Do you always drink the same brand of soda or coffee? If so, why? In this lesson, you’ll learn about brand loyalty. You’ll also have a chance to take a short quiz after the lesson.

Definition of Brand Loyalty

Brand loyalty occurs when a customer chooses to repeatedly purchase a product produced by the same company instead of a substitute product produced by a competitor. For example, some people will always buy Coke at the grocery store, while other people will always purchase Pepsi.

Brand loyalty is often based upon perception. A consumer will consistently purchase the same product because she perceives it as being the superior product among the choices available. You should note that brand loyalty usually relates to a product, not a company. For example, while you may be loyal to your Honda Accord, but when it comes to motorcycles, you might believe that a Harley leaves a Honda motorcycle in the dust.

Brand loyalty is important for several reasons. First, it reduces the cost of production because the sales volume is higher. Second, companies with brand-loyal customers don’t have to spend as much money on marketing the product, which will permit the company to either retain more earnings or to invest resources elsewhere. Third, companies may use premium pricing that will increase profit margins. Finally, loyal customers tend to recommend products that they like.

Businesses have to exert significant effort to facilitate brand loyalty. You need to convince potential customers that your product has a significant advantage over other products to justify consistent purchases of your product. Businesses also will attempt to leverage brand loyalty developed for a product to other products offered by the company. The hope is to create brand loyalty for as many products as possible.

Examples

Examples of brand loyalty abound:

  • Mac users v. PC users
  • Pepsi drinkers v. Coke drinkers
  • McDonalds v. Burger King devotees
  • iPhone v. Android smart phones

A great example of a company that has successfully leveraged brand loyalty resulting in practical product-line loyalty is Apple. Let’s say you fell in love with your first iPod. Then you couldn’t resist getting the iPhone with its music, video and app abilities. You loved your iPod and iPhone so much that you decided to trade the old PC in for an iMac. Finally, you have become so loyal to the Apple brand that you have purchased an iPad to fill out your consumer electronic needs.

Lesson Summary

Brand loyalty occurs when a consumer will repeatedly purchase the same product instead of competing substitute products. Brand loyalty is often based upon the consumer perception that a product is superior to other products. Cultivating brand loyalty provides many advantages, including reduced costs of production, reduced marketing expenses, the potential for premium pricing and customer referrals. A wise business will attempt to leverage brand loyalty of one product onto its other brands.

Learning Outcomes

Once you are done, you should be able to:

  • Recall what brand loyalty is
  • Explain why brand loyalty is beneficial for companies
  • Describe an example of brand loyalty