Article

Brand Loyalty 101: How to Measure It & Why It’s Important

A brand marketer needs to not only build up a customer base, but a loyal customer base. Strong brand loyalty is an important marker of success for many consumer brands, but loyalty is difficult to define and measure. In Numerator’s latest white paper, Modern Measures for Driving Loyalty and Efficient Marketing, we investigated what loyalty means, how it can be uniquely measured, and why it’s important.

What is brand loyalty?

Brand loyalty is the desire and sentiment a consumer has towards purchasing a brand repeatedly. For example, a consumer purchases Monster Energy drinks every week, choosing to do so over other energy drink brands. There may be many other energy drink options, such as Celsius or Red Bull, but the consumer’s reasoning for choosing Monster Energy consistently is because they enjoy the product and also enjoys and relates to the brand’s marketing and messaging.

Brand loyalty is not limited to just purchasing the same product repeatedly. For example, brand loyalty can extend to other products from the same brand. Unilever’s Dove brand highlights this as it operates across a variety of categories such as personal wash, deodorant and hair care. Consumers who choose Dove products in all these categories are considered loyal given their desire to purchase the brand.

Brand loyalty vs customer loyalty

An additional type of loyalty is customer loyalty. But what is the difference between brand loyalty and customer loyalty? While brand loyalty is built on how a consumer perceives a brand and the experience it provides, customer loyalty is based on absolute pricing (i.e. a consumer purchases one brand instead of another brand given it is the cheaper option or they have a coupon). Whereas brand loyalty is a longer-term tactic focused on perception, customer loyalty is centered on short-term tactics such as pricing and promotions to encourage repurchasing.

Why is loyalty important?

Tracking customer and brand loyalty is important for marketers because it offers insight into the overall health of their brand and can help them determine if they are primed for growth. If brands can drive loyalty, they will naturally win market share as more purchases disproportionately flow to their brand. By having strong loyalty, marketers will be able to get their consumers to purchase other products as they expand their offerings.

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How do you measure loyalty?

In the past, companies have varied in their approach to measuring loyalty. Often companies will measure brand loyalty through surveys that examine customer perceptions of their brand in relation to others. A benefit of this approach is measuring perception directly from the consumer, which could be different from how they purchase. However, the limitation is that custom survey research can be expensive and not scalable if measured across several products.

For customer loyalty, measuring is typically done by looking at repurchase rates. This immediate quantitative measure showcases whether consumers are purchasing the product again, but the measure could be uninformative in the case of consumer brands that play in frequently purchased categories.

Neither of these solutions gives a holistic picture of consumer purchases in relation to brand or customer loyalty and the switching made between brands.

In today’s fast-moving consumer landscape, Numerator measures loyalty differently by quickly answering the question that brands want to know: “Are my customers repurchasing my brand?” With Numerator’s unmatched 150k OmniPanel capturing purchases across all channels, brands can track the entire consumer journey and quantify loyalty through modern measures. By doing so, we found that the best way to track loyalty is through tracking consecutive repeat rate (otherwise known as Markov repeat). Consecutive repeat rate provides a more accurate representation of loyalty given its ability to be a leading indicator for future performance such as market share.

Consecutive repeat rate is the rate at which consumers are repurchasing a brand at their next immediate category purchase. For example, a consecutive repeater is a customer who purchases Clorox cleaning wipes on their first trip for cleaning wipes and buys Clorox again on their second trip for cleaning wipes. However, if that customer purchased Clorox on the first trip, Lysol on the second trip, and Clorox on the third trip, they would not be a consecutive repeater. This difference distinguishes consecutive repeat rate from traditional repeat rate.

There are two reasons consecutive repeat rates are important to track:

  1. Consecutive repeat rate is a stronger leading indicator of market share performance. For example, in the prebiotic & probiotic sodas category, consecutive repeat rate was able to identify future market share performance for the next three quarters twice as often as traditional repeat rate.
  2. Loyalty is better defined through consecutive repeat rate. Traditional repeat rate was often a primary indicator of loyalty, but with many consumer brands having frequent repurchasing, the measure is diluted. If a consumer purchased Campbell’s soup, then made five purchases of Great Value soup before returning to Campbell’s, they would still be considered a repeat consumer. Numerator discovered how soon a buyer returns to the brand has a significant impact on the value the brand gets from that buyer. For example, dog food buyers who returned to the same brand on their very next Dog Food trip were both more valuable to the brand and more loyal. As the lag between repurchasing grows, their value and the brands’ share of category requirements erode. Consecutive repeat removes the lag between repurchases, instead looking at repurchasing at the next immediate trip.

Chart showing that as repurchasing gets closer to the next immediate purchase, loyalty and buy rate increases.

Customer Lifetime Value is another way of measuring loyalty from a longitudinal standpoint across several years. If you’re interested in learning more, you can refer to our Customer Lifetime Value 101 article where we discuss its driving forces, how customer lifetime value is calculated, and why it is important.

What drives brand and customer loyalty?

Brand and customer loyalty are defined differently, so their drivers are different, too. When it comes to brand loyalty, the primary drivers are based on brand perception, such as good products and excellent customer experiences. Marketers should survey purchase-verified consumers, both those who purchased the brand and those that did not. Consumers that purchased will provide insight into what is working, while those that did not will help the brand determine whitespace. Marketers can use this information for future innovation and marketing to refine the product offering. Beyond surveys, marketers can leverage panel data to see how consumers are switching between brands. This technique helps identify which brands are primary competitors at the time of purchase.

When it comes to customer loyalty, pricing and promotions are the main drivers. To grow customer loyalty effectively, marketers should understand two important data sets. The first is the promotional landscape, which can be understood by looking at overall promotional trends and which brands are growing their share of promotions within the category. The second data set involves the promotions that are effectively driving incremental sales. If marketers are unable to know which promotions drive new buyers or increase buy rate, they could be subsidizing purchases and actually losing sales. Measuring effectiveness is important in both regular trade promotions and also promotions made through first-party CRMs.

Marketers can also affect both brand and customer loyalty through advertising. Brands can create audience segments and target them in marketing campaigns through television or social media advertising by identifying their repeat consumers.

Get a better view of loyalty with Numerator.

Measuring loyalty requires data that covers all purchases made by the consumer and is single-sourced to connect them together. Reach out to us to learn more about cutsom reporting and measuring brand loyalty through Numerator Insights.

 

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