Is brand loyalty dead?

Billions of pounds are spent every year by organisations to build brand loyalty within their customer base.  One of the traditional cornerstones of marketing theory is that consumers are loyal followers of a brand, whether through aspirational desires or simply that customers are content with the convenience that a brand gives them – a classic tale of needs and wants.

But the world is changing.  We are becoming less loyal to brands and as a consequence, brand holders need to adapt their traditional strategic marketing plans.  Why is this happening?  No one can put a finger on one definitive reason but we can suggest four theories that have contributed to this shift in consumer behaviour.

  1. Consumer empowerment – Twenty years ago the number of customers who switched their main banking organisation was minute. With the banking system still in the early stages of adopting the technological shift that now gives us so many advantages, the risks of things going wrong in the movement of a bank account far outweighed the benefits that a better deal on an interest rate may give.  Today, technology means that switching banks is as painless and risk-free as changing supermarket brands.  In many instances the banks and service providers we used have simply become slightly different shades of grey.  Whether we know (and are prepared to admit it) we are commodity buyers.  Supermarkets today offer the same products, the same services and often share the same postcode.  They fight for our attention by promising to be cheaper than the others.  Gone are the days when companies used to offer to “beat any price by 1 pence”.  That isn’t enough for the savvy shopper.  We know that we can shop around whilst sitting on a train, at our desks or from our sofa.  Comparison websites have done the hard work for us, acting like football agents, happy to play one party to a transaction off against another for a small slice of the pie.  Whilst we may not totally realise it, we are the empowered generation.brand-loyalty-word-cloudWe were also loyal to utility and service providers because they were able to keep barriers to entry in place after they had been deregulated.  Telecommunications, Gas, Electricity and television services have all been able to continue to discriminate in terms of price and service, offering attractive deals to win new customers, whilst keeping existing clients on old deals.  As these markets have liberalised, consumers now have the power to move from provider to provider to get the best deal, or customer service, showing no remorse for brand loyalty.
  1. Peer reviews – Which? The UK-based Consumer Association were always seen as the customer’s champion, happy to butt heads with some of the biggest brands in the world over poor service. However, it didn’t really help us make decisions here and now.  Today, the Internet allows us to search for recommendations and reviews for products and services with no boundaries.  Peer reviews have become more important and valuable to a restaurant or a hotel than a Michelin Star or Five Star rating.  The Global Financial Crisis has meant we have all had to become a bit more careful with our hard-earned cash and so we make more researched decisions using the power of Social Media and peer review sites.  As Warren Buffet once said, “A great reputation is like virginity. It can be preserved, but it can’t be restored.”

Supermarket shoppers now value cost and access over brand loyalty.  Mark Price, Managing Director of Waitrose, recently summed up this changing trends in UK Supermarket shopping in an interview with The Telegraph.

“People are buying food for now.  The notion that you are going to go and push a trolley around for the week is a thing of the past.  All these trends are effectively pulling people out of the big box, out-of-town retailing”  With a number of the low-cost, no frills chains now firmly established in High Street sites, vacated by the big brands as they moved to out of town megastores, customer loyalty to a particular brand is slowly disappearing.  There is no longer any shame in using these budget supermarkets, especially as a number of their products are winning awards for quality over the more established retailers.

  1. Market disrupters – 2015 marks the tenth anniversary of the start of the Social Media revolution. Today, Facebook has over 1.2 billion “users” – meaning that 1 in every 5 people on Planet Earth uses the Social Media site.  Katy Perry has more followers, hanging onto her every word, on Twitter than the combined populations of Australia, Sweden and The Netherlands combined.  A software application that has never created a dollar in revenues from its basic product set of allowing someone to send a message to another user was sold for $22 billion in early 2014, a basic service that has been used since mobile phones were created.  Try and work the return on investment out on that!  But these are the organisations that shape our behaviours today.  Tomorrow’s disrupters are still in the minds of their inventors and founders, waiting for that compelling event, the bright spark, to launch them into the world.  The users of these products are complete brand agnostic.  If it is the latest trend, the craze that all of their friends are talking about, then they will engage.
  1. Privacy – Every organisation we interact with online wants our personal data. They want to understand what makes us buy goods and services, and what they need to do to make us buy more.  Loyalty cards were all the rage ten years ago, our wallets bulging with cards for every retail chain we used.  We stayed loyal to a brand so that we could earn more points, and ultimately get the rewards which normally meant spending more time or money engaging with the brand.  The brand holders were clever – they realised this and ensured that the information they were getting back from our spending patterns allowed them to start targeting promotions at us.  That behaviour has now simply switched to our online world, with our every move now tracked, and whilst we used to marvel at the fact that ads used to appear on websites for products we were just thinking about, we now know that is because of the footprint we leave every time we take a step online.

Whilst there have been changes to what data can be collected, by whom and when, we are lazy consumers, rarely taking time to understand the warning notices on websites about Cookie collection, clicking “accept” so that we can simply get to the main details on the website. And the more data organisation can collect on us, about who we are, where we live, what we buy and therefore what we may be thinking about, the more valuable as a “data file” we become.  Our profiles are sold on multiple times without us ever knowing.  Knowing how certain brands use the data we give them makes us less likely to ever be a brand ambassador for them.

People are simply not as loyal as they used to be. Our Socialnomic world means that we are happier interacting with nameless, faceless entities online, content to make short-term decisions for instant gratification of our needs and wants.  The consumer is revolting, in the nicest sense of the word, becoming more educated and happier to change their spending habits.  Brand loyalty to some shoppers simply refers to them visiting a particular store to find products before they “showroom” online to find the best deal.

This all sounds great.  The consumer revolution is here.  But what about the dangers it brings?  Our natural habit when searching for a product or service online is to use the words “cheap”, “free” or “discount” in our search terms.  We want quality but are rarely prepared to pay the market rate for it.  We buy into the concept that the consumer is king and as such feel that we deserve a discount for not being loyal to a brand anymore.  Consequently, we open ourselves up to danger online.

Just as brand holders realise that they have to make their online presence more compelling to attract the “floating voters”, so too do cyber criminals who understand how they can exploit our new-found brand freedom.  They will use the same tactics as brand marketers, offering headline promotions and deals to reel us in to their websites.  In many instances they even go as so far as building copycat websites to give us that warm glow that we have genuinely got a bargain.  That is until the goods turn up at your door (if you are lucky), looking nothing like or performing like the real thing.  Trying to retain brand loyalty for many organisations online is now also a matter of managing reputation and supply chains.  Someone who buys a “fake” Mulberry handbag may genuinely believe that they are buying into a brand, even though the item is counterfeit. In reality they are simply buying it because in their eyes they are getting a bargain.  By removing the fake items off the internet does not mean they will buy a real product at twice the price instead.

One area where brand loyalty remains is in technology.  That loyalty may not be through choice, rather than through convenience.  Technology companies have never really wanted users to be able to switch to alternative brands – a simple look in my plug cupboard at home will reveal over a dozen mobile phone chargers, all different depending on the manufacturer.  Digital media, such music, films and books in most instances cannot be transferred between devices made by different manufacturers, nor in theory can they be passed onto friends or family such as a physical CD, DVD or a book can.  The popularity of Spotify, Netflix and Kindle, which are all vendor-independent has had a massive impact on digital piracy, with users happy to pay a small monthly charge (in the case of the first two) to access genuine and quality content.

Loyalty is dead. The consumer revolution will continue to shape our spending habits, and with e-commerce now worth over £13bn per annum, brand holders need to re-align their thinking on how they can build a more compelling brand argument that focuses not solely on loyalty but on value, consumer choice and above all quality.  The brands that will emerge as winners in the 21st century will be those that get their engagement strategy right whilst retaining some of the old fashion values of convenience, price and above all customer service.

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