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You are here: Home / Articles / General Articles / CONSUMER DISLOYALTY IS THE NEW NORMAL

CONSUMER DISLOYALTY IS THE NEW NORMAL

By RI Magazine September 10, 2019 37 Comments

Assume the people you consider to be the most loyal customers on the planet are, in fact, disloyal. Because 92% of the time, you’ll be right. New Nielsen findings demonstrate that just 8% of consumers consider themselves to be firmly committed loyalists.

Yet the marketing tactics and investments rarely reflect these realities. A whopping 46% of consumers tell us they are more likely to try new brands than they were five years ago; a clear signal to a trend we should expect to intensify. Yet we see few signs that adjustments have been made to marketing initiatives or innovation pipelines to match these numbers.

The implications of not dramatically rethinking campaigns that focus on winning or retaining loyal customers are meaningful. The drag effect of consumer demand for choice and voting with their wallets will overwhelm existing marketing and product development efforts.

Of course, the tension for fast-moving consumer goods (FMCG) retailers and manufacturers of all sizes is palpable. Sure, there’s the so-called Amazon effect that expands choice and enables price awareness…but it’s more than that. It’s WeChat groups in China on the hunt for deals or even brokering deals. It’s unbranded fresh food, delivered to the door in the U.K. at prices that go head-to-head with supermarkets. And it’s traditional grocery retailers that are trying to find ways to retain profitability levels in a world where home delivery undermines margins.

Yet brands, on all parts of the consumer journey, continue to throw money against marketing efforts aimed at holding or growing loyalty without a clear benefit proposal. We think that’s a mistake that needs to stop being repeated.

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SA helpful lens to determine a new approach may start with considering degrees of loyalty and disloyalty. Apart from that 8% group of firm loyalists, it’s rarely binary.

Consider this: consumers are actively on the lookout for new brands as the gamble of buying a new product is de-risked by levers like rising income levels in developing markets. A massive 42% of global consumers say they love trying new things, and a further half (49%) of consumers—while preferring to stick with what they know—can be moved to experiment. With the overwhelming majority of consumers actively or passively open to unfaithful actions, the risks for brand owners have never been greater.

This information alone tells us that “conventional” product innovation is no longer about being first to market, delivering the next best attribute or even greater value, but extends to identifying a brand’s larger purpose, for connecting with more discerning and fickle consumers.

There are also some truisms that tend to shine through. Price matters. Price sensitivity is real, but less important than value. We see that coming through in both developed and developing markets, though often in different ways.

In the developed markets of North America, Asia-Pacific and Western Europe consumers have for decades had access to an array of large and small, local, destination, online and organized hypermarkets, supermarkets and convenience stores, and they all come with well-stocked shelves and multiple product options in a variety of flavors, pack sizes and price points—or simply much more choice. One-third of these consumers love new, as opportunities to be distracted and disloyal have been around for much longer.

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On the flipside, a larger proportion of consumers (closer to half) in Asia, Africa, Middle East, and Latin America are enthralled with new products. Retail and product assortment in developing markets has traditionally been informal and limited, often with only two or three product options on shelf per category.

As more products are “born and bred” in these markets, consumers are now also exposed to more choices that appeal beyond the power of big brands. The power of local products and local supply chains is running hard and fast against the longtime global players.

In all environments, there will continue to be better quality and more quantity on the way. ‘Gaining ground’ or ‘loving the latest’, regardless of market specific circumstances, is the new battleground for brands. Consumers are less likely to form strong, long-lasting bonds with brands, especially when ties may have been weak, or at best forced, due to a lack of alternatives.

Being a slave to choice will not be an option for brands…and that’s a far cry from marketing campaigns that chase loyalty or innovation efforts that rely on the power of a master brand.

Consumers are also aware and engaged with broader competitive sets than five years ago. Amid the growing product repertoires, consumers are more careful about those they are associated with and ready to walk away from brands that do not resonate with their lives and ideals.

A further multiplier to the equation we’re to consider is that a quarter (24%) of global consumers are reviewing products across broader ranges than ever. We call this group “conscious considerers” and they’re important because, even though they are choosing more widely than ever across brands, they tell us they prefer to stay with those they’ve tried in the past. It will take more to convince these consumers to change, but they still send signals of disloyalty that are ringing louder every day. Marketers can move their decisions to force disloyalty, especially if their current brands haven’t given them compelling reasons, conditions or characteristics to stay.

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What is also fundamentally evident, is that consumers are mostly less strongly bound to familiar brands, which means brand halo effects risk losing even more power over time. This is good news for new, unknown brands but a signal to the well-known, heritage brands, that the trust ties are loosening. For brands of all sizes, marketing to the growing traits of disloyalty, instead of the declining rates of loyalty will be key.

 

By SCOTT MCKENZIE, Nielsen Intelligence Leader

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