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Brand loyalty matters more than just about anything to profitable brand growth. And yet, many don’t get it…like the author of a large marketing research firm’s newsletter declaring that “brand loyalty is an urban legend and an illusion”. And they’re not alone…in practice, when clients ask me to review their trackers, I often find they fail to even measure brand loyalty.

Five reasons brand loyalty matters to marketers:
1. Your brand cannot grow unless it increases its repeat rate, the basic measure of loyalty
2. Loyalty based targeting is the key to improving advertising performance
3. Those who are more loyal to your brand are less price sensitive and do not require deals so more loyalty means better margins
4. When people are favorable to your brand it gives you an advantage at every step along the purchase journey
5. Brand propensity (basically another term for loyalty) needs to be baked into your attribution model and exposed vs. control testing or you will mistake baseline for incremental conversions

Let’s understand what Brand loyalty is. It isn’t about buying only one brand…that’s a red herring. It is about a consumer’s self-imposed restriction in the alternatives they consider, pay any attention to, and buy, producing higher than random repeat buying patterns. For example, the brand of frozen pizza we studied had a 10% share but a 44% repeat rate. In general, across 7 categories from Numerator data, we saw brand switching being restricted by 50-70% of what it would be without loyalty.
Virtually all consumers restrict their choices. Sometimes they really love a particular brand. More often, it is their survival mechanism in the face of too many choices. Without brand knowledge a grocery shopping trip would take hours. It’s why you only watch a tiny fraction of the TV channels you have access to. A behavioral economist would realize brand knowledge fuels simplification heuristics and that produces brand loyalty patterns.

Brand growth. When more consumers prefer your brand over others, it leads to a higher repeat rate, which creates a sustainably higher market share. This “repeat rate to share” pattern is a mathematical certainty…like the relationship of a circle’s circumference to its area. In fact, I can easily calculate what a one-point improvement in repeat rate gives you in terms of increased sustainable market share. What underlies non-random repeat buying and switching is a distribution of consumer probabilities of choosing your brand vs. any competitor. Because the curve isn’t “bell” shaped but U or L-shaped, the great majority of category buyers have 0 chance of buying your brand. If your marketing shifts this curve to be more favorable, share, repeat rate, penetration must all increase. It’s brand geometry.

Loyalty-based ad targeting. Now let’s chop up the same U-shaped loyalty curve. Those below 20% probability of choosing your brand (low loyal, largely non-buyers) mostly have a 0 probability of buying your brand. The middle of the loyalty curve (those with a 20-80% probability of buying your brand) form the “Movable Middle”, and they are VERY INTERESTING because they are expected to be FIVE TIMES more responsive to your advertising. We derived this with math but in-market experiments consistently show this relationship. “High loyals” are responsive to advertising but there is little headroom. So, the brand loyalty curve should be your main segmenting lever for ad targeting and our research shows that targeting the Movable Middle should increase ROAS by 50%.
There is also a behavioral economics reason why low loyals don’t respond to your advertising; it’s called “inattentional blindness”. To the 80% (say) of consumers who would never buy you, your brand is like the gorilla in the video of kids bouncing basketballs…never seen so ad impressions to them are largely wasted.
When you target the Movable Middle, you will also be targeting your own customers with extra media weight because research shows most of them are in the Movable Middle. You are fighting for their purchases and to retain them. That finding is contrary to marketing practice at more than a few marketers I speak with, who actually put their customers on suppression lists. Completely wrong…

Price elasticity. My own research has demonstrated that those who are more loyal to a given brand (higher share of requirements) pay more for it because they do not require a deal to buy it. This is a point that Larry Light and Bill Moran, two of the best brains in marketing ever who I also had the pleasure of working with, have consistently made.

Winning the shopper journey. 70% or so of journeys that begin with a search engine start in a generic way (DISQO data). Let’s say you search for “best plug-in hybrid SUV” and numerous brands and review sites show up in the search results. Why would you click a particular link? Consumers are drawn to choices that are familiar and favored.

MTA and testing. When you model conversions, the main drivers are prior brand propensity and if they are actively shopping. Marketing activities come after that. So, if brand propensity is not in the model, it will be quite flawed. Also, if you do not control for this in creating a matched control cell, your gold standard test will be tarnished.

Implementing loyalty analytics in marketing research. Any brand tracker SHOULD use a constant sum question (sadly, many don’t) which gets at your competitive standing in the mind of that respondent. Respondents who give you between 2 to 8 points (out of 10) are your Movable Middles. Do an ad test (exposed vs. unexposed) and see how the Movable Middle responds to advertising vs. low loyals. It is likely to be quite dramatic. Pull apart those who give you 0-1 points by attitudinal favorability and you will find the 10% who are your best acquisition target…model that subset at scale for targeting…now your tracker is on the verge of real incremental value.

Brand loyalty will always exist because it’s human nature! We all seek to belong to a tribe who feels the way we do (think of how you feel at Starbuck’s, or if you prefer, Dunkin). We wear logos and we follow brands in social media. Perhaps most importantly, brands are powerful simplifying heuristics and humans crave simplification. These forces produce repeat buying, essential for growth.

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