Brand loyalty is the act of consumers consistently purchasing a product or patronizing a company. Companies typically build this loyalty through strong advertising and marketing campaigns that influence consumers as well as high-quality products or services. Marketing is necessary to entice consumers to purchase one company’s goods over competing goods. The importance of brand loyalty leads to increased market share, higher profits and better goodwill among consumers. Companies will often go through a series of activities that improve their loyalty among customers.
Market share represents the amount of a market’s total sales that one company earns when consumers make purchases. Brand loyalty allows a company to market and advertise its goods or services in the market. Companies are often unable to capture a significant portion of market share without informing consumers. Additionally, new companies might have no customers who are informed or loyal to the business and its products. Therefore, building loyalty by offering quality products or undercutting another company’s brand loyalty can improve market share.
Profit is the main reason why a company operates in a given business environment. A company makes profit by selling goods and/or services to consumers, with profits coming from either a high volume of sales or high profit margins. Brand loyalty allows a company to generate higher sales through word-of-mouth advertisement. Word-of-mouth advertising occurs when current customers have enough loyalty that they recommend a company’s products or services to other consumers. This allows the company to build a loyal consumer base through its current customers.
Goodwill is the positive relationship that a company has with its customers. Companies can establish goodwill by offering high-quality products at a fair price. Loyalty built through goodwill often means that a company is able to sell products to consumers regardless of price changes or alterations in the company’s operations. In some cases, however, changes that leave a negative outlook with consumers can decrease loyalty to a brand. To avoid a reduction in goodwill, companies must be sure to listen and react properly when consumers provide feedback.
Brand loyalty is often expensive for companies to achieve. Though it sounds simple enough, it is not always easy. Competitors that have a strong, loyal consumer base can make it difficult for a new company to enter a market. Other times, the necessary expenditures for advertising products might be prohibitive for some companies. Well-managed plans and operations can be more successful than blanketing an entire market with advertising.