How Brand Loyalty is Disappearing and What to Do About It

BLOG

How Brand Loyalty is Disappearing—and What to Do About It

December 2, 2020

We’ve heard a lot about how the pandemic has accelerated several marketing/media trends such as cord cutting,1 online shopping2 and live video viewing.3 But we haven’t heard as much about how COVID is accelerating the erosion of brand loyalty.

Marketing teams have been battling this problem for decades. The emergence and growth of national retailers, private labeling, competitive “everyday low” pricing, and ecommerce-driven convenience shopping have chipped away at brand loyalty over time. And the situation has become worse throughout 2020.

shopping online

How bad is it?

According to Fortune magazine, communications agency Ketchum reported in July that “…45% of American shoppers have altered their brand preference amid the rapid changes in the world.” And only month later, McKinsey’s research estimated that number at 73%.4

How has the pandemic made it worse?

The pandemic certainly has accelerated the shift to online purchasing. Shopify reports that 52% of buyers say they’ve shifted more of their spending to online. This has contributed to an even greater shift to private label brands and is further eroding brand loyalty by:

  • Exposing consumers to the opinions of other consumers through connected ratings and reviews
  • Promoting/positioning certain products over others in search results (e.g., “Amazon’s Choice”), and
  • Attaching price breaks, faster delivery or both to certain products during sorting and selection.

More people are drawn to deals when their finances are constricted, and they are more likely to sacrifice brand preference for lower cost or greater value.

Many people also have started buying more from small, local businesses, according to Shopify. 46% of buyers in the US and Canada said they made purchases from local, independently-owned businesses since the pandemic started.5

Is it going to last?

Unfortunately, McKinsey’s analysts expect these attitudes to continue beyond the COVID-19 period. According to its research, 75 to 83% of US consumers plan to stick with brand loyalty-eroding behaviors post-pandemic.6 (See chart from McKinsey & Company report.)

Mary Elizabeth Germaine, partner and managing director at Ketchum Analytics, adds, “We’re seeing massive consumer behavior shifts that are likely to persist.”

Ketchum’s study found that “62% of people who have changed their brand preference will make that a permanent change before the pandemic is over.”7

What do we do about it?

Some industry stakeholders recommend integrating brand-building media tactics with ecommerce experiences as a way to battle loyalty defections in the online purchase process.

Suggestions include running paid search, display and video ads on retailer sites and apps, as well as placing other paid promotions in retailers’ targeted emails and social posts.8

McKinsey & Company chart

These tactics increase brand visibility at critical points and help retain previously loyal customers. However, they may not be enough to revive fading sentiment, as there are deeper forces at work eroding brand loyalty. They have been gathering momentum for many years and COVID has added much weight and speed.

Change is the new loyalty

Writing on Retail in Forbes back in 2016, marketing strategist Kathleen Kusek cited a study from a year earlier by the digital and consumer loyalty firm Catalina that 90 of the top 100 CPG brands were losing market share on what were then and still are “consistently low-growth categories.”9 

This trend was amplified by McKinsey at the time, which reported that loyalty still drove purchasing behaviors in only three of 30 major categories.10

group on phones

Kusek contended that this signaled a revolutionary new “philosophy of buying” not based on loyalty at all but on something completely antithetical to it — change

Cultural and attitudinal shifts, driven largely by technological progression, have been transforming bedrock institutions such as marriage, religion, politics and business for decades, elevating change to hero status and placing significantly more value on the “new” vs. the “known.” She summed it up this way:

“The consistent theme is that change is not something to be feared or avoided. Change is inherently good. And the hankering for change is increasing at an accelerated rate.”11

What she couldn’t have known writing in 2016 is that in 2020, COVID would super-accelerate our consumption of change and solidify its prominence in our habits and desires.

Embracing change

As their audiences consume more and more change — sudden events, breaking news, social swings, tipping points, viral trends, the latest craze — brands and their agencies need a way to: 

  • Read emerging signals in the vast ocean of data generated every moment by our current technologies, 
  • Tap into their previously unspoken Brand Mentality™ for instructions about what matters, and
  • Respond most opportunistically in real time.

This need has led us to develop a solution that is win for all parties—brands, agencies and publishers alike. It encompasses brand safety and suitability in an entirely new framework called Brand Mentality—a brand’s unique worldview and “human-like” mindset that aligns with its audiences.

Brand Mentality™ unique mindset

For example, one dimension of the platform taps into your Brand Mentality™ around competitors to anticipate and respond to what people are saying and sharing in market about their brands and products, news they are making, business moves, comments by executives, interviews, etc. 

This enables you to “competitive conquest,” even in short windows of opportunity. One CPG client quickly drove a 7x increase in purchase intent behaviors using our solution when a competitor CEO made news with controversial public comments that polarized his brand’s customers.

We’re currently sharing details about our Brand Mentality™ framework and invite you to join the discussion. Just click the button below to request an exclusive seminar session:

Notes

  1. 6 More Trends That Coronavirus Has Accelerated https://www.ypulse.com/article/2020/06/11/6-more-trends-that-coronavirus-has-accelerated/
  2. 5 Consumer Trends Accelerated by COVID-19 https://www.shopify.com/blog/consumer-trends
  3. US Digital Users 2020 – Insider Intelligence Trends, Forecasts & Statistics https://content-na1.emarketer.com/us-digital-users-2020
  4. Brand loyalty is changing due to the pandemic https://fortune.com/2020/10/21/brand-loyalty-retail-trends-covid/
  5. 5 Consumer Trends Accelerated by COVID-19 https://www.shopify.com/blog/consumer-trends
  6. Consumer sentiment and behavior continue to reflect the uncertainty of the COVID-19 crisis https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/a-global-view-of-how-consumer-behavior-is-changing-amid-covid-19
  7. Brand Reckoning 2020: How Crisis Culture Is Redefining Consumer Behavior, Loyalty and Values https://www.ketchum.com/covid-consumer-survey/
  8. The Cost of Convenience: Declining Brand Loyalty https://www.ama.org/marketing-news/the-cost-of-convenience-declining-brand-loyalty/
  9. The Death Of Brand Loyalty: Cultural Shifts Mean It’s Gone Forever https://www.forbes.com/sites/kathleenkusek/2016/07/25/the-death-of-brand-loyalty-cultural-shifts-mean-its-gone-forever/
  10. Technology Is Eroding Consumer Loyalty http://www.thelowdownblog.com/2017/04/technology-is-eroding-consumer-loyalty.html
  11. The Death Of Brand Loyalty: Cultural Shifts Mean It’s Gone Forever https://www.forbes.com/sites/kathleenkusek/2016/07/25/the-death-of-brand-loyalty-cultural-shifts-mean-its-gone-forever/