Apple are gearing up for the launch of the hotly anticipated, 10-year anniversary model of the iPhone – the iPhone X.As usual, expect to see queues stretching around the block on November 3rd for a chance to be one of the first to get their hands on the device. This loyal customer base (or more accurately;fanbase) is of huge value to Apple and has propelled them to the dominant market position they enjoy today. But what exactly is Apple’s branding strategy, and how does their customer loyalty lead to a sustainable competitive advantage?
What is Apple’s Brand Value?
To illustrate just how valuable the Apple brand is, consider this; it is the most valuable global brand of 2017 according to Forbes, weighing in at an impressive $170 billion. This represents over 20% of the overall market value of the company. Luckily, there are many lessons and best practices that other companies can apply to their own marketing strategies.
Using Apple as an example, I will discuss the importance of brand loyalty for all businesses, its relationship with customer satisfaction and strategies for developing loyalty to maximize Customer Lifetime Value (CLV).
Brand Loyalty
It is estimated to cost between 5 and 10 times more to acquire new customers than to retain existing ones (Wreden 2007). In order for a company to retain their customers they must cultivate loyalty as it is the most effective way of preventing switching behavior.
“Customer loyalty is a deeply held commitment to re-buy or repatronize a preferred product or service consistently in the future, causing repetitive same brand, or same brand-set purchasing, despite situational influences and marketing efforts.” (Oliver 1999)
Apple has built up an incredibly loyal customer base since the return of Steve Jobs in the late 1990’s. This is for a number of reasons such as Jobs’ evident passion for his products and the customer experience, their continuous innovation in consumer tech, the guaranteed high quality of all of their products and how they satisfy their consumers aspirations.
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This has given Apple the base to grow into the world’s most valuable company from the brink of bankruptcy. In recent years Apple has faced increasingly stiff competition from Samsung and other competitors. Maintaining and developing their brand identity has been an effective strategy to defend their market position going forward.
Apple’s Sustainable Competitive Advantage – Loyalty
Loyal customers are important strategic assets which gives the firm a sustainable competitive advantage over competitors. Javalgi and Moberg (1997) hypothesized that loyalty can be discussed either as a behavior or an attitude. ‘Attitudinal loyalty’ (i.e. having a positive attitude towards the brand) is a more compelling reason for loyalty as there can be many reasons for repeat purchase behavior other than loyalty – convenience, habit etc. Loyalty is biased repeat purchase behavior.
An integral concept in customer loyalty is commitment. This helps to differentiate the strong emotional bias evident in loyalty from weaker brand preferences (Peter and Olson 2004). This is important because if loyalty is measured purely on the basis of Customer Lifetime Value (CLV) then it may be incorrectly assumed that high value customers have commitment to the brand. In reality there are many reasons why a customer would have a high CLV but not be brand loyal – lack of choice, loyal to the price etc.
Why is Customer Loyalty Important?
There are a number of benefits that result from customer loyalty. Primarily, loyalty improves a firms overall financial performance due to increased purchases and the ability to maximize the potential of each customers CLV. It is much cheaper to serve existing loyal customers than to acquire new customers. Other benefits include loyalty as a sustainable competitive advantage, as mentioned earlier, and increases in positive word of mouth and referral business.
Apple has developed a branding strategy that allows them to benefit from all of these factors. Their financial performance over the past number of years is unprecedented as they became the most valuable company in the world. With the emergence of Samsung as a strong competitor, the loyalty of their customers has proven to be a valuable competitive advantage. They have maintained their premium pricing strategy whereas Samsung have undercut them with largely imitation products. The passion that Apple customers have for the brand also results in them spreading positive word of mouth, further reinforcing Apple’s brand identity.
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Brand Loyalty Marketing
Malthouse and Mulhern (2007) cite the following benefits of loyalty as a marketing goal:
- Increased retention rates – This can be achieved through better products, more competitive pricing and increased brand value. Apples products are at the cutting edge of innovation and their brand is synonymous with high quality, beautiful design and state-of-the-art technology. Their pricing strategy is based on their strong brand equity and so competing on price would not be consistent with the brand message.
- Increased share of wallet – We have seen Apple expand its product offering to tablets, wearables and TV. This allows them to maximize the value of their brand equity across multiple product lines, bringing their loyal customers with them.
- Increased referral rate – This could include a formal referral program, however in Apples case informal positive word of mouth is more apt. Word of mouth is a very credible form of natural promotion, and having brand ‘fans’ that actively endorse their products is an effective strategy for building loyalty.
- Decreased marketing costs – Improving the efficacy of marketing spend can be achieved through effective segmentation, innovative strategies etc. With a stable customer base marketing investment can be directed toward activities with a high Return on Investment (ROI).
Customer Satisfaction
It is important to note that customer satisfaction will not always lead to customer loyalty. While satisfaction with the product or service is necessary, it may not be enough to develop the loyalty of the customer (Oliver 1999). Three key drivers of loyalty are “product superiority, personal fortitude (depth of one’s involvement and interest), and social bonding”. Apple leverage each of these factors – particularly product superiority and personal fortitude.
For a customer to become loyal, they must positively evaluate past performance of the brand and, on the basis of this, decide to continue the relationship (Aaker 1991). Most customers just want the brand to deliver on its promise – simply do what it’s supposed to do. Over delivering on consumers’ expectations is unlikely to have a much greater effect on a consumer’s attitude towards the brand and may just give them unrealistic expectations for future transactions (Dixon and Freeman 2010). Apple concentrate on delivering on their brand promise on a consistent basis meaning customers are content at the very least. This is how satisfaction can lead to loyalty.
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How to Create Brand Loyalty
There are 4 ways to create brand loyalty according to Collinger (2003):
- specialized customer service
- customized product offerings
- personal interactions
- added product or service benefits
As Apple is a global technology giant it is not feasible for them to provide specialized customer service, customized product offerings and personal interactions to all of their customers. However they offer Apple Stores and Genius Bars that provide for a certain degree of personal interaction and customer service. This is further enhanced by the announcement of ‘town squares‘ – a sign that they are taking personal interaction very seriously.
In addition they continuously satisfy the product benefits criteria. While they are not always the first to implement cutting edge technology, they have a great track record in successfully launching new features and products. Apple products are seen as the very best in high-end consumer tech and the company consistently delivers on this brand promise.
In Summary
Apple is a brand with one of the highest levels of customer loyalty and this has catapulted them to the dominant position they enjoy today. For businesses that want their customers to purchase more than once over their lifetime (which is most), knowing how to cultivate loyalty is an extremely important skill. Moreover, if you’re struggling to differentiate your offering in a relatively hom*ogeneous industry, developing customer loyalty and brand equity is a great way to build sustainable competitive advantage.
To see a proposed brand strategy for Hackett’s Bookmakers, click here.
References
Aaker, D.A. (1991). Managing Brand Equity: Capitalizing on the Value of a Brand Name. Free Press, New York, NY.
Collinger, Tom (2003), “The Tao of Customer Loyalty: Getting to ‘My Brand, My Way’,” in Kellogg on Integrated Marketing, Iacobucci and Calder editors, 16-38.
Dixon M., Freeman K., (2010) Stop Trying to Delight Your Customers, Harvard Business Review, July-August
Javalgi, R. and R. Moberg, 1997.Service loyalty: Implications for service providers. International Journal of Services Marketing, 11: 165-179.
Malthouse E.;Mulhern F. (2007) Understanding and using customerloyalty and customer value. Journal of Relationship Marketing, 6(3-4):59-86
Oliver, R. L. (1999). Whence customer loyalty? Journal of Marketing, 63, 33–44.
Peter, J. Paul and Jerry C. Olson (2004), Consumer Behavior and Marketing Strategy, McGraw-Hill.
Reichheld, F.F. (1996). The Loyalty Effect. Harvard Business School Press, Boston, MA.
Wreden, N., (2007) Profit Brand: How to increase profitability, accountability and sustainability of brands, Kogan Page; 1st Pbk. Ed edition
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AppleBrand LoyaltyCustomer Lifetime Value
