Q&A: Consumer Loyalty after the Recession
Among the main consequences of recession was the loss of consumer loyalty. Consumers from every country and all social classes changed their traditional brand preferences without feeling remorse. Loyalty waned and new, opportunistic brands appeared such as private labels, own brands, pricing-and-discount portals and others. While many brands are fighting back with promotions and other marketing devices in order to recover trust and loyalty from their old consumers, a new species has appeared around the globe. It is a more thoughtful, careful, mature and ruthless consumer, who knows prices and loves discounts. But – just as usual in the consumption world – some secrets are still captivating.
HOW DID THE RECESSION IMPACT ON CONSUMER LOYALTY?
- The crisis and its immediate aftermath took their toll on brand loyalty. This means there is a different bond between loyal clients and their companies – habits have changed. The first step in loyalty loss is brand replacement. The frequency, place and moment for shopping have also been altered, as well as the payment options and the people who paid for it. The crisis has turned consumers less loyal and, in a few words, this means that their custom has become “unpredictable”;
- The USA was one of the first markets to experience the impact recession had on loyalty. In June 2009, Pointer Media Network – a consultant from Catalina Marketing Crop, which compiles shopping information in 23,000 stores throughout the country – published a large report on the subject. It had a rash conclusion: Only four out of ten brands kept at least half of their highly loyal clients between 2007 and 2008. The briefing was based on shopping-behaviour analysis of 32 million consumers and 685 leading brands. Pointer claims 48% of highly loyal clients maintained this pattern during the whole period of analysis, while 19% reduced their loyalty and 33% changed their brands in the same category;
- Several studies have shown that there are no constant features when analysing fidelity, although satisfaction, perceived value, the sense of saving money contributed by the brand and the type of product do have their influence over it. Consumers around the world have reportedly shown themselves as more loyal in the case of concrete events or deeply rooted habits. For example, the Chamber of Spanish Marzipan and Nougat Candy Manufacturers (TUMA) revealed last December that despite the economic downturn experienced by the country, nougat consumption rates reached 89.75% at Christmas, close to the historic average. “The loyalty of Spanish consumers to a traditional, seasonal product is the key for a better understanding of the solidity of its consumption,” the head of TUMA said.
WHO BENEFITS FROM THE LOSSES ENDURED BY BIG BRANDS?
- Although many consumers reduce shopping in times of crisis, loyalty loss does not necessarily imply that; consumers may change their chosen brand, type of product or justification for buying something instead. Even as the crisis is left behind, private labels and own brands have increased their number of supporters over the past few years. In North America, retailers such as Kroger, Safeway and Wal-Mart have conducted aggressive expansion campaigns of their own brands, local media have reported. These products are frequently cheaper than those from traditional brands and they appeal to consumers who want to make the best out of every penny, many of whom have lost their loyalty to leading brands. In Europe, large stores such as Carrefour have done the same thing – in Latin America, many companies have returned to the format of smaller-sized stores, closer to residential neighbourhoods;
- Thousands of companies have benefited from the combination of loyalty loss and the rise of social networks and the online market. Companies focusing on convenience, better prices, speedy shopping and additional services succeeded beyond the branding universe. The internet has become the main means for unfaithful consumers – a place where there is one factor above everything else: smart shopping, up to the point that IBM decided to change the name of its “e-commerce” department to “smart commerce department”;
- Discount price seekers are on the rise all over the world, especially in Asia, Oceania and Latin America. Discount coupons, which have become very popular among Americans over the last few decades, are currently increasing their importance thanks to the internet, via “collective shopping” in emerging markets.
HOW CAN CONSUMER LOYALTY BE RECOVERED?
- Client captivity is always a challenge for food manufacturers and others in any given economic system and it is harder to retain customers in times of recession, although it is not impossible to do so. Some of the most successful strategies deal with detecting new shopping habits, some of which seek to save up money. Other successful ideas involve attracting “intelligent” customers, such as the classic gifts-and-benefits programme of the airline industry;
- In an article on Chief Marketer – a portal – Barry Curewitz, managing partner of consultant Whole-Brain Brand Expansion, claims that brands skilled at regaining customer loyalty are focused on short-term actions such as discounts and benefits during the crisis, as well as catchy marketing phrases in the vein of “Just do it” or “Oooops, I could have had a V8 [eight-cylinder car].” For Curewitz, “innovation” will be crucial for generating – and re-establishing – long-term bonds. Mastellone, a dairy manufacturer present in Europe and Latin America, did just that in order to get its clients back: they innovated in products such as yoghurt and cheese, offering discounts for these new products on the packaging of their most popular products;
- “2011 may well be called the year of customer loyalty,” says Mark Johnson, CEO of Loyalty 360 – The Loyalty Marketer’s Association. “In today’s crowded marketplace, creating loyal, engaged customers is more important and more challenging than ever,” he said at a recent event, and listed several upcoming trends: Loyalty will focus more on emotions than on rational, incentive-based initiatives (since rational decisions actually lead to loyalty loss); the voice of the customer programmes is an important strategy; relevancy will be a key driving force of customer loyalty and engagement. (Personally relevant deals are the second most frequently chosen reason for spending more with a company, mentioned by 48% of people, according to new research conducted in late 2010 by Ipsos Mori and The Logic Group).
WILL THE IMPACT OF THE RECESSION ON CONSUMER LOYALTY ENDURE?
- The inaction of many companies seems to point out that their CEOs are simply expecting their clients to return magically to their old habits “once everything is over.” But when is it indeed going to be over? When is that supposed to happen? There is no simple answer to these questions. Considering the toll that the economic crises in Mexico (1994), Asia (1997) and Argentina (2001) took on consumer lifestyles in those countries, there is no good news for these CEOs as for more than a decade after these crises, normality was slow to return;
- Back in 2004 in Argentina, Clarín – a Buenos Aires-based newspaper published an article which pointed out that “post-crisis consumers are more rational and careful when shopping; they are also informed about product prices and unafraid of using discount coupons.” In 2011, a full decade after the crisis, the situation remained largely the same. In Mexico and other Asian nations, change was less abrupt; nevertheless the crisis remained a part of collective memory with tangible impacts;
- In terms of loyalty, the crisis notwithstanding, the future will bring more challenges. If it seems unlikely, consider the following story, which appeared in The Economics Times, the Economics supplement of The Times of India: Piyul Gupta’s apartment in Powai, a suburb in Mumbai has two bathrooms. Both bathrooms contain multiple shower gels, two different face wash brands, three different brands of soap and two different brands of toothpaste. “We normally buy the same brands from the supermarket. Sometimes when Isha (Piyul’s ten-year-old daughter) is with me, she picks up new things for herself and us,” says Piyul, when we asked her about her buying behaviour. However, her bathroom clearly did not reflect this tendency. It was discovered that when Piyul says ‘same brand’ she actually means ‘similar brands.’ So if this month she has bought a particular brand of shower gel and body lotion, there is actually a greater likelihood of her buying something different next month. Without fuss, and often without realising it!
- Johnson, from the Loyalty Marketer’s Association, added on his 2011 trends list that cause-related marketing/corporate social responsibility programmes that are aligned with strategic corporate goals will effectively drive loyalty “Especially with Millennials.” For this generation, social gaming and social media activities will be crucial for any given loyalty initiative.