As a regular item in NeedToKnow: Trade Marks, I highlight a scientific or psychological study on consumer behaviour that has caught my attention.
Consumer loyalty is the behaviour of consistent purchasing of a brand over an extended period of time, measured as a proportion of times a consumer choses the same brand compared to other brands in the same category. Consumer loyalty is, quite rightly, seen as the key to a successful product and business. However, sometimes, even the best quality product does not garner the loyalty it deserves; and even advertising a product may only result in a short-term spike in sales, and may do little to stop consumers from switching to other brands over time.
A report issued recently by market research company, Nielsen, sheds light on this elusive concept of loyalty, and when and why we switch brands. The Nielsen Global Survey of Loyalty Sentiment questioned over 29,000 respondents in 58 countries, across 16 categories of goods and services. Some of the most interesting findings, set out in the report entitled How Loyal Are Your Customers? A View of Loyalty Sentiment Around the World1, were the following.
- We are more likely to switch brands for those products that we buy most frequently. This is counter-intuitive, as one would have expected that for everyday staple products, we choose the “default”. Rather, across all of the 16 categories surveyed, the survey found that loyalty was lowest for foods and beverages, namely alcoholic beverages (43% likely to switch brands), snack foods (39% switch), carbonated beverages (38% switch) and cereals (37% switch). The switch rates for snack foods were even higher in Europe, which Nielsen attributes to high levels of discounting of such products. It appears therefore that high levels of promotions in some staple product categories is impacting adversely on any attempts to build loyalty to any one brand, as consumers have become accustomed to “chasing promotions”.
- Compared to products, loyalty to retailers was generally higher, with high loyalty rates for grocery retailers (74%) and mobile phone providers (75%). Nielsen suggests that these high loyalty rates are due to the very successful and generous customer loyalty schemes offered by such service providers.
- The survey suggests a word of warning about overuse of retailers’ loyalty program communications - overuse can cause consumers to opt out of them, so a balance needs to be struck.
- The good news for retailers did not, however, translate to online retailers, with switching sentiment for online retailers being quite high (39% likely to switch). This shows how difficult it is to establish online loyalty, and that “bricks & mortar” retailers still have a significant loyalty and business advantage.
- For online businesses, free shipping was rated very highly (44%) as a benefit which increased loyalty.
- The survey showed that while a lower price was usually the strongest motivator to switch brands, brand owners had to "get the price/value equation right”, as poor quality products quickly reversed-back the price-motivated switch.
- Finally, the survey noted some important cross-country and cultural differences, which brand owners need to be mindful of if they market their products internationally.
By understanding these peculiarities and differences in consumer loyalty across categories and markets, brand owners can deploy the appropriate marketing strategies to build loyalty.
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