How To Create Brand Loyalty Among Today's Consumers

As many consumer goods markets and segments reach maturity the importance of customer retention has become an even greater issue especially as the number of new customers available becomes increasingly small. Deep brand loyalty is the ideal goal of any marketer, bearing in mind the often-stated link between loyal customers and increased profitability.



Report Highlights
Nearly half (45%) of consumers across Europe and America believe that there is too much choice when making most purchase decisions. Nevertheless, consumers also think it is important to be open-minded about trying new experiences. Brand loyalty appears to increase with age in Spain, as brand loyalty is considered important to some degree by almost 60% of consumers aged over 50. Brand loyalty increases further among those aged 65 and above. The added choice characterizing the consumer marketplace today is both a driver and an inhibitor of brand loyalty. On one hand, more promiscuous, experimental consumers are encouraged to explore new things. In contrast, time-pressured shoppers feeling overwhelmed by daily obligations are choosing tried and trusted brands.


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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
INTRODUCTION 2
Brand loyalty reflects a longer term commitment from the target consumer and can be expressed by two types of buying behavior 2
Loyalty is characterized by an emotional and behavioral response 2
There are two forms of brand loyalty from a consumer behavior perspective 2
Creating loyal consumers will help reduce costs and maximize revenues in the long-term 3
The importance and impact of brand loyalty will vary by industry, sector and product category 3
Two important contingencies must be accounted for when it comes to brand loyalty 4
ANALYSIS 5
TREND: Consumers are becoming increasingly experimental and self-expressive 5
Consumption is increasingly characterized by the 'butterfly effect' 5
Consumers are becoming more transient in relationships with people, institutions and brands 6
But consumers do value brands which reinforce their self-identity 6
Consumers are becoming more transient and less brand loyal 7
Divorce rates remain high as relationships lose their permanence 8
Variety-seeking behavior is on the rise, thereby limiting the scope for consumer loyalty 9
Consumers feel their variety-seeking behavior is viewed favorably by fellow consumers 11
Takeout: securing longer term brand loyalty will be made more difficult by the 'butterfly consumer' 11
TREND: Consumers are often overwhelmed by choice 11
Increased choice in the shopping environment can make people emotionally overloaded 11
Consumers are rebelling through 'auto-pilot purchasing' in order to narrow down the choices 12
The ease of online grocery shopping further elevates 'auto-pilot' shopping 12
Takeout: Brand loyalty exists on different levels 13
INSIGHT: Some consumer demographics are more brand loyal, while others are defying conventional wisdom 14
Household personality has a major impact on purchasing behavior 15
Boomers are less brand loyal than previous generations of mature consumers 15
Research indicates that so-called minority consumers tend to be more loyal or at least value a more personal approach to targeting 16
Gay, lesbian, bisexual and transgender consumers are thought to be extremely brand loyal 16
Brand loyalty is often associated with Hispanics consumers in the US 16
Hispanic consumers show the value of first-mover advantage 17
Around 20% of loyal consumers demonstrate contingent loyalty based on price 17
Takeout: minorities form a viable segment if served well 18
INSIGHT: Consumers only respond profitably to effective loyalty schemes 18
Most consumers have a variety of loyalty cards but this is not a strong indication of brand or store loyalty 19
Consumer understanding and the innovative use of data is more important than price promotions in garnering loyalty 19
Brands need to capture data from willing consumers 20
The penetration of private label continues to increase as consumers are trusting it more and more 20
Takeout: The rising power of retailers is undermining brand strength 21
INSIGHT: Media clutter makes it difficult to develop a brand relationship with consumers 21
Profusion of media channels makes accurate selection and targeting ever more important 21
Brands that are created by campaigns have less durability than consumer-created ones 22
Consumer-generated content is one way of securing loyalty but it is not without limitations 22
Word-of-mouth advertising has a powerful impact on brand, especially in securing initial brand custom 23
Word-of-mouth influences consumer switching behavior 23
Less brand loyal consumers can actually have a stronger word-of-mouth impact 23
Consumer trust risks being damaged when word-of-mouth is paid for, or unsolicited 24
Takeout: The development of ever more sophisticated media technology is overwhelming consumers 24
INSIGHT: Consumers are becoming more demanding in their expectations 25
Consumers are still attracted to brands that deliver what they promise 25
Consumers want brands that deliver on brand promises all the way through the 'brand touchpoints' 26
Consumers are increasingly conducting online product research which increases expectations 26
Quality is a vital attribute for securing consumer commitment and brand loyalty 26
Consumers' quality perceptions can be grouped under four main factors 28
Ethically driven brands have carved out a differentiated niche 29
Consumers judge ethical brands with greater scrutiny 29
Starbucks is one example of a brand that has lost brand power as consumers react to its 'corporate giant' status 30
Innocent smoothies' core consumers have reacted badly to their trial stock period in McDonald's 30
Conclusions: Developed consumer markets have reached maturity, making retention of customers more vital than ever 31
ACTIONS 32
Create a feeling of brand community 32
Use festivals as an opportunity to target core consumers and develop positive brand associations 32
Coordinate with opinion-forming consumers to guide brand direction 33
Encourage consumers to firm up their allegiance through marketing communications 33
Challenge consumers to be more loyal 34
Expand the core product to create a sense of brand ownership 35
Diffuse branded artifacts to engender loyalty 36
Explore the opportunities for branded spaces in key locations 36
Engender loyalty simply by giving consumers what they want 37
Ensure availability is a given 38
Put the brand in places where consumers want it when experiencing a specific and relevant need state 38
APPENDIX 40
Definitions 40
Methodology 40
Further reading and references 40
Ask the analyst 42
Datamonitor consulting 42
Disclaimer 42

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Table 1: Consumer survey: European and US attitudes to seeking out new experiences, by country, 2004 10
Table 2: Consumer survey: trends in European and US consumers' variety-seeking behaviors, by country 2005-2006 10
Table 3: Grocery sales through the Internet/home shopping channel, by country (US$ m), 2001-2011 13
Table 4: Private label by country (US$ m), US & Europe 2001-2011 21


Figure 1: Brands need to achieve higher involvement from their customers to boost loyalty 3
Figure 2: Brand Loyalty is hard to achieve as customer recruitment is also essential for long-term growth 4
Figure 3: Six key factors are creating the 'butterfly consumer' 6
Figure 4: Consumers value brands that reflect their attitudes and values on life 7
Figure 5: Divorce rates have continued to rise in Europe (EU15), 1995-2005 8
Figure 6: A feeling of 'choice paralysis' often influences shoppers 12
Figure 7: Brand loyalty is characterized by deep and shallow connections with the target consumer 14
Figure 8: Taste/pleasure is non-negotiable in food and drink innovation 27
Figure 9: Taste/pleasure is non-negotiable in food and drink innovation 28
Figure 10: Nescafe is one of the latest major consumer brands to tune into ethical positionings 29
Figure 11: Swift growth from a niche brand raises consumer expectations and the need to manage them 31
Figure 12: Events marketing is a positive way to interact with consumers 32
Figure 13: Marmite's polarizing positioning should do much to create future brand loyalty 33
Figure 14: Yorkie's chunky appeal and masculine positioning encourages a strong consumer reaction 34
Figure 15: Gourmet brands are always likely to attract loyal followers 35
Figure 16: Part of Ladybank Distillery's approach could translate to other luxury consumer goods 35
Figure 17: Brands need to find ways to make themselves mores 'sticky' even in the home 36
Figure 18: Royal Unibrew demonstrates its presence at festivals in an unmissable fashion 37
Figure 19: All snack foods can balance indulgence and an increased focus on health 38
Figure 20: Putting products conveniently within consumers' grasp is vital to gain loyalty 39

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