Posted on : 2023-04-14 05:45:14
Article : Good evening, Friday management TASK -How has the pandemic changed consumer-buying behaviour, purchase drivers, and brand loyalty?
Unlike customer loyalty, which is money-based (prices and discounts), brand loyalty is perception-based (image and experience). Brand-loyal customers believe that a certain brand represents both higher quality and better service than any competitor—and the price does not matter. Brand-loyal customers might make fewer total purchases, but the profit margins on their purchases are larger. Most established brand-name products operate in highly competitive markets, jockeying for market share with new and old rival products, many of them barely distinguishable.
In post pandemic time one of the more quoted studies talks about an observation that 75% of U.S. consumers switched brands or stores during the pandemic; 60% of these consumers plan on incorporating those new patterns into their future buying habits post-Covid. The quick math on those numbers shows a 45% shift of loyalty over the long term. Clearly, the pandemic has caused consumers to reconsider their brand loyalties.
It’s hard to be loyal to a preferred brand when every store is out of stock. But even if supply issues drove a large share of the brand switching over the past 14 months, some consumers will still prefer the new brands and change their preferences permanently. If we take a look at the situation before the pandemic, consumer fickleness was already evident in the marketplace. The lack of brand loyalty among millennials became an overused trope; they were accused of “killing” everything from mayonnaise to beer. Within the consumer-packaged goods (CPG) industry, brand loyalty can be an extremely elusive goal. The cost to consumers to try a new brand or a product in a new category is low. Additionally, demand drivers have shifted over the past decade to product attributes and characteristics such as sustainability, non-GMO, locally sourced, etc.
CPGs have been under tremendous pressure to innovate and address these new consumer needs. In some cases, the shifts in demand drivers have been quite profound. For example, in the area of sustainability, a Capgemini study found that sustainability concerns are now influencing behaviour for 53% of all consumers. Sustainability is even more important to Gen Z; 57% in the 18-24 age group have switched to brands because they were sustainable.
To stay relevant, CPG brands need to focus their new product research and development strategies on these trending demand drivers. Consumers are expecting more from CPG brands. Unfortunately, much of the “innovation” in the marketplace has been limited to packaging changes or variety/flavour extensions. Most true innovation (defined as a new product or a new formulation) has come from emerging brands and start-ups rather than established big brands. The lack of innovation provides an opportunity for new brands to steal market share as well as grow the overall category. It is observed that leading brands have contributed only 25% of the growth in their respective categories; 45% has come from small and medium brands and 30% from private labels.
In addition, consumer expectations go beyond the attributes of the product—they extend to the behaviour of the brand. The same study found that 79% of consumers are changing their purchase preferences based on a brand’s social responsibility, inclusiveness, or environmental impact. Back in the early 2000s, P&G defined the two “moments of truth” that are critical to drive consumer-purchase and repeat-purchase behaviour. These two moments of truth were foundational for brand building a decade ago, but so much has changed. Digital interactions are pervasive—the consumer is “always on.” Engagement and interactions have evolved so there are few singular moments of truth per se; rather, there is a constant requirement of truth. As a result, consumers expect an authentic brand experience with every interaction. The experience needs to connect with consumers’ belief systems and align with their emotions and attitudes about issues such as inclusiveness, diversity, and climate change.
So we may say loyalty isn’t dead; nor has it declined. But the drivers of loyalty have changed, and CPGs that aren’t building and managing their brands based on these new dynamics are losing share and revenue to the brands that are. From that perspective, for those brands, customer loyalty really is as dead as Polly in Monty Python’s famous dead-parrot sketch. Post your comments with examples of brand loyalty from your career experience, our preceptive management solution will be post on Monday 17th April 2023.
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