Marketing and brand loyalty

Future of Marketing: Brand Loyalty

1994 report on marketing described an ongoing paradigm shift from the old 4P model of marketing, to a newer model based on relationship marketing. The report describes how evolving trends in business such as "the globalization of business and the evolving recognition of the importance of customer retention and marketing economies and of customer relationship economics, among other trends, reinforce the change in mainstream marketing" (Gronroos 10). The other major factor that has driven the change is the rise of services marketing, which requires a different approach than traditional product marketing.

The shift to relationship marketing is described saying, "a shift is clearly taking place from marketing to anonymous masses of customer, to developing and managing relationships with more or less well-known or at least somehow identified customers" (Groonroos 22).

One method of creating this relationship between the customer and the company is by brand building and creating brand loyalty.

Stephen King argues this point saying that in the increasingly competitive and rapidly changing business world "it becomes increasingly difficult to sustain an objective comparative advantage over one's competitors so it will become increasingly important to position organizations as 'brands' in the minds of actual and potential customers" (King 3).

According to King, in the fast-paced business world, brand building is the only way to create a stable long-term demand for any product or service, the only way to add value to attract customers, and the only way to maintain profitable margins (King 5).

The current pace of change is especially rapid in the ecommerce market. A recent study on brand loyalty in this market shows how the ideas about brand loyalty are changing. The study provides the usual definition of brand loyalty as being "the minimum price differential needed before consumers who prefer one brand switch to some competing brand" (Chen & Hitt 5). Brand loyalty is also described as being due to "real switching costs, decision biases, uncertainty about the quality of other brands, or other psychological issues that drive customers' seemingly 'unreasonable' behaviors" (Chen & Hitt 5).

This study then continues to apply these past ideas on brand loyalty to ecommerce. The findings of the study are that even though the barriers to switching between providers is minimal in ecommerce, brand loyalty still exists in ecommerce. It was also found that 70% of CD and book shoppers were loyal to just one site (Chen & Hitt 6).

A recent survey by AARP reported that 91% of consumers care more about value than brand name, that 71% use past experience to decide whether to purchase a brand or not, and that 61% also include quality as an important characteristic impacting their decision-making (AARP).

The discrepancy in this data is that while 91% of customers report that they care more about value than brand, 70% of book and CD purchasers repurchase from the same provider even if products are available cheaper elsewhere. In this case, the customers are reporting on their attitude via the survey, but clearly there must be other factors affecting their behaviors.

Grisaffe gives a reason for this discrepancy where he says that there are two components to brand loyalty, attitude and behavior, where the attitude about a brand impacts the behavior but does not necessarily lead to the behavior. For example, a customer satisfied with a brand does not always make the decision to repurchase, for various reasons. Therefore, attitude is only half the picture, with behavior being the other half.

The Future of Brand Loyalty

Selling online is the retail area with the greatest ease of switching between suppliers. With this ease of switching, suppliers will need to develop methods to retain customers. These methods will be related to finding ways to ensure customers are satisfied as well as giving them a reason to remain with the supplier. Examples of schemes that encourage customers to remain with one supplier include bulk discounting and buy four, get one free type schemes. The online providers will be those who will focus the most on retaining customers and building brand loyalty and therefore, will become more experienced and superior in these areas.

With more consumers purchasing online, the service provided by these companies will become the standard consumers expect even from non-ecommerce retailers.

The future then, will include a greater focus on brand loyalty, having a relationship with the supplier and on being provided with reasons to remain with a certain supplier. Ecommerce companies will lead the way with the trend and create the benchmark that all other companies will have to live up to.

In the future then, for all suppliers of both products and services, how to retain customers will be an important part of the marketing mix. The focus will be on relationship marketing, with companies needing to consider how to build an effective relationship between itself and the customer. Just as Groonroos predicted, companies will no longer be dealing with anonymous masses of customer. Instead, the customers will be considered in detail, with companies considering how to provide for the full needs of the customer.

As more companies develop relationships with their customers and cater to their specific needs, customers will expect more. For this reason, marketers will need to add to the marketing mix much more than just the characteristics of the product and include such items as customer satisfaction with the service. With customers more demanding and having greater options, companies will also need to develop marketing programs that prevent customers from trying other products.