Research paper(emotional loyalty)
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  • 1. The Importance of Emotional Loyalty in Building Brands BY Paker Nazir Suri Lecturer Rai Business School Meadows Campus Faridabad Haryana Email:
  • 2. The Importance of Emotional Loyalty in Building Brands“The essential difference between emotion and reason is that emotion leads to actionwhile reason leads to conclusions.” By Donald Calne, neurologistIn search for new market and due to globalization many multinational companieshave came to India, they became threat to the domestic companies as they werecompeting for the same customers, the customers were bombarded by all sides fromadvertising and an amazing array of products and services as a result they becamemore demanding, savvy and fickle. By the advances in technology and Internet theswitching of brands have became a common act with customers. Marketers point tocustomers as “BUTTERFLIES” flitting from brand to brand from one organizationto organization, they thought that loyalty is NO MORE OR DEAD. FrederickReichheld in his book, The Loyalty Effect, wrote that on an average, companies losehalf their customers in five years.In today’s world the organization has realized the importance of loyalty and theyhave started working on it. We all know that retaining customers is more profitablethan acquiring new customers. Different studies have shown that an increase incustomer retention by 5% leads to increase in profits by as much as 25% - 85%. Sothe latest mantra in the current market scenario is Customer Loyalty. Loyalty leadsto long-term financial performance. Domestic companies should clearly understandthe importance of emotional loyalty to become the market leader.Customer Loyalty???According to Webster’s Dictionary, loyalty means “unswerving in allegiance;faithful to a cause, ideal, person, or custom.” Customer loyalties illustrate thetendency of a customer to choose one business or product over another for aparticular need. Loyalty is the process of finding, acquiring and retaining thecustomers who repeatedly buy the company’s product or service.Most importantly the question arises how to create loyalty among the customers?The study says that the initial pace in loyalty is customer satisfaction. The customersatisfaction is achieved with CPV (Customer perceived value), CPV is the differencebetween the prospective customer’s evaluation of all the benefits and all the costs ofan offering and perceived alternatives. CPV is thus based on the difference betweenwhat the customer gets and what he or she gives for different possible choices. The
  • 3. customer gets benefits and assumes costs. The marketer can increase the value ofthe customer offering by some combination of raising functional and emotionalbenefits and reducing one or more of the variable types of costs.The key to generating high customer loyalty is to deliver high customer value,customer delivered value means the whole cluster of benefits the company promisesto deliver minus the whole cost of the customer and if the result turns out to bepositive than it can be said the customer is satisfied and if the result is negative thenthe customer is unsatisfied by the product/ brand/ organization.According to Philip Kotler here are some Determinants of Customer DeliveredValue Determinants of Customer Delivered Value Image value Image value Personnel value Personnel value Total Total customer customer Services value Services value value value Product value Product value Customer Customer delivered delivered Monetary cost Monetary cost value value Time cost Time cost Total Total customer customer Energy cost Energy cost cost cost Psychic cost Psychic cost©2000 Prentice Hall
  • 4. Loyalty Types • Contractual Loyalty – It is based on formal agreement. This type of loyalty is strong till the time the contract or agreement is ON once the contract ends the loyalty also ends. It is more common in B2B business but it also implies in consumer markets like medical insurance, GYM membership, newspapers and magazines, AMC of software etc. But some marketers say this is not a loyalty as customer has compulsion to make purchases whether they are satisfied or not. • Transactional Loyalty – This refers to customer purchase without any compulsion for a particular brand. But in this the loyalty is based on price, convenience and perception of the value, whenever the customer will get a better option in terms of price, convenience and perception of the value they will easily switch to another brand without any hesitation. So the loyalty level is very low at this stage also. At this stage the competitors are at strong position as with aggressive promotional activities they can easily takeaway your customer. • Functional Loyalty – In this stage the real Loyalty came in to existence but not the emotional one, the customers perceives the product attributes and features superior as compared to the competitors. In this stage the customer prefers to recommend the product to others, here we can say that the word of mouth is born. • Emotional Loyalty – Here comes the loyalty, which will be creating out more positive customer experience by bringing together operational excellence with human touch throughout customer relations. It is the combination of feeling and actions.
  • 5. This approach enables companies to bond consumers to their brands, and improves customer satisfaction and thereby increasing its revenues and profits. The customer is ready to pay premium and they easily recommend the product or services to others. Most notably emotional loyalty drives the customer satisfaction According to Prof. Susan Fournier of Harvard University for the development of emotional loyalty with brands few factors are there:-1. Congruence with deeply rooted life themes (such as personal freedom.)2. Accomplishment of life projects (like the banquet hall where your marriage has taken place, last time where a girl met her boyfriend first time or the fragrance which his girlfriend applies regularly then that person would be always have an emotional attachment to that fragrance – the person becomes emotionally attached to that place or brand.).3. Resolutions of current concerns (like some girl wants to loose weight for some specific occasion and product has given her the desired result then she will be totally committed to that particular brand)Ogilvy Loyalty Index Emotional Loyalty PyramidThe Ogilvy Loyalty Index assumed there is a strong correlation betweenemotional loyalty and brand purchases. But, importantly, that correlation is notlinear. Increases at different levels of emotional loyalty result in differentincreases in sales for the brand. The greatest sales increases? By far? Areproduced only at the highest level of emotional loyalty, called "Bonding."According to Ogilvy the emotional loyalty pyramid provides interesting insightsinto the customer ride.
  • 6. • Presence In this stage the emotional loyalty is very stumpy. Here the customers have just tried the product or they are aware and familiar with the brand only.• Relevance and performance Consumers started believing the brand that it is for people like him. After relating with brand the consumer needs to believe that the brand is good for developing the strong relationship between the consumer and brand.• Advantage Consumers feel that the brand has some quality that gives them a reason to buy and believe that is better than competition and is one of the consumer’s favorites.• Bonding The top most stage of pyramid – Bonding - consumers believe that brand’s advantages are unique from all the competitors, the brand don’t have any substitute and they just don’t like it they love it. Here comes the loyalty with the human touch, with the emotions to acquaintance the customers with the brand.
  • 7. Till now we have clearly understood the concept of emotional loyalty (The human touch) and the importance of it in the current market scenario so for all the companies and specially the Indian companies who wants to compete with the MNCs should work seriously on the building of the loyalty that to emotional loyalty with out this they cannot contend with competition.Conclusion • Organizations interested in developing lasting relationships with their customers really should understand the concept of emotional loyalty because of the obvious link with relationships. • The challenge for companies that wish to create true customer loyalty is to understand the nature of loyalty itself and to develop strategies that will succeed in creating higher levels of emotional loyalty among existing customers. The payback from such a strategy is potentially enormous. • Companies that covet to practice emotional loyalty should go for CRM. All CRM programs rely on communicating with customers, giving them encouragement to remain active and choosing to do business with a company. Communicate regularly to show that you know your customer personally. The different CRM programs follows: 1. Analytical CRM - the use of data modeling and profiling to accomplish CRM goals 2. Collaborative CRM - the tools used to directly engage and interact with customers 3. Operational CRM - the "back end" systems, which unify the business and deliver product • To achieve the emotional loyalty delivery on brand promise is very necessary for eg. IDEA giving free calls to IDEA and reduction in call rate, so this means that whatever the brand should promise to the consumer it should be fulfilled. • Loyalty of employees is compulsory as if the employees are not emotionally loyal to the brand then how can they convince the consumer
  • 8. to be emotionally loyal and it is essential to empower employees to undertake effective service recovery.• Employee Training -- Train employees in the manner that you want them to interact with customers. Empower employees to make decisions that benefit the customer.• Be Flexible. Try to solve customer problems or complaints to the best of your ability. Excuses? Such as "Thats our policy”? Will lose more customers then setting the store on fire.• Know Their Names. Get to know the names of regular customers or at least recognize their faces.• Reliability. If you say a purchase will arrive on Wednesday, deliver it on Wednesday. Be reliable. If something goes wrong, let customers know immediately and compensate them for their inconvenience.
  • 9. BIBLOGRAPHY • Marketing management - twelfth edition – Philip Kotler and Kevin Lane Keller • From the Customer’s Perspective: Defining Loyalty By Jim Barnes • Loyalty business model – From Wikipedia • Emotional Loyalty: The Key to Marketplace Success – Garth Hallberg (Ogilvyone worldwide – New York) • Emotional Brand Loyalty – A Rethink – A new report from BDRC • Susan Fournier, "Consumers and Their Brands: Developing Relationship Theory in Consumer Research," Journal of Consumer Research, March 1998, pp. 343-373. • Brand Zealots: Realizing the Full Value of Emotional Brand Loyalty By Horacio Rozanski, Allen G. Baum and Bradley T. Wolfsen • Frederick Reichheld -- The Loyalty Effect • Building Emotional Loyalty – MS Ballaji and Ms Supriya – Marketing Mastermind April 2007..