Is there a loyalty 20 rupees off can’t buy?

Customer Loyalty is a complex subject in the best of times. Every marketer wants its own customers to stay loyal and buy repeatedly from it, while at the same time it wants to encourage experimentative behaviour in its rivals’ customers. This means a brand wants to stimulate fundamentally conflicting behaviour in people.

What is loyalty anyway?

The fact is, since brands live in a competitive world, loyalty is a relative and fluid term and its incidence can change from one category, customer segment and market to another. Except when people have little choice within a category [phone connections a few years ago or power supply at present, for example], some customers want to experiment with new brands and new variants, while others prefer to stay with a brand. Often, loyalty, which can be loosely defined as a customer’s willingness to choose a brand more often over a period than its rivals, is dependent on the price of the product, the level of involvement, the level of competitive marketing activity (including but not limited to advertising), and the number of brands available with similar perception of value delivery.

Often, as in the case of low choice categories, there may be natural barriers to brand switching, even where competition is stiff. In mobile telephony, for example, many post paid customers tolerate unsatisfactory service for fear of having to lose touch with people, if they were to switch their operator. This may give brands a false sense of loyalty, on classical metrics. Similarly, in packaged goods, given our retailing structure led by kirana stores and small, owner-operated super markets, customers are often loyal to the store, instead of to a brand. They move quite easily between brands within their basket, based on retailer push and often promotional offers. Modern format retailing encourages experimentative behaviour anyway and poses further threat to loyal behaviour.

What happens when times are tough?

As customers juggle to fulfil competing needs within limited resources during stressful times, their value consciousness scales new peaks. In fact, the definition of value shifts during challenging times. People prefer simple price offs over cross promotions, which they decode as attempts to get them to buy what they either don’t need or could easily buy at a later date. We found this and more fascinating behavioural changes when we conducted twin consumer researches earlier this year called SENTIMETER and SPENDRIFT, in partnership with specialist consumer diagnostic company - the key. Our ongoing research IntenTrack also gives us INTENT scores for brands within a category as a robust surrogate for loyalty.

It begins simply.

People talk more to each other and to ‘experts’ during stressful times. This means some people buy more of brands which they have got strong relationship with and actually recommend them to friends. Recommending a brand makes these customers appear to be ‘experts’. At the same time, deal seeking behaviour increases dramatically, and many actively look for promotional offers and ‘help friends’ by telling them about ‘the best deal in town’. ‘Deal seeker’ and ‘bargain hunter’ gain legitimacy as desirable labels and become badges to wear. Even well-to-do people compare prices vigorously. This results in faster movement within brand basket than usual and classical loyalty metrics suffer, as overall shopping activity drops. Result: brands which stand for value, both physical as well as emotional, enjoy strong loyalty and advocacy.

Strong company brands gain

In categories where the company is the brand [appliances, cars, services] or where the customer’s self perception of ‘native expertise’ is low, trust and therefore loyalty converges around the company. With a lower intensity, big and established packaged goods brand too hold their repeat purchase level. It may appear counter intuitive, but even small specialist brands see loyal behaviour, since their advocacy levels are usually high and a small group of people make an implicit decision ‘not to let my brand die’. In general, trust in the Government, PSUs, and big corporate groups rises and these see a loyalty shift towards them.

Net net, there is no one pattern loyalty flows during slowdown and resource crunch. It’s the same with brands as with human behaviour. Some think tough times are the best to cement relationships, while others think adversity is the license you need to flirt.

[Published in Financial Express BrandWagon Sep 1/2009]

Original article