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Quantifying 'Brand Loyalty'

Dave Kanicki, Farm Equipment

Our special report, “Is Brand Loyalty Dead?” in this issue was a different experience for us. In addition to speaking with you, the dealers (see “Dealers Weigh in on Brand Loyalty Erosion”), this time we also spoke with your customers — the farmers.

We know from experience that farmers can be resolute in their steadfast dedication to certain equipment colors. We wanted to find

out if it was still the case. So we surveyed a couple of thousand high-income Midwestern farmers ($500,000 or more in annual income) to gauge their feelings about brand loyalty. Are they or aren’t they?

In short, the survey results indicate, “yes,” overall farmers remain brand loyal, but they’re far more loyal to some brands than others. You can read about it in detail here.

But more to the point, what does “branding” and “brand loyalty” mean to your bottom line?

You already know that it’s far more costly to attract and sell new customers as it is to keep current ones. But it’s also been demonstrated that a 1% increase in customer service will often grow sales by the same amount because satisfied customers buy more from companies they’re happy with.

We also know that customer-focused companies outperform those that concentrate on the bottom line. Numerous market research studies confirm that as much as 65% of a company’s business comes from satisfied customers. There’s ample evidence that a 2% improvement in customer retention has the same impact on profit as a 10% reduction in overhead.

“We all want happy customers,” says Jim Alexander, a marketing consultant who works with small to medium businesses, But what we really want, he says, is for them to come back and spend more money with us. That’s really what brand loyalty is all about.  It’s called brand building.

He adds that highly satisfied customers are likely to be easier to deal with and less concerned about price. In fact, 68% of defecting customers leave because of bad service, not price or product quality.

Our survey of high-income farmers bore this out. Of the 12 factors that would cause a farmer to switch brands, price was No. 6 behind parts availability, product engineering, dealer service, product specialists at the dealership and manufacturer warranty.

Advertising and other promotional efforts all play a part in building brand loyalty, but the foundation is clearly based on customer satisfaction.  We know farmers talk to each other. In most cases, if they’re happy with your service, they will recommend you to 5 new farm customers.

On the other hand, fewer than 10% of unhappy customers ever make an “official” complaint. Studies show that one unhappy customer tells 9 others about it and 13% tell more than 20. Word of mouth works both ways — and bad news travels fastest and furthest.

As much as we may want and need to quantify the impact of “brand loyalty,” the fact remains that it is essentially an emotional issue to most consumers that is difficult to measure.

When all is said and done, farmers want the same thing from their dealers as dealers want from their suppliers. Loyalty is a two-way street. They want to feel good about the relationship. More than anything else, brand loyalty is built on trust. Farmers want to believe that you care as much about their success as you do your own.

Posted December 23, 2010
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