Beware the loyalty prophets of doom
Everybody knows about brand loyalty. It’s one of the first concepts taught to marketing undergraduates. In a decent MBA programme a couple of weeks are spent exploring all the strategic attractions of building loyalty for a brand: price insensitivity, repeat purchase, advocacy. No wonder, then, that most brand managers spend a lot of their lives talking about, understanding and then protecting that magical little army of consumers considered to be loyalists.
But in recent weeks this might have come into question. There has been a slew of powerful, data-driven articles predicting, or in some cases announcing, the imminent death of brand loyalty.
Ernst & Young (E&Y) recently published data from a global sample of 25,000 consumers showing that only 28 per cent of consumers cite brand loyalty as influencing their shopping behaviour. They conclude that the concept of brand loyalty “could become a thing of the past”.
It’s a theme echoed by consulting firm Bain & Co, which surveyed 3,500 British shoppers and discovered that only 42 per cent of consumers have a brand in mind before they go shopping.
And even if a consumer has a preference, data from TNS suggests the likelihood that this will turn into a purchase is not guaranteed. Its report The Commitment Economy canvassed 39,000 consumers across 17 markets and found that 42 per cent of consumers may not buy their preferred brand because other factors influence the decision-making process. According to Steve Hamilton-Clark, chief executive of TNS MENA: “Brand managers preoccupied with being the customers’ preferred choice could do well to understand that there are other factors too that need their attention.”
Given all this evidence, it’s hardly surprising that articles in influential magazines such as Forbes in the US - Is Brand Loyalty Dying a Slow and Painful Death? - and Marketing Week - The Big Brand Loyalty Theory is History - suggest that the end might be nigh for one of brand management’s central concepts (see MWlinks.co.uk/promotions).
My advice to marketers is to take all of the above with a large pinch of your favourite brand of salt. While it’s true that building brand loyalty is increasingly difficult to achieve, it’s certainly not cause to throw the loyalty baby out with the recessionary bath water.
At first sight, the recent evidence suggests that brand loyalty is diminishing to a point of non-existence, but look again. E&Y’s figure of 28 per cent of consumers who are influenced by brand reputation seems painfully low. If I asked your dad how he bought his butter would he agree that brand had anything to do with it either? Like the fabled consumer who says he buys Guinness because it is good for him, not because of the advertising, most consumers under-report the influence of brand on their decision-making in these types of surveys.
To be fair, the data from Bain and TNS is much more robust. But, once again, it’s not necessarily such frightening news. We learn that only 42 per cent of consumers have a brand in mind when they go shopping (Bain) and that 42 per cent might not buy that brand at point-of-sale (TNS). Put those figures together and about 25 per cent of consumers have a brand in mind and usually buy it at point-of-sale.
That figure might sound low, but it’s always been that way. The whole point of brand loyalty is that a small proportion of the market provides the majority of profit. With the clients I work with on CRM projects, we inevitably observe a relationship of about 20 per cent of total consumers providing between 70 and 80 per cent of sales. Most consumers aren’t brand loyal - they never were.
Too many marketers have this halcyon vision of a past where consumers were brand loyal for life. Very little data exists to suggest that this vintage era of marketing ever existed and, if it did, I’ll bet it was never as strong as myth and the fuzzy goggles of nostalgia would suggest.
Clearly, the proportion of brand-loyal consumers is in decline thanks to the recession, the power of big retail and, increasingly, accessible sources of data. But again I would counsel marketers to retain perspective. Yes it is becoming harder to build and maintain brand-loyal consumers. But just because something is becoming harder to achieve does not warrant the wholesale rejection of the concept. If anything it elevates its importance.
Learn from brands that have continued, or increased, their proportion of brand loyal consumers in recent years. Ask Apple, Gillette, Benefit or Call of Duty about the death of brand loyalty and they’ll beg to disagree.
The game of brand loyalty remains the same. It’s just slightly tougher and some of the weaker players are questioning the rules. Be clear about your position. Execute with élan and efficiency. Don’t let retailers run your marketing. Avoid price-based promotions. Spend 10 per cent of your marketing budget on research and, most important, stay loyal to brand loyalty.