Brand Loyalty and the Recession: It’s All About Passionistas vs. Frugalistas

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When you’re pinching pennies, like most Americans are these days, it’s a lot easier to move from a more expensive laundry detergent to a lower-priced brand — even if you’ve been a dedicated consumer of the first brand for an extended period of time.

A new report from Catalina Marketing’s Pointer Media Network shows that brand loyalty is being thrown out the window by consumers, according to Business Insider — at the same time that Brand Keys’ latest ranking of customer loyalty and brands finds that passion can outstrip even the most frugal of consumer impulses.

To be sure, the studies cover different points in time. The Catalina study parses the choices of 32 million consumers and about 685 brands in 2007 and 2008, finding that “52% of ‘high-loyal consumers’ — those who bought 70% or more of goods from the same brand in a year — started buying more from a competitor the following year or left the brand entirely,” Business Insider reports.

“The concern is that consumers who switch will build new brand rituals and allegiances that endure far beyond the recession,” Pointer Media said, the site reports.[more]

As an example, one orange juice brand lost 64.8% of its high-loyal customers in one year, which meant “34% fewer dollars spent on the brand in 2008, and a devastating 8% decline in potential overall revenue,” according to Business Insider.

One of the worst hit were all-purpose clearers, which had 62% of its customers stop being so loyal during that year. Cereal and canned tomatoes also lost 65% of loyal customers as well.

The study also notes that there is a key group of shoppers that it would benefit brands to retain since 2.5% of regular shoppers can account for 80% of sales for a brand. To paraphrase the turn-of-the-century merchant and advertising pioneer John Wanamaker, it’s just a matter of figuring out which 2.5%.

“Brand loyalty has always been primarily driven by emotion,” says Robert Passikoff, whose Brand Keys agency just released its 2011 Customer Loyalty Leaders ranking.

Social networks, a new category, had three of the six brands consumers identified ranked in the top-25 brands that generate the strongest consumer loyalty.

The 2011 Brand Keys Loyalty Leaders List includes 528 brands in 79 categories. The brands in the 2011 top-100 include: Amazon (#1, bumping Apple), Apple iPhone, Facebook, Samsung cell phones, Apple computers, Zappos, Kindle, Patron Tequila, and Mary Kay cosmetics.

The top-50 ranked Brand Keys Loyalty Leaders is comprised of eight general categories. Beauty brands account for 32% of the most loyalty brands “The ‘emotional engagement’ that women share with their favorite beauty brands is very powerful,” said Amy Shea, Brand Keys executive vice president for brand development. “But that emotional resonance extends to technology too, as consumers seek to customize their life experience more than ever.” 

Tech is 20% of Top 50: Technology brands account for 20% of the top-50. “Nothing today is better at fueling a consumer connection than technology,” noted Passikoff, “although there are fewer tech brands in the top-50 than last year.” 

Samsung is Loyalty MVP: Samsung appears to be this year’s loyalty MVP, winning mentions in four categories: cell phone (#4), computers (#44), smart phones (#57) and HDTV (#80). “When we talk about brands standing for something meaningful,” said Shea, “Samsung is the perfect example. They’ve organically come to stand for quality, leading-edge technology.” Technology loyalty leaders include: Apple (twice, iPhone and computers), Samsung (twice, cell phones and computers; Kindle, Google, LG, Bing, Sanyo, and Sony Ericcson.

Retailers Ring Up High Loyalty Ratings – Amazon is Tops: Mirroring the 2010 rankings, 16 percent of the top-50 Brand Keys Loyalty Leaders are retail brands (bricks and clicks). Amazon moved to the #1 spot, displacing the Apple iPhone (#2). Other retailers generally ranked lower than last year, “perhaps an indicator of the challenges wrought by the economy,” said Shea, “as retailers struggle to differentiate on something more than price.” Brands included Zappos (#6 and new to the years list), Wal-Mart (#13, down from 2010 #3), J. Crew (#21, down 8 spots). Other retailers included Target (#33, down 7), Sam’s Club (#38, down 9), Kohl’s (#44, unchanged), and BJ’s (#50, down 7).

Strong Alcoholic Beverage Showing: Of the top 50 brands, 12% were alcoholic beverages, the same as 2010, in the two categories surveyed: vodka and tequila. This year vodka category leaders included: Grey Goose, Ketel One, 3-Olives, and Stolichnaya. In tequila, it is Patron and Don Julio. “While it’s tempting to blame this appearance on the pressures of the economy, alcoholic beverages have shown up at the top regularly,” noted Shea. “No beer brand made it to the top-50 ranking this year, though Sam Adams placed in the 58th spot.” Four other vodka brands, and one tequila brand, fell into the 50 to 100-loyalty range.

Starbucks Soars from 432 to 100: On the other side of the bar, Dunkin Donuts coffee (#12 up from #14 in 2010) and McDonald’s coffee (#26, down from 18 last year) were the only other beverage brands to make the top-50 loyalty rankings. Starbucks, a brand synonymous with coffee for many consumers, and a brand in the process of reinvention, demonstrated the largest increase in the rankings, ending up in 100th place, up from #432 last year. 

Auto Brands Run Out of Gas: Automotive brand loyalty rankings were generally unchanged from 2010. Only Hyundai made the top-50, in the #7 position, down one place from last year. Toyota, a perennial loyalty leader, #37 last year is now #59. “Toyota is still feeling the effects of the recalls, tsunami and the economy,” noted Passikoff. There’s good news though. “It could have been worse for Toyota. They owned high degrees of loyalty and the ‘Loyalty Rule of Six’ kicked in. (loyal consumers are six times more likely to give a brand the benefit of the doubt in uncertain circumstances). “That truth showed up in this year’s decline,” said Shea. 

Loyalty Leaders Top-100 Winners and Losers: Some brands that showed the greatest gains in loyalty, vaulting them into the top-100 included: Starbucks (+352); Skechers (+290); Ford (+237); and Overstock.com (+150). “Skechers virtually created a new athletic shoe category,” noted Shea, “And Ford reinvented their brand. Overstock has been moving up the list over the years, and the weakened economy only helped strengthen their loyalty bond with consumers.” Among the brands in the top-100 that saw the greatest losses in loyalty were: Nokia (-63), Blackberry (-51), Chanel cosmetics (-23) and Eucerin skin moisturizer (-23 each), True Value (-21), and 3-Olives Vodka (-18). “Some brands have, of course, suffered loyalty losses as consumers shifted to less expensive brands that had considerable meaning,” said Shea. “But brands that understand that real emotional connections can serve as a surrogate for added-value can create stronger loyalty bonds no matter the economy. 

Biggest Loyalty Losers: Out of all 528 brands included in the 2011 survey, the bottom 10, for which consumers showed the lowest levels of loyalty, include:

519. Bank of America

520. Dr. Pepper

521. Budweiser

522. Friendster

523. BP

524. Tylenol (OTC Allergy)

525. NHL

526. Taco Bell

527. American Apparel

528. Borders

“For many of these brands, it’s been a slow and steady decline, for others a free fall. It all comes down to delighting the customer and creating an emotional bond. Brands that can do that not only go to the top of the Loyalty List but become top earners,” says Passikoff.

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