How does brand reputation affect Australian customer loyalty?

Although loyalty is intangible, it can be measured by evaluating how likely a customer is to recommend, engage with, and make repeat purchases from a brand. GetApp investigates what loyalty means for consumers and how small to midsize enterprises (SMEs) can leverage their brand reputation to promote customer loyalty. 

Customer loyalty, by definition, is a positive recurring relationship between a customer and a brand. This valuable commodity encourages existing customers to choose a brand over competitors and drives repeat purchases. Loyalty, too, is based on interactions that result in a build-up of trust over time. Customers are often loyal to a brand because they have got to know it and associate it with positive experiences that connect them to its values, ideals, and reputation.  

Why is customer loyalty important? A loyal customer is likely to promote your brand by making recommendations —think of them as brand ambassadors that will bring in more business. Consumers who like to stick to a preferred brand may also be less sensitive to pricing when comparing it with alternatives and may be prepared to spend more. Therefore, nurturing the customer relationship through a well-executed customer experience can, over time, create loyalty that can benefit your business. 

We surveyed 1,007 consumers in Australia to find out what loyalty towards a brand means to them. This article explores what drives customers to a new brand, what brand characteristics are important for building their loyalty, and how they express commitment to brands that satisfy their expectations. You can find the entire survey methodology at the end of this article. 

The influence of price and quality on customer loyalty

The relationship between a product’s price, quality, and how much consumers value it is often the narrowing factor for a purchasing decision. Without an initial transaction that results in a positive interaction between a customer and a brand, the road to creating loyalty can’t begin. The price-quality-value conundrum can therefore be considered the make-or-break factor for customer loyalty. 

Our survey results indicate that 59% of consumers are very open to trying new brands, but what is the most common factor that entices customers to take a chance on a new product? Price. Most survey-takers (71%) said a good price motivates them to try a new brand. 

Reviews also help accredit the quality of a product, which helps guide potential customers to make a purchasing decision. In fact, good reviews is the second most cited (54%) reason that would drive those willing to try a new brand. 

Additionally, the third most cited motivator by 53% of the respondents is when a brand offers good value for money. Good value is perceived when a product or service is well worth the money paid for, which justifies its asking price. Therefore, consumers likely to try a new brand are looking for an affordable, quality product.

Maintain quality and retain loyalty 

Most survey-takers (67%) rarely stop buying from a brand if they are satisfied after purchasing a product or service. As mentioned previously, loyal customers are likely to be less sensitive to price, which may be justified if the quality of the product or service is maintained. However, brands that foster customer loyalty and relationships must tread a fine line between quality and price.

Consumers can perceive medium-quality products with high prices as overcharged products. If increased product prices and quality don’t justify the price point beyond what the product offers, this can result in a negative experience for the customer. Of the respondents that stopped buying from a brand this year, half (51%) said they stopped buying from that brand because of a price increase. 

There is a similar danger to overpricing if the quality of a product is lowered and the price remains the same. Our survey results found that 28% of those who had stopped buying from a brand this year had done so because of a reduction in quality. 

Brands would be better off developing a better product or dropping the price to align with the product offering and not risk negative customer experiences, which can harm customer loyalty. Balancing price and quality is a juggling act that brands need to evaluate carefully, not only to retain loyal customers but also to strategise against competitors. 

Leverage brand reputation to promote loyalty

Slashing prices is not an uncommon business tactic against the competition to attract new customers. Still, it is often a short-term approach compared to developing loyalty, which can be a long-term strategy. To find out more, we asked our survey-takers what brand characteristics they think are important for building customer loyalty. Unsurprisingly, value for money was the most popular characteristic, chosen by 77% of the respondents, followed by the quality of products and services (64%). 

However, as an alternative to competitor price wars, brands with a good reputation can also attract customers with the perception that their product or service provides more value than their competitors. In our survey, a brand's reputation was cited as the third most important characteristic by 57% of respondents for building loyalty. Reputation is considered by only 4% of respondents as an unimportant characteristic for building customer loyalty, the second least common response after value for money (3%).  

Brand engagement is a measure of loyalty 

Brands with high, positive engagement can deduce a measure of their customers’ loyalty. High engagement allows brands to receive customer feedback for product launches and collect customer data to improve their products and services. Companies that provide an engagement feature can also measure their products' success by evaluating their customers' approval. 

Brands that encourage customer engagement through features such as live chat, gamification, personalised content, and dynamic forms can gather data from interactions to evaluate and measure customer loyalty. Personalised offers are the preferred type of communication indicated by the respondents (76%) that said they would like to receive communications from their favourite brand(s). 

Offers are most likely to interest customers, and brands can justify asking for personal details if they personalise offers based on this information, such as birthday coupons. When we asked Australian consumers what kind of information they would be willing to share with brands, email address (78%), sex/gender identity (74%), and birthday and age (72%) were the most selected answers.

The more a brand knows about its customers, the better it can improve its customer experience and create loyalty. However, brands should take care with how they request and protect this information as this may deter customers who have privacy concerns about how their data is handled.

Interestingly, 72% of respondents said they would engage with their favourite brand(s) by downloading their mobile app if they had one. Among the majority that would download a brand’s mobile app, the most popular feature they would like it to have is a loyalty program, selected by 76% of these respondents. A loyalty program is a system designed to reward customers who make frequent purchases. Depending on their business goals, companies can choose between various types of loyalty programs to engage their loyal customers.

Loyal customers recommend brands 

Brands that want to stand out can use the help of their loyal customers to promote them as reputable brands. The majority (79%) of survey-takers said they would recommend a brand to their family and friends to express their loyalty. Therefore, the benefits of customer loyalty genuinely create brand ambassadors, who promote a brand's reputation and help acquire new customers.

Further, the second most cited way of expressing loyalty, indicated by over half of the respondents (57%), is by joining a loyalty program. In the second article of this two-part series, we will evaluate how customers use and perceive loyalty programs that help businesses retain customers and drive repeat business.