Part V: The Top 7 Reasons You Need Effective Retail Promotions

Posted by Fred Lizza, CEO, Dydacomp

#4: Reinforce Brand Loyalty

Brand loyalty is earned.  It occurs because customers perceive that the brand offers the best fit of product features, image and/or level of quality at the best price. This perception ultimately becomes a new buying habit. If a customer makes one purchase of a brand and is satisfied with it, they will likely become loyal to the brand, forming a habit of purchasing the product and/or purchasing it from the retailer because they perceive one or both as safe and familiar.   Once they become a loyal buyer, they are likely willing to pay a higher price for their favorite brand and will likely recommend the brand to others.

According to a research survey, 62 percent of U.S. consumers join retail brand loyalty programs to get discounts but only 36 percent have received a reward or promotion from the program that actually made them come back to the brand. One reason might be the fact that, according to the survey results, 81 percent of brand loyalty program members don’t understand the benefits they’re supposed to get from the program or how the program works at all.[1] The report went on to say that brand loyalty programs can provide a lot of benefits to marketers but the more the program is customized for each customer’s needs the better chance of success.

Nancy Giddens of the University of Missouri and Amanda Hofmann of Iowa State University[2] found that there are three main reasons why brand loyalty is important:

  • Higher Sales Volume – The average U.S. company loses half of its customers every five years, equating to a 13 percent annual loss of customers. This statistic illustrates the challenges companies face when trying to grow in competitive environments. Achieving even 1 percent annual growth requires increasing sales to customers, both existing and new, by 14 percent. Reducing customer loss can dramatically improve business growth and brand loyalty, which leads to consistent and even greater sales since the same brand is purchased repeatedly.
  • Premium Pricing Ability – Studies show that as brand loyalty increases, consumers are less sensitive to price changes. Generally, they are willing to pay more for their preferred brand because they perceive some unique value in the brand that other alternatives do not provide. Additionally, brand loyalists buy less frequently on cents-off deals; these promotions only subsidize planned purchases.
  • Retain Rather than Seek – Brand loyalists are willing to search for their favorite brand and are less sensitive to competitive promotions. The result is lower costs for advertising, marketing and distribution. Specifically, it costs four to six times as much to attract a new customer as it does to retain an old one.

To be continued…


[1] New Media and, Rich Meyer, December 17, 2011

[1] Brand Loyalty, Nancy Giddens and Amanda Hofmann, Iowa State University, August 2010

[1] New Media and, Rich Meyer, December 17, 2011

[2] Brand Loyalty, Nancy Giddens and Amanda Hofmann, Iowa State University, August 2010

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