By Sarah Christie
The changing consumer
We are intrigued (but not surprised) by a recent report which indicates that brand loyalty is on the rise again. Research commissioned by The UK’s Consumer Trends Index found that 62% of consumers are prepared to pay more to purchase from their preferred brand, and 63% cite the loyalty program of their favourite brand as either important or critically important to winning their lasting loyalty. This seems to signal a change in direction, following a period where many had said brand loyalty in conventional terms was on the decline.
In a world of increased choice, consumers found new freedoms
It had certainly seemed that the consumer had become wise to loyalty gimmicks and blind commitment to default choices. Diversification and proliferation of brands in many sectors over recent years led to a deluge of brand choice in many sectors. The consumer was suddenly faced with options, encouraging brand reconsideration, and as a result needed to become well versed in brand comparison, navigating the cognitive load this entailed.
A new breed of consumer came of age in this era of increased choice, and for many, multiple options led to opportunities to reconsider and stress-test existing relationships, or revel in the freedom a non-committed relationship brings. Add to this the swift digitisation of the consumer landscape, with sites offering comparison tools, unprecedented access to (even niche) brands and the ability to directly compare at product level, and we entered an era where brands needed to work hard to keep customers and win at every touchpoint in order to retain custom. In the instance of comparison sites, the tactical matter of price became a key consideration, shifting the dialogue further away from brand. And if this didn’t mean the end of brands as we know it, it certainly promoted more transactional, tenuous, relationships and led some to conclude that traditional loyalty was a thing of the past. In this transactional world, the subscription became king, with brands keen to tie in the wayward and flighty consumer via repeat automated purchasing.
COVID accelerated this trend
The pandemic brought an increased liberation from old habits. With the world on its head, and ‘old ways’ not always an option, we increased our online usage and also occasionally needed to accept a lack of access to our usual brand. And if some of us retreated to comfort of the familiar and the psychological salve of repeats on TV and childhood board games, the opposite seems to be true of how we bought brands. In a small number of sectors, a desire to stick with what we knew kept us close to familiar brands (e.g. in Financial Services, where account switching plummeted by 30% during lockdown). But for most, forced out of our comfort zones, we needed to reconsider what we looked for in brands – an omnichannel experience, credibility, purpose and value. Loyalty in retail and supermarket choice declined, and a 2021 study looking at the impact of the pandemic on consumer behaviour found more than a quarter of UK and US consumers felt no brand loyalty at all coming out of the pandemic.
So why is loyalty increasing now?
The consumer has undoubtedly come out of the pandemic with a new prioritisation of ‘relationships that matter’ and an increased value placed on experiences, quality, convenience and needs met (resulting in value). All this means a landscape where brand is all the more important and where consumers are seeking deeper, emotional connections with the brands they buy. Many brands have spiced up their loyalty programmes to reflect the increased reciprocity (and out and out value) the post-COVID consumer seeks. We hypothesise that this is behind the recent results which indicate brand loyalty being on the rise. A well-documented decline in impulse purchasing means this is a trajectory which is likely to be maintained.
What are smart brands doing now to capitalise on this revived openness to brand loyalty? We have undoubtedly seen a shift in consumer focus from price to value, and we have partnered on several projects exploring value strategy as a drive towards greater customer centricity and therefore higher consumer engagement. The new battlegrounds are hearts and minds rather than just purse strings and share of wallet. Consumers are increasingly looking to brands to fill their need for experiences, and deeper emotional connection at brand level needs to be prioritised. Successful brands will also see this as an opportunity to harness the intimacy and multiple touchpoints preferred by the digital marketplace. Loyalty programmes are on the rise and are providing a neat intersection between a consumer ripe for brand commitment and the very real consumer worries about financial pressures. And, whilst the landscape in many sectors remains fragmented and crowded, the brands which stand out will be the ones who let the consumer fall head over heels in love.
Why not contact us to find out how we can support your business in navigating the new loyalty landscape.