Building Brand Loyalty: Not to Be Overlooked

In modern marketing strategy, a large focus is placed on acquiring new customers. In fact, a recent research survey showed that 72% of small businesses planned to use the majority of their marketing budget to try to attract new customers as opposed to marketing new benefits and products to their existing customers¹. However, expanding a company’s customer base does not always equate to business growth. Recent studies have shown that building loyalty with existing customers is equally important, as existing customers tend to be more profitable. For example, one study found that if a company improves their retention rate by 5%, their profit margins can increase by up to 90% ². Additionally, existing customers are cheaper to market towards, as acquiring new customers can cost up to five times more than marketing towards and supporting an existing customer base³.

Customer loyalty is a customer’s willingness to buy from a certain company again. This loyalty is formed largely in part due to positive experiences that a customer has with a brand, and can influence a consumer to pick one brand over another. In the long-term, if these positive experiences continue, consumer’s loyalty can grow alongside consumer’s trust in a given brand. Another benefit of loyal customers is that they can become ambassadors for the brand, and spread positive word of mouth or recommendations via social media for free. Around 55% of loyal customers said that they would recommend a favorite brand to friends or family, and 12% said that they would share their positive experiences with a brand on social media⁴.

To stay ahead of competitors, businesses need to find ways to increase their customer loyalty so that their brand will be at the forefront of consumers’ minds when they go to make a purchase. As mentioned above, much of brand loyalty is built on positive experiences that people have with a brand’s products and services. These experiences, and thus loyalty, largely revolve around the product design itself and the customer service representatives representing the brand to the consumers. However, marketers can also create brand loyalty through various marketing strategies and tactics that can appeal to consumers on an emotional and mental level.

One interesting way that companies can build loyalty is through launching their own credit cards. Creating a credit card allows a brand to build various reward programs and give their members points, incentivizing them to shop at the store⁵. When customers use a brand’s credit card, it also removes some of the credit card fees that the business would have to pay to third party credit card companies. In other words, the business is now receiving more of this percentage that would have otherwise been a lost opportunity for profit⁶.

For a business, having their own credit card ensures that their brand is in the daily lives of their customers. For example, many airlines have their own credit cards. However, for a majority of people, flights are not something that consumers buy on a weekly basis. However, they may use their airline-branded credit card on a weekly basis, thus keeping that airline brand at the forefront of their mind. Using this credit card will also earn them points that they can spend on that airline, so they will likely choose that airline the next time that they fly in order to take advantage of any potential points or discounts.

Additionally, many younger people feel more comfortable beginning to build their credit with a small-credit-line card from one of their favorite brands⁷. Credit cards from specific brands are also often easier to apply for and be approved for as opposed to big, name brand credit cards⁸. Large credit card companies (such as Chase, Capital One, Discover, etc.) are also prime examples of companies that utilize brand loyalty in their marketing. For many people, choosing their first large-credit-line credit card is an important decision, and people weigh the various financial factors that each one entails. With a large and increasing number of credit card options available for consumers to choose from, many of the big-name credit cards have launched creative ways to market towards the younger generations.

One recent example of these marketing tactics is the partnership between Capital One and one of the biggest names in music, Taylor Swift. Swift and Capital One formed a partnership in 2019, with Swift appearing in ads for several of their cards, and the two releasing exclusive merchandise that only cardholders could purchase. This partnership rose to a new level in November 2022, when Swift announced The Eras Tour, and revealed that Capital One cardholders would have advanced access to tickets for this highly anticipated event. While Capital One has not revealed the number of people who signed up for a Capital One card following the announcement, it can be assumed from the vast amount of social media posts surrounding the topic that a substantial amount of people, specifically younger people, did. Inspiring young people to open what is most likely their first credit card with a specific company often translates into customer’s having early and long-term loyalty for that card. Therefore, many young people will go forward having brand loyalty for Capital One solely because their credit card helped them see Swift in concert. The credit card industry captures the power of brand loyalty, as strategic marketing and partnerships can make people excited about and loyal to a given brand, even a brand that they may not have been interested in beforehand.

In today’s competitive and fluctuating economy, prioritizing brand loyalty is becoming paramount to many companies, as increasing brand loyalty has the power to increase a company’s market share and overall reputation.

Questions marketing managers would consider: