How Can Brand Loyalty Become A Problem For Retailers
In the era of experience-driven purchases, brand loyalty has become one of the most important elements for customer retention. Loyal customers are more likely to perform repeat purchases and promote your products. They are also emotionally invested with your brand. In short, they are the dream of every business owner.
But branding efforts come with their own set of risks. In your attempts to build a strong fan base, things may backfire unexpectedly.
So when and how can brand loyalty become a problem? Read through this article to discover the main issues that arise through the process and what you can do to prevent them.
- How Can Brand Loyalty Become A Problem?
- (1) Failing to keep up with consumer expectations
- (2) Creating unnecessary loyalty programs
- (3) Transparent pricing & more options
- (4) Internal communication issues
- (5) Your offer is no longer relevant
How Can Brand Loyalty Become A Problem?
When you don’t clearly define the objectives of your strategy, you will eventually run into problems. Apart from that, your methods may be outdated, expensive, or, worse yet, unnecessary. Here are 5 instances in which brand loyalty ends up hanging by a thin thread.
1. Failing to keep up with consumer expectations
Customers today do not form an opinion about your brand based on past performance. Instead, they compare you with the most popular competitors. Due to that, brand loyalty is hard to maintain, even for companies that invest heavily in marketing. When the cost to meet customer expectations exceeds the available budget, companies are forced to lower their already thin profit margins.
Example: If an online fashion retailer offers 50% discount on all their clothing and free delivery on orders above $30, the customer will expect a matching offer from your e commerce store. If you choose not to follow industry standards, brand loyalty may be affected negatively, decreasing your sales.
How to prevent this issue: To meet (and exceed) your customers' expectations, you will need to set yourself apart.
- Work on your unique value proposition. In order to set yourself apart from the industry standards, brand authenticity is what you're after.
- Clearly communicate what your customers can expect from you. You may not be able to beat your competitor’s price point but you can focus on other aspects, like quality and communication.
- Discounts and perks are not always the best way to build brand loyalty. When potential customers first discover your brand, use storytelling to tap into their emotions. This can be done through welcome emails, Social Media content, and the “About us” page of your website.
2. Creating unnecessary loyalty programs
When the trend of loyalty cards hit the markets, many companies saw a customer retention opportunity. However, loyalty programs don’t always work, and will sometimes lead to lower profit margins. Collecting points to receive perks and discounts is often complicated and the rewards are not worth the effort.
Example: In 2017, Macy’s reintroduced its loyalty program, adding e commerce perks, like free shipping.
Although the company’s revenue increased by 1,3% during that holiday season, other online retailers achieved better results without any loyalty programs.
How to prevent this issue: If you decide to introduce a loyalty program, make sure you perform in-depth research on the current market conditions. Ask yourself the following:
- Do loyalty programs improve (repeat) sales in my industry?
- Which competitors have managed to build successful loyalty programs?
- What do these companies offer and how can we offer even more?
- Are the definitive costs worth the potential rewards?
If the answers point you towards a positive future outlook, analyse the wishes and needs of your customers. Based on the findings, create a loyalty program that is convenient in its use and valuable for its users.
3. Transparent pricing & more options
Mobile devices are now responsible for most search queries. Due to their convenience, information is now much easier to access. As a result, consumers compare prices while shopping and find better deals in seconds.
Example: Nowadays, consumers visit fashion outlets to try on different clothes and find the right fit. They leave the store without making a purchase and order the same product from e commerce outlet stores, where the same product has a better price.
How to prevent this issue: Make sure you are up to date with the pricing of your brand’s products in e commerce stores. You can always adjust your price according to the market or communicate with the vendors to ask for clarification.
Remember - consumers are smart. Cost-saving opportunities will not only lead customers away from your brand’s physical store(s), but it could also hurt your reputation.
4. Internal communication issues
Large companies divide their workforce into several departments. Each of these departments is responsible for a different part of the customer experience (marketing, sales, customer service, etc.). Depending on the systems put in place, communication between these departments may be inconsistent. As a result, customers often feel that their relationship with a given brand is not personalised.
Example: The marketing department of a shopping mall decides to host a giveaway. The winner receives a gift card that can be used in selected stores on the shopping mall’s premises.
- While driving to the shopping mall, the giveaway winner calls the shopping mall’s customer service to ask which stores accept the gift card.
- The customer service is not aware of any giveaway price since they did not properly communicate with the marketing team.
- They inform the caller that gift cards can be used in any store.
- The winner will now receive an unpleasant surprise when trying to use the gift card in stores that do not participate in the giveaway.
How to prevent this issue: Internal communication is very important when it comes to the relationship between company and customer.
- Each department should appoint one person responsible for keeping track of all activities where communication between parties is essential.
- The company should also create an SOP document for common issues that may arise due to communication problems. These can be more generic (for sales funnels), but also specific (for giveaways, Black Friday discounts, etc.).
- Email marketing campaigns should be highly segmented and continue even after a purchase is completed. To better understand their performance, companies could also send surveys or questionnaires.
5. Your offer is no longer relevant
Brand loyalty fluctuates based on several factors. Some of these factors are, unfortunately, not in your control. A common issue that falls into this category is brand relevance.
Existing customers may not always relate to your brand’s values and mission. Others may choose your products purely based on rationality instead of emotional attachment. As a result, they can easily move on to a brand with which they can better identify.
Example: When Gymshark launched its clothing brand, their products were focused on fitness athletes and bodybuilders. Wearing their clothes was a statement; it indicated the pursuit of a muscular, aesthetic physique.
Many customers, however, pick up the sport of bodybuilding only temporarily. Not to mention that the sport is heavily male-oriented. This was a problem for the Gymshark loyalty program, as their products did not appeal to the average fitness enthusiast. Thankfully, the company managed to adapt, expanding its selection, and rebranding their logo.
How to prevent this issue: Consider the role that your brand should play in the customer’s life. Make sure your product does not only appeal to individuals that follow temporary trends, but focus on timeless concepts that can change their shape and size. This can easily be done through wording (e.g. Vegan -> Plant-based) but also through visuals (Specific -> Abstract).
Brand awareness campaigns are essential for businesses in any industry. However, many tend to solely focus on the positive potential. Not many ask how can brand loyalty become a problem.
In this article, we looked at 5 different ways in which brand loyalty can limit your scope and threaten your business. More specifically, we explored what happens when your company:
- Fails to keep up with consumer expectations
- Creates unnecessary loyalty programs
- Needs to align its offer due to transparent pricing & more options
- Has internal communication issues
- Loses customers due to an offer that is no longer relevant
You should now have a better idea on how to handle each of these situations. If any more questions remain, make sure to check the frequently asked questions below.
Frequently Asked Questions
How can brand loyalty become a problem in your industry? The information below helps you understand the basics of branding campaigns.
What is the importance of brand loyalty?
Creating a loyal fan base will help you increase your revenue due to repeat purchases. Acquiring a new customer is often more expensive than nurturing an existing customer into making a second purchase. Aside from that, loyal customers are also a great way to promote your brand, since reviews and word-of-mouth advertisement are still very powerful.
What are the different types of brand loyalty?
- Heart-loyal customers: Buy based on emotional response and altruistic motive.
- Head-loyal customers: Driven by rationality and common sense.
- Hand-loyal customers: Buy based on habit. They choose one brand because they are “used to it”.
What is the role of social media in brand loyalty?
If you are wondering how to build brand loyalty through social media, you should focus on three things:
- The value you offer - Is the information you provide valuable and entertaining?
- The way you communicate - Make sure that your tone of voice relates to the audience.
When done right, social media communication can play a significant role in your efforts to build a loyal customer base.
Can retail brand loyalty decrease naturally?
Yes. This is the unfortunate consequence of shifting trends on an industry level or grobal level. Brand loyalty can also decrease gradually when companies are now longer interested in staying up to date with the changes in their customers’ wishes and needs, and failing to adapt accordingly. To avoid falling into this trap it is important to remain innovative, meaning to observe how the customer is changing over time. You competitors will likely do the same at some point to survive, but the one that manages to adjust before the issue reaches the industry level are those that can benefit the most (claim more market share).
What are some common communication problems in retail?
- The brand focuses on product promotion (what) instead of value promotion (why).
- The marketing and sales department does not have a good understanding of the customers’ wishes and needs.
- The customer service department is not trained well enough to feel confident in making independent decisions which improve the speed and efficiency of problem solving.
- The ever-growing product availability makes it hard to identify strong value propositions of brands.
- Market leaders cannot find common ground with their audience (the customer).
How can brand loyalty become a problem for retailers?
Brand loyalty can cause several issues for a brand:
- When the cost of nurturing exceeds the CLV, the business ends up losing money.
- Over time, loyal customers expect more free product and more personalized offers.
- An ever-growing email list leads to an increase in software costs and qualified staff.
- There might be pressure to adjust the company’s values depending on societal changes. Many brands fall prey to this issue and change their identity to accommodate a small minority that is responsible for only a small percentage of their revenue.