Customer Loyalty vs. Brand Loyalty: What’s the Difference?

Customer and brand loyalty can encourage customer retention, but price can affect customer loyalty, while brand loyalty is built on trust.

Organizations need to devise strategies to retain existing customers, as these typically generate most of the profit from long-term customers. Although both customer loyalty and brand loyalty drive customer retention, they differ in their emotional connections, marketing approaches, and profit margins. To increase retention, organizations should aim to increase customer and brand loyalty.

What is Customer Loyalty?

Customer loyalty occurs when customers make repeat purchases based on prices, discounts, rewards programs, service, and overall customer experience. A person who shows customer loyalty to an organization does not necessarily have an emotional connection to that particular brand and may frequently buy from different brands in the same categories. Organizations like Walmart and Kohl’s have great customer loyalty.

What is brand loyalty?

Brand loyalty occurs when customers make long-term commitments to brands based on product quality, reliability, and values. A customer who demonstrates loyalty to an organization’s brand usually feels an emotional connection to that brand because of the quality of its products or its mission statement. In fact, brand loyal customers often remain loyal even when competitors offer lower prices. Organizations like Apple and Tesla are very loyal to the brand.

3 Differences Between Customer Loyalty and Brand Loyalty

Customer and brand loyalty differ primarily in their emotional connections, marketing approaches, and profit margins.

1. Emotional Connections

The emotional connection that drives customer loyalty differs from the connection for brand loyalty. Low prices, loyalty programs, and quality CX promote customer loyalty because they make customers feel like organizations are listening and appreciating their needs. Many people buy with fixed budgets. So, when organizations offer items at affordable prices for consumers, they can become loyal customers.

Additionally, loyalty programs reward loyal customers with additional, often personalized offers, which helps consumers feel that organizations value their commitments.

Brand loyalty, on the other hand, is less transactional and more emotional. This stems from trust between customers and brands, rather than price. Customers can develop brand loyalty from how they perceive an organization’s reputation, product quality, or mission statement.

For example, a customer who always buys the same brand of smartphone without considering potentially cheaper options represents brand loyalty. The customer trusts the quality and reputation of the brand and is unlikely to consider an alternative.

Additionally, a customer can still buy the same brand of coffee because they are publicly supporting and donating to a charitable cause. In this case, customer loyalty to the brand stems from an emotional connection to the moral actions of the brand.

Customer loyalty and brand loyalty drive customer retention, but they differ in customer sentiment, marketing approach, and profit margin.

2. Marketing approaches

Since customer loyalty is price-centric, while brand loyalty is trust-centric, these two loyalty strategies often rely on separate marketing approaches. To build customer loyalty, marketers can focus ads on price and customer savings, which attracts customers with set budgets. Additionally, marketers can use rewards programs to incentivize frequent purchases.

For brand loyalty, marketing teams must strive to connect with customers on an emotional level. For example, marketing teams could associate their brand with an idea or mission that customers might care about. An electric car company can associate itself with innovation and sustainability, or a whole food store with health and wellness. Clients trust brands that share their own morals and values, which can build brand loyalty.

3. Profit margins

Many organizations with high customer loyalty have lower profit margins because they offer products at low prices. However, these organizations usually make a large number of sales, which makes up for the low margin.

Conversely, many brand-loyal organizations have higher profit margins because their customers respect the brand and its values ​​over price. These organizations may charge high prices for products because loyal customers are willing to pay. However, some organizations with high brand loyalty may sell fewer products and services than organizations with high customer loyalty.

All organizations need to devise strategies to maximize customer retention. While some business models can drive customer loyalty, while others lean more toward brand loyalty, organizations can benefit from either strategy.

Joseph P. Harris