Recession Affecting Brand Loyalty

I've written a number of posts over the past year-and-a-half -- including "Welcome to the 'Trading Down' Economy," "'It Hasn’t Gotten to Human Food Mixed with Pet Food Yet...,'" "A Shift in Spending Behavior," "Postponable Luxuries," "Proving Me Wrong," "More on What the Consumer Is Up To" -- detailing the dramatic impact the financial crisis has been having on consumer behavior.

However, up until recently, many so-called experts have insisted that when it comes to the power of brands, not much has changed, even in the current environment. Consumers would remain willing to stick with and pay extra for market-leading goods and services, even if there were plenty of cheaper or more reasonable options available.

Moreover, like those who didn't see the Great Unraveling coming, no small number assumed that the downturn was cyclical rather than secular, and that any major market disruptions would be temporary, so they failed to plan accordingly.

To top it off, it seems that many analysts and industry insiders did not anticipate that the short-term price increases numerous "brand name" firms pushed through early in the downturn to compensate for falling volumes, while providing a one-shot profit boost, would make it much easier for cash-strapped consumers to take their business elsewhere.

Under the circumstances, only those who should have known better will be surprised to learn, as Reuters reports in "Recession Takes Bite Out of Brand Loyalty: Study," that the rules of the consumer marketing game are not what they were.

The U.S. recession is taking a bite out of national brand loyalty in products ranging from Advil pain reliever and Green Giant frozen vegetables to Jif peanut butter, according to a study released on Monday.

Just four out of 10 brands held on to at least half of their highly loyal customers from 2007 to 2008, according to the study from Catalina Marketing Corp's CHKHDC.UL Pointer Media Network, which gathers purchasing data at 23,000 stores nationwide.

Retaining customers is a challenge for food sellers in any economy and keeping them in a weak economy can be even more difficult.

Forty-eight percent of highly loyal consumers stayed that way during the study period, while 19 percent reduced their loyalty and 33 percent completely defected to another brand in the same category in 2008, the research showed.

Comments

[Dave Wrixon:]

Yes, this is a huge issue for the American economy. Most of its "added value", it branding, which generally means generic product or commodity plus very expensive TV advertising. I mean, how many brands of cutting edge products with a reputation for quality do you know that don't actually get all their stuff made in China?

Frankly, what I am looking for in a brand is to acquire through the like of Walmart or Tesco with a made in China ticket. The Chinese sourcing guarantees value for money and these guys know the local markets well enough not to import rubbish.

One of the problems is that even many of the unknown brands are producing very reliable stuff, and consumers don't really crave obsolete quality. As technology changes so fast, it seems almost pointless have out of date kit. How cool is a first generation iPhone?
Hell, I have two Samsung tellies which I bought because they were about half the price of Sony and I had just got divorced. They must be about six years old, never had a warranty, never needed repairing. Flat screen tubes are not very cool these days but I cannot find a good excuse to get rid of them and get something rather more with it such as a 42" LCD. Can you imagine how pissed off I would be if I spent twenty times as much on Bang Olufsen?

Jun 23 01:59 PM