they need, taking the customer-brand relationship beyond loyalty, to true partnership.

 

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