2016 19 february

A MarketPoint Whitepaper

Brand
Loyalty

Loyalty and friendship, which is to me the same, created all the wealth that I've ever thought
I'd have.
Those are the words of Ernie Banks a recipient
of the Presidential Medal of Freedom, 14-time
National League All-Star, two-time MVP, Gold
Glove recipient, two-time NL home-run leader,
MLB All-Century Team member, and the first
Chicago Cub ever to have his number retired.

Mr. Sunshine knew what it meant to have a

loyal following. Even when his batting skills
began to wane, coach Leo Durocher was
reluctant to remove him from the line-up, for
fear of backlash from his fans. But Bankss
words dont apply only to baseball, as youll see.
They also hold the secret to brand loyalty.

What is brand loyalty?

n very superficial terms, we say that customers

are loyal to brands when they make repeat
purchases. If the owner of a Ford truck, for
example, purchases another vehicle from
Ford, we label that buyer a loyal Ford customer.
But would we call the customer loyal if the Ford
dealer were the only game in town? Or, what if
the customer test-drove many cars and had her
heart set on a Toyota, but couldnt afford the
car she really wanted? What if the customer
would have bought a model from Chevrolet,

had she been aware of it, but never received

any marketing information on the competing
product? Are these customers loyal by choice or
by default? And does that even matter?
The true test of loyalty does not present itself
in a vacuum. Loyalty is best evaluated in the
context of market pressures. Loyal customers
choose to do business with their preferred brands
irrespective of price differential, peer or business
pressure, persuasive marketing messages, or ample
alternatives.

Brand Loyalty is Fragile

30%

56%

46%

of less frequent
customers
wouldnt
miss a company
or brand if it
went away (Carter)

of US consumers said the

number of brands they
consider for a given product
or service has increased
significantly over the past 10
years (Carter)

of US consumers
say theyre more likely
to switch providers
today
than they were
10 years ago (Carter)

80%

of consumers look online

to see what other people
think, instead of just
sticking with a brand they
know (Kaye)

Loyal Customers are Highly Valued

5%

$1.6 trillion

increase in
A
customer retention can result

The potential revenue up

for grabs from switching
among consumer brands (Carter)

How Much
are Loyal
Customers
Worth?

80% of a business profits

come from 20%
of its customers (Hong)

Brand advocates spend

in a

2x

40% lift in profit (Hong)

77%

of customers still
say they have no relationship
with a brand (Hobbib)

The probability of generating an

as much as regular

additional sale from an existing

customer is 7x greater

customers and have 5x

than from a new prospect (Hong)

the lifetime value (Hobbib)

And loyal customers are highly valued. Studies have

repeatedly shown that loyal customers are more
likely to recommend a brand to friends, colleagues
and family members. This creates a steady stream
of new customers for the brand, significantly
lowering sales and marketing costs, a significant

driver of business expense. Many businesses

find that it costs 10 times more to acquire a new
customer than it does to retain an existing one.
(Williams) Whats more, brand advocates are likely
to outspend their counterparts two-to-one, over
their lifespan. (Hobbib)

Percentage of Unfavorable Customer Opinions as Expressed on Social Media (Carter)

96%

94%

93%

88%

Telecom

Consumer Electronics

Retail

Airlines

72%

Hotel Chains

According to Accenture, 28 percent of consumers

would label themselves as loyal. (Carter) This is
remarkable considering the fact that 46 percent of
U.S. consumers report being more likely to switch
brands than they were just 10 years ago. (Carter)
A brief sampling of social media quickly reveals
that dissatisfied customers are far more likely
to post their opinions online than their satisfied
counterparts. For example, 96 percent of social
media posts that concern the telecom industry are

negative. Retail chains, airlines and hotels dont fare

much better, showing 93 percent, 88 percent and
72 percent unfavorable comments, respectively.
(Carter) Though daunting, the percentage of
negative comments on social media should not be
surprising. According to one study published in the
Harvard Business Review, 48 percent of customers
who had negative experiences with the company
told 10 or more people. (Kolowich)

Why Do Customers Switch Brands?

Top 3 Reasons Customers Switch (Carter)

cheaper pricing

!!!!xx!.

18%
16%

Given the value of loyal customers, one might expect

organizations to focus their energy effectively on
customer satisfaction. Yet ironically, two of the
top three reasons that consumers switch brands

31%

rude staff

too many mistakes

are entirely within the control of management:

rude staff (18 percent) and too many mistakes
(16 percent). (Carter)

Measuring brand loyalty

istorically, organizations have measured customer loyalty in terms of

customer retention rate. But retention
rate is obviously a trailing indicator.

moter Score cannot tell an organization what it is

doing well and what it is doing poorly. And so, diligent leaders turn to customer surveys to establish
meaningful metrics on specific performance areas.

One of the most widely accepted leading indicators for customer retention is the Net Promoter
Score (NPS), developed by Bain & Company. NPS
is a relatively simple calculation that lends itself to
almost any organization, in any industry. An organizations score is based on its customers responses
to this question: On a scale of 0 to 10, with 0 being
not at all likely and 10 being extremely likely, how
likely would you be to recommend us to a family
member, friend or colleague? (Reichheld)

Many companies provide online tools suitable for

customer satisfaction surveys. One leading survey
tool, Survey Monkey, suggests that organizations analyze various factors to determine the level of brand
loyalty among their customers: (Survey Monkey)
1) Level of service, including issues related to accessibility, convenience and responsiveness
2) Trust, including issues related to privacy and
receptivity to suggestions
3) Esteem, or how highly a brand is regarded and whether it is preferred over other
brands or competitors
4) Quality, or how likely a product or service is to
fulfill or exceed the customers expectations
5) Value, or how likely it might be for the customer to switch providers for an equal or
lower cost

Responses are divided into three groups: Detractors (0-6), Neutrals (7-8) and Promoters (9-10). To
calculate its Net Promoter Score, an organization
simply subtracts the percentage of respondents
classified as Detractors from the percentage of
respondents classified as Promoters. Note that
the Neutrals are ignored in the calculation. The
resulting scores range between negative 100
(100 percent Detractors) and positive 100 (100
percent Promoters). Studies by Bain & Company
and others have consistently shown that, between
organizations competing in the same market, the
organization with the higher Net Promoter Score
is more likely to be profitable than competitors
with lower Net Promoter Scores. (Reichheld)
By tracking changes in its Net Promoter Score,
over time, a company can determine whether its
odds of profitability are improving or decreasing.
However, because of its simplicity, the Net Pro-

In its 19th Annual Customer Loyalty Engagement

Index (CLEI), Brand Keys rated brands in terms of
their ability to meet customers expectations. The
brands that topped their categories included many
familiar names: Air Canada, Apple, AT&T, Avis, Chipotle, Discover, Dominos, Dunkin Donuts, Exxon
Mobile, Facebook, Ford, Google, Hyundai, Kelloggs Nutri-Grain Breakfast Bars, Konica Minolta,
Nationwide, the NFL and Travelocity. (Passikoff)
The survey further found that consumer expectations increased by 28 percent over the previous
year, while brands have improved their ability to
satisfy expectations by only 7 percent.

Researchers Patrick Spenner and Karen Freeman developed the Decision Simplicity Index
for measuring stickiness among customers who
do business on the internet. They found that the
likelihood of retaining a customer was directly
related to the ease with which consumers can
gather trustworthy information about a product
and confidently and efficiently weigh their pur-

chase options. Writing for the Harvard Business

Review, the authors noted, Brands that scored in
the top quarter in our study were 86 percent more
likely than those in the bottom quarter to be purchased by the consumers considering them. They
were 9 percent more likely to be repurchased and
115 percent more likely to be recommended to
others. (Spenner)

Building brand loyalty

f E. Jerome McCarthy were alive today,

he would likely tell us that brand loyalty is
dependent on the 4Ps: Product, the tangible
and intangible characteristics of whatever
youre selling; Price, your ability to serve the
customer for a cost that is competitive and
within his budget; Place, your ability to meet the
customer when and where he needs your products
or services; and Promotion, your ability to stay
top-of-mind in the customers consciousness.
But Debra Kaye, partner at Lucule Consulting,
says that brand loyalty is dependent on factors
beyond the 4Ps. If you want to build brand
loyalty in an age when 80 percent of consumers
look online to see what other people think,
instead of just sticking with a brand they know,
Kaye argues, you have to be smart about both
the quality of your product and the experience
of buying it. (Kaye)
In an article written for Inc. magazine, Kaye
reveals three secrets to building brand loyalty:
(Kaye)

1) Deliver on the products promise every time.

2) Over-deliver on fixing mistakes.
3) Focus on the customer experience.
Spenner and Freeman echo and expand on
her themes, encouraging companies to do the
following: (Spenner)
1) Create an efficient path for customers to
move confidently toward the purchase.
2) Keep your communications simple to avoid
customer abandonment.
3) Build trust in the information you provide.
4) Facilitate side-by-side comparisons for the
customer.
Matt Kleinschmit, senior vice president at research consulting firm VisionCritical, suggests
three simple steps to ensure brand loyalty:
(Kleinschmit)
1) Deliver compelling products with a
seamless customer experience.
2) Make your customers the hero
(i.e., the real story is not about you).
3) Listen to your customers.

Loyalty Programs: Are They Worth the Trouble?

73%

70%

of consumers believe
that brands should use
loyalty programs to
demonstrate their
loyalty (Ming)

of loyalty program
members consider the
program a part of their
relationship with a
company (Ming)

Yet only

90%
want to receive
ongoing
communication from
loyalty programs
(Ming)

59%
of consumers would
be more likely to join a
loyalty program that
offers a smartphone
app (Ming)

US small businesses credit loyalty

10% ofprograms
for their repeat business, while
existing customer relationships
57% credit
(Carter)

Generational differences

ot surprisingly, brand loyalty is affected by age. Millennials (born

1981-1997) are the most loyal generation to their favorite brands, at
50 percent (Smith) and 24 percent more loyal
than Gen Xers. (CrowdTwist) Furthermore, 83
percent of millennials can be motivated to join
loyalty programs to save money, and 74 percent
of millennials say they would be likely to take

a survey to earn loyalty points. Millennials are

also the most technologically engaged generation, with 87 percent using two or three digital
devices daily, and half relying on their networks
to make buying decisions. (Schawbel) In sharp
contrast, only 1 percent of millennials claim to
be influenced by advertising, (Schawbel) and
52 percent say that brands must be willing to
change based on consumer opinion. (Staff)

What Makes Consumers Loyal?

89%

of consumers say
great customer
experience is key
to driving brand
loyalty (Ming)

44%

of millennials say they are loyal

to brands they buy (Carter),

and

52%

will choose quality over price (Carter)

Brands Millennials Are Most Loyal to:

Amazon, Apple, Asus, Beats, Chevrolet, Chipotle, Converse, Ford, Google, Levis, Nike, Old Navy,
PayPal, Ralph Lauren, Samsung, Sephora, Target, Under Armour, Verizon, Victorias Secret (Carter)

Generation X (born 1965-1980) are slightly

more likely than millennials to join a loyalty
program to save money, and slightly more
likely to take a survey to earn loyalty points.
(CrowdTwist) And while 85 percent of Gen Xers
are motivated by discounts and coupons, they
are less interested in earning loyalty points for

their social media activity than their millennial

counterparts. (CrowdTwist)
Baby Boomers (born 1946-1964), the least loyal
of the three generations, are 16 percent more
willing than Gen Xers to change brands. Eightyfour percent of Boomers join loyalty programs to
save money and 62 percent to receive rewards.

Consulting the Oracle

ill Hobbib is vice president of product marketing for Oracles social and
commerce line. In an article for Forbes,
Hobbib lays out 10 steps for building
brand advocates: (Hobbib)
Inside Out
1. Excel at individual interactions. Provide an
excellent customer experience with phone
calls, emails and field visits.

2. Engage customers through multiple

channels, including physical contact,
phone calls, websites, email, smartphone
apps, text messaging, video and social
media (especially Twitter).
3. Provide a consistent, connected customer
experience by integrating marketing,
commerce, service, sales and social media
systems; and then map the customers
journey to identify gaps.

4. Make it easy to do business with your

company. This includes reevaluating the
customers online experience, the acquisition process, speed and ease of incident
resolution, and continual improvement
feedback loops.
5. Collect and act on customer feedback.
Outside In
6. Connect your internal silos for a complete
view of customer data, to help management
teams focus their resources on journeys
that drive the most revenue, loyalty and
advocacy.

7. Involve employees in all steps of the

process.
8. Rethink customer service metrics. Rather
than focusing on operational efficiency,
focus on first-contact resolution.
9. Evaluate cross-organizational performance
around the customer experience, with live
chat, case management, guided resolution,
customer engagement tracking, social contact
center, and social listening and engagement.
10. Cultivate a customer-obsessed culture. Use
the Net Promoter Score and customer satisfaction surveys to focus the organization
on the customer experience.

Back to baseball

he more you know about brand loyalty,

the more you realize that Ernie Banks
was right. Loyalty and friendship
are the keys to success in life, and in
business. Stickiness depends entirely on the
relationship you build with your customers. Its

the first rule of business karma. Good intentions

and good deeds bring happiness, while bad
intentions and bad deeds lead to suffering.
Or, as Hall of Fame Dodgers manager Tommy
Lasorda once said, You give loyalty, you'll get it
back. You give love, you'll get it back.

Net Promoter Score is a Registered Trademark of Bain & Company

Customer Loyalty Engagement Index is a Registered Trademark of Brand Keys

About the Cover:

Baseball legend Ernie Banks receives
the Presidential Medal of Freedom at
a ceremony at The White House on
November 20, 2013 in Washington, DC.
Photo licensed. Photo credit:
Rena Schild / Shutterstock.com

About the Author

ichael Zimmerman is the Senior Marketing Strategist at MarketPoint

LLC, a business consulting firm specializing in strategic communications, brand management and outsourced marketing. Calling on 36
years of management experience, including two CEO positions and
several marketing leadership roles, Michael is a regular contributor to SmartCEO
Magazine (New York, Philadelphia, Baltimore, and DC editions); he has been published in Social Media Today, Technorati, The Social Customer, and Sales and Marketing
Management Magazine, and speaks frequently at area universities.

Jenna George contributed research for this whitepaper.

Copyright 2016, MarketPoint LLC

10

Works Cited

Carter, Brandon. Customer Loyalty Statistics: 2015 Edition. 31 December 2015. Blog. 13 February 2016.
<http://blog.accessdevelopment.com/customer-loyalty-statistics-2015-edition>.
CrowdTwist. The 2015 CrowdTwist Loyalty Program Report: Demystifying Brand Loyalty Among Millennials. 2015. CrowdTwist.
Document. 23 December 2015. <http://crowdtwist.com/research-report-generations_form/>.
Freeman, Patrick Spenner and Karen. To Keep Your Customers, Keep It Simple. May 2012. Article. 24 December 2015.
<https://hbr.org/2012/05/to-keep-your-customers-keep-it-simple>.
Hobbib, Bill. 10 Ways To Turn Customers Into Brand Advocates. 14 December 2015. Article. 12 February 2016.
<http://www.forbes.com/sites/oracle/2015/12/14/10-ways-to-turn-customers-into-brand-advocates/#7f0d1be2409b>.
Hong, Pat. 12 Experts on Loyalty Marketing Strategy & Why Every Interaction Counts. August 2015. Article. 5 August 2015.
<http://www.linkdex.com/en-us/inked/loyalty-marketing-strategy-experts/>.
Kaye, Debra. 3 Secrets to Building Brand Loyalty. 14 March 2014. Article. 24 December 2015.
<http://www.inc.com/debra-kaye/3-secrets-to-build-brand-loyalty.html>.
Kleinschmit, Matt. Three ways companies are building customer loyalty. 27 March 2015. Blog. 24 December 2015.
<https://www.visioncritical.com/build-customer-loyalty/>.
Kolowich, Lindsay. 7 Customer Loyalty Programs That Actually Add Value. 1 July 2015. Blog. 28 December 2015.
<http://blog.hubspot.com/blog/tabid/6307/bid/31990/7-Customer-Loyalty-Programs-That-Actually-AddValue.aspx#sm.000xgkuz5109heljxbg2ki0kqx8b6>.
Ming. The Top Customer Loyalty Programs and Why They Work. n.d. Article. 3 March 2015.
<http://www.consumerstrategist.com/top-customer-loyalty-programs/>.
Passikoff, Robert. 2015s Brands With The Most Loyal Customers. 16 February 2015. Article. 23 December 2015.
<http://www.forbes.com/sites/robertpassikoff/2015/02/16/2015s-brands-with-the-most-loyal-customers/#100bee447770>.
Reichheld, Rob Markey and Fred. Introducing: the Net Promoter System. 8 December 2011. Article. 1 February 2016.
<http://www.bain.com/publications/articles/introducing-the-net-promoter-system-loyalty-insights.aspx>.
Schawbel, Dan. 10 New Findings About The Millennial Consumer. 20 January 2015. Forbes. Article. 23 December 2015.
<http://www.forbes.com/sites/danschawbel/2015/01/20/10-new-findings-about-the-millennial-consumer/>.
Smith, Geoff. Study: Millennials Are the Most Brand-Loyal Generation. 30 September 2015. Article. 24 December 2015.
<http://www.inc.com/geoff-smith/millennials-becoming-more-loyal-in-era-of-consumer-choice.html>.
Staff. Millennials and Brand Loyalty: A Complicated Affair. 25 March 2014. MarketingCharts. Report. 29 December 2015.
<http://www.marketingcharts.com/traditional/millennials-and-brand-loyalty-a-complicated-affair-41522/>.
Survey Monkey. 5 Key Metrics for Measuring Brand Loyalty. n.d. 23 December 2015.
<https://www.surveymonkey.com/mp/5-key-metrics-measuring-brand-loyalty/>.
Williams, Jed and Swanciger, John. A Checklist to Get Your Customer-Loyalty Program Off the Ground. 7 May 2014. Blog: Customer
Experience. 2 February 2016. <https://www.entrepreneur.com/article/233675>.

Please pass it on!

Copyright 2016, MarketPoint LLC, Havre de Grace, MD. Reprints by permission: 410.942.0600

11