Understanding Brand Loyalty and Its Relation to Customer Satisfaction

Brand is a product or service, which relates a firm’s products or services and reputation with consumer needs and shareholders expectations. Typically being distinctive and authentic, a brand name reflects an organization’s positioning relative to its competitors as well as the organization’s personality in the context of the target market. In the minds of consumers, Lexus is known for pursuit of perfection, Apple for innovation and design and PepsiCo for its appeal to younger generations. Therefore, a strong brand is more than just a name; it is a promise that can be trusted.

Consumers enter into a purchase with certain expectations about a product or a service and satisfaction is the hoped-for-outcome. Those expectations are based on (1) past buying experience, (2) brand connotations, (3) word-of-mouth, (4) the firm’s promotional material and communication, (5) the competitors’ promises, (6) individual persuasibility and perceptual distortion, and (7) price. In this context, brand loyalty occurs as a result of customer satisfaction because consumers commit to a certain brand based on favorable attitudes and behavioral responses.

Brand loyalty can be classified into two broad categories.

Behavioral brand loyalty is measured by the ratio of the times that a repeated purchase occurs over total purchases. This measurement of proportion of purchases includes cognitive, affective and conative features, which imply an indirect relationship between brand loyalty and customer satisfaction. In other words, considerations of customers' perceptions about a brand can make or break a firm’s branding strategy in the context of repetitive purchases when measuring brand loyalty levels.

Attitudinal brand loyalty holds that brand loyalty involves a favorable attitude which reflects a preference or commitment expressed over time. This argument implies that consumers like the particular firm more than its competitors and therefore they express a favorable preference over the firm’s products or services.

Both behavioral and attitudinal brand loyalty consider that consumer have developed a feeling of favorable attitudes towards the organization and therefore they engage in repeat purchases. However, marketing studies hold that, often, repeat purchases occur as a result of convenience or lack of alternatives bearing no intentional component.

The benefits of customer loyalty for a firm are numerous. First of all, loyal customers are less price- sensitive, which means that they are ready to pay a higher price, if required, in order to acquire the product or service. As a result, apart from higher profitability for the firm, the cost incurred for pursuing new customers is reduced. Loyal customers are also strong advocates of the firm playing a powerful role in the decision making process of other people. The word-of-mouth advertisement is a strong marketing tool that improves the firm’s reputation and brings certainty to the firm by enlarging its customer base. In addition, loyal customer expose higher tolerance for mistakes, are willing to provide feedback for any unfulfilled needs, to try additional products and to offer a higher share of wallet.

In conclusion, brand loyalty is highly affected by customer satisfaction and commitment. Loyal customers trust the company and function as reference groups increasing the firm’s reputation and profitability.