Customer vs. Shareholder
The Harvard Business Review (HBR) has intimated that financial accounting and shareholder primacy affect how companies treat loyal customers. HBR argues that quarterly earnings and reporting undermine how loyalty affects profitability. Two profitability strategies—shareholder primacy vs. customer capitalism—have affected how customer metrics like brand loyalty are ranked as profit drivers.
In the 1950s, Peter Drucker referred to as “the father of business consulting” by Forbes and “the greatest management thinker of the last century” by GE Chair Jack Welch, said that “the true purpose of a business is to create and keep customers.” Conversely, in the 1970s, Milton Friedman said that companies exist to maximize shareholder value, the argument HBR said introduced “the age of shareholder primacy.”1
In 2019, CEOs from the Business Roundtable, including Tim Cook of Apple, Jeff Bezos of Amazon, Mary Barra of General Motors, Robert F. Smith of Vista Equity Partners, and Larry Fink of BlackRock, broke with decades of corporate orthodoxy by stating that “the purpose of a corporation” is no longer to advance only the interests of shareholders. Instead, companies must deliver value to customers indirectly by supporting customer values on issues like protecting the environment and dealing ethically with suppliers.7
What Is the Difference Between Brand Loyalty and Customer Loyalty?
Brand loyalty is commonly based on image and experience while customer loyalty is money-based, relying on prices and discounts. Brand-loyal customers believe that a certain brand represents higher quality and better service than any competitor regardless of pricing. Customer loyalty requires companies to maintain low prices and offer regular discounts.
What Are Brand Ambassadors?
Brand ambassadors are professional marketers that companies hire to serve as spokespersons for their products.
What Is the Role of Corporate Social Responsibility in Brand Loyalty?
Corporate social responsibility (CSR) is a business model that helps a company be socially accountable to itself, its stakeholders, and the public. According to the Journal of Consumer Psychology, customers act favorably toward a company that engages in CSR.8
The Bottom Line
Brand loyalty occurs when companies can retain customers across product lines. Instead of investing capital to land new clients, companies with high brand loyalty have the advantage of deploying resources to improve their products or enhance their customer service to repeat consumers.