Brand loyalty: Does it exist any more?
For years you worked to get brand loyalty rates as high as possible. You believed that once a consumer liked what you offered, they were yours “forever.” True then. Not so true now. Brand loyalty is not what it once was.
Brand Loyalty: The impact of the internet
With the development of the internet, a whole world of unknown products and services opened to shoppers. With online shopping and door-to-door delivery there are no restrictions on where you can shop. In your city. In other cities. States. And even other countries.
McKinsey Research confirms Brand Loyalty is in decline
The shift in brand loyalty was described by market research conducted by McKinsey and Company.
To arrive at their conclusion, McKinsey dug into its database, which covers more than 125,000 consumers shopping for more than 350 brands.
After analyzing the data, it found that of 30 categories, only three were primarily loyalty-driven. Mobile carriers: 81% of purchases in this category were driven by brand loyalty as opposed to shopping around. This is followed by Auto Insurance (76%) and Investments (69%). The chart below shows the loyalty levels of major categories.
Where brand loyalty is almost non-existent
By contrast, most categories are skewed just as heavily – if not more – towards shopping rather than loyalty. The most competitive categories, perhaps not surprisingly to women, are shoe retail and cosmetics, with 97% and 96% of purchases, respectively, the result of shopping around.
The vast majority of consumer electronics purchases also appear to be from shopping around rather than sticking with the same brand choices: personal computers (91%), laptops (88%) and tablets (82%) each skewed heavily towards shopping around. With the disparity in pricing, it’s not surprising that people would shop around for a category moving more and more toward “generic.”
Brand loyalty is “ephemeral”
Across 27 selected categories, an average of 87% of consumers shopped around, while only 13% could be considered loyalists. Among those who shopped around, only one-third (33%) ended up remain with the incumbent brand, while the remaining two-thirds were “tempted” away to another brand.
Overall, consumers’ purchase behavior across those 27 shopping-driven categories broke down as follows:
- 13% – loyalists, who didn’t shop around;
- 29% – shopped around, but ultimately stuck with the incumbent brand; and
- 58% – switched to a different brand.
Finally, there’s an important note to the data: it’s extremely important for brands to be top-of-mind. The analysts discovered that brands in the “initial consideration set” were twice as likely to be ultimately purchased as those brands that were considered later in the purchase journey. Overall, almost 7 in 10 brands purchased by those who switched were part of those consumers’ initial consideration set.
What does this all mean?
If you’re in business, there’s a new marketing challenge to retain customers. After all, it’s far more expensive to get a new customer than it is to retain an existing one. Or, it was at one time. But let’s analyze those categories where brand “loyalty” is high. Some hypotheses I offer:
• If it aint broke, they won’t change. If their phone, insurance or investments are delivering as promised (or better), consumer inertia works in your favor. It’s a hassle to make changes in these categories.
• If competitors are pretty much as good or as lousy as all in these categories, why bother to change. People tend to prefer to stay with a known rather than an unknown.
Some ideas about making your brand loyalty stronger
Those where brand loyalty levels are low, you need to do work. Not only do you need to improve internet and phone service, but you need to improve service at retail. For some reason, people are complaining about the terrible service they are receiving at stores. Either they don’t find sales help, or if they do, the person isn’t helpful or knowledgeable. So while you’re focusing on building your internet presence, don’t forget about the other channel of distribution. Here are some suggestions:
- Make sure your packaging stands out and distinguishes you from the competition.
- Make sure your packaging “sells” and not just “tells” your product story.
- Have your packaging includes a toll-free number so prospects can call you at POP to ask questions. This is especially helpful if no one is around to answer their questions.
- Make sure you are a constant presence online and in print so there is high top-of-mind awareness of your product and/or service.
I hope this article has been helpful to you. If you need assistance in creating brand awareness, positioning or whatever, The Marketing Garage is always here to help. Contact me at email@example.com. Your initial consultation is gratis.