Causes and Effects of Customer Loyalty - Essay Sample

Introduction

Customer loyalty towards a brand is the holy grail that all businesses constantly search with their marketing endeavors. Dick and Basu (1994) succinctly capture the significance of customer loyalty to a business by alluding that it is "the central thrust of marketing efforts" (as cited in Watson, Beck, Henderson, & Palmatier, 2015, p. 1). There is no consensus on a universal definition of customer loyalty. However, existing studies generally agree that customer loyalty comprises of an assortment of attitudes and behaviors that drive consumers to favor one brand relative to its competitors (Magatef & Tomalieh, 2015; Watson et al., 2015). Because the needs and wants of consumers evolve regularly, businesses face a difficult challenge to create and maintain customer loyalty. As a result, the most pertinent question among marketers has always been what causes customer loyalty? Once a company attains a loyal customer base, the query shifts to what are the effects of customer loyalty to a business? In view of these questions, this paper contends that brand loyalty results from brand experience and brand commitment. These aspects create both affective and attitudinal loyalty to a brand, which eventually helps a company in customers' retention and lowers marketing cost.

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Causes of Customer Loyalty

Brand Experience

A positive customer experience is vital for creating customer loyalty. Brand experience has four major dimensions - sensorial, affective, behavioral, and intellectual - which are either independent or mediating factors of brand satisfaction and commitment (Maheshwari, Lodorfos, & Jacobsen, 2014). Brand experience drives consumer loyalty because it is more probable that clients who encounter a superior brand experience will desire to buy from that same brand in the future (Newman & Werbel, 1973 as cited in Maheshwari, Lodorfos, & Jacobsen, 2014, p. 16). Further, the evaluation of a past transaction between a brand and consumer influence whether the client is likely to form a positive attitude (which is the basis of attitudinal loyalty) or not toward that brand (Watson et al., 2015).

Brand Commitment

Commitment is a lasting desire to preserve a valued affiliation between two or more parties (Sung & Campbell, 2009). Research links commitment to favorable outcomes such as consumers' psychological attachment to a brand, personal identification with a brand, and increase price tolerance towards a given brand (Sung & Campbell, 2009). Brand satisfaction and investment positively drive consumers' commitment (Sung & Campbell, 2009). On the other side, the availability of quality alternatives negatively impacts on brand commitment (Sung & Campbell, 2009). For instance, people feel compelled to use a product if it offers gratification in the form of benefits and valuesgratification. If the same person feels that another product has better benefits and values than the one they are using, they may switch to that other product (Sung & Campbell, 2009). However, if a person has already invested in a given product, the cost of that investment - may induce them to continue using that product or service (Sung & Campbell, 2009). Also, handling of consumers' complaints well creates a commitment to a brand (Nawaz & Usman, 2012) for it leads to customer satisfaction.

Effects of Customer Loyalty

Customer Retention and Low Marketing Cost

Creating customer loyalty helps a company to create a base of recurring consumers. It is these types of clients who help to drive sales up. Therefore, many companies that focus on satisfying their clients take extra steps to convert the contented buyer into a loyal customer. Pursuing this strategy makes more sense for it is less costly to turn a client into a recurring customer than it is to convince a new person to buy one's services or products (Magatef & Tomalieh, 2015). As such, consumer loyalty helps in customer retention, which then helps to cut marketing costs.

Recommendation

Many companies attempt to create customer loyalty by using loyalty programs. In the U.S. alone more than 90% of companies engage in some of form of these programs (Wollan, Davis, de Angelis, & Quiring, 2017). As a result, membership to loyalty programs grew by 26.7% between 2012 and 2014 (Wollan et al., 2017). Despite the increase in the cost of these campaigns, many consumers (71%) claim these programs do not engender loyalty (Wollan et al., 2017). This strategy is thus expensive and ineffective. Also, loyalty programs tend to create loyalty to the programs themselves and not to the brand using it (Evanschitzky et al., 2012). As such, if a competitor commences a similar program, those consuming under that loyalty campaign could easily switch to the other company (Evanschitzky et al., 2012). Therefore, companies should instead invest in creating brand value by focusing on consumer experience and commitment. To do this, businesses should provide tangible benefits such as better quality, excellent and innovative customer services, and competitive prices.

Conclusion

The quest for creating customer loyalty to a brand is the ultimate purpose of all marketing strategies. Brand experience and commitment are the main sources of consumers loyalty. Consumer loyalty leads to a higher rate of clients' retention, which consequently helps cut the cost of marketing. Although many companies focus on loyalty programs to lure consumer loyalty, this strategy is expensive and ineffective. Sales and marketing executives should thus focus on measures that result in better brand experience and commitment.

References

Evanschitzky, H., Ramaseshan, B., Woisetschlager, D. M., Richelsen, V., Blut, M., & Backhaus, C. (2012). Consequences of customer loyalty to the loyalty program and to the company. Journal of the Academy of Marketing Science, 40(5), 625-638. https://doi.org/10.1007/s11747-011-0272-3

Magatef, S. G., & Tomalieh, E. (2015). The impact of customer loyalty programs on customer retention. International Journal of Business and Social Science, 6(8), 78-93. Retrieved from ijbssnet.com/journals/Vol_6_No_8_1_August_2015/8.pdf

Maheshwari, V., Lodorfos, G., & Jacobsen, S. (2014). Determinants of Brand Loyalty: A Study of the Experience-Commitment-Loyalty Constructs. International Journal of Business Administration, 5(6). https://doi.org/10.5430/ijba.v5n6p13

Nawaz, N. U., & Usman, A. (2012). What makes customers brand loyal: A study on telecommunication sector of Pakistan. International Journal of Business and Social Science, 2, 123-221. Retrieved from http://www.ijbssnet.com/journals/Vol._2_No._14%3B_July_2011/24.pdf

Sung, Y., & Campbell, W. K. (2009). Brand commitment in consumer-brand relationships: An investment model approach. Journal of Brand Management, 17(2), 97-113. https://doi.org/10.1057/palgrave.bm.2550119

Watson, G. F., Beck, J. T., Henderson, C. M., & Palmatier, R. W. (2015). Building, measuring, and profiting from customer loyalty. Journal of the Academy of Marketing Science, 43(6), 790-825. https://doi.org/10.1007/s11747-015-0439-4

Wollan, R., Davis, P., De Angelis, F., & Quiring, K. (2017). Seeing beyond the loyalty illusion: It's time you invest more wisely. Retrieved from Accenture website: https://www.accenture.com/t00010101T000000Z__w__/gb-en/_acnmedia/PDF-43/Accenture-Strategy-GCPR-Customer-Loyalty.pdf