Is brand loyalty a thing anymore?

A full 73 percent of consumer packaged goods (CPG) categories are showing a decline in their status as a must-have, even when on sale, according to Deloitte’s annual American Pantry Study.

The study, which covers more than 354 CPG brands across 34 categories, found that it wasn’t just national brands that are losing favor with consumers. This year’s research showed a change in attitudes about store brands — which often appeal on price — to premium goods whose appeal is based on attributes such as convenience and health.

According to Deloitte, 25 percent of consumers are willing to pay 10 percent or more for a product that is either new or innovative and 33 percent are willing to do the same for a craft version of a food or beverage.

"This is a critical moment for consumer product companies," said Barb Renner, vice chairman, Deloitte LLP and U.S. Consumer Products leader, in a statement. "While the majority of consumers say they are committed to sustained frugality year after year, our findings point to early signs that they may finally be responding to a belated but increasingly strong economic recovery. It creates tremendous opportunities and risks for companies in this sector, given households’ lack of commitment to national brands brought on by years of stretching dollars to the limit. Brands that get things right can use the economy’s momentum to regain their place on consumers’ shelves, but those that move too slowly could very well be left behind."

In-store personalization

While price may be less of a factor than in recent years, it is still significant in consumers’ purchasing decisions. According to Deloitte, 51 percent of shoppers make purchasing decisions at the shelf. Eighty-nine percent of these cite discounts as a driver in their decisions. Price however, is not the only way to drive sales, according to the study’s authors.

Rich Nanda, principal, Deloitte Consulting LLP and co-author of the study, said, "CPG companies should step back and consider challenging the status quo, rather than immediately resorting to discounts and promotions. Focusing more effort on non-price related triggers might seem risky in the short-term, but may improve long-term brand health, loyalty and margins."

Convenience and health are high on consumers’ lists. Best of all is a combination of both. Eighty-six percent prefer products that are both healthy and convenient. Twenty-five percent are willing to pay a 10 percent premium for that combination.

BrainTrust

"I am suspicious of surveys like these. Why wasn’t this analysis done using frequent shopper data which would give a truth yardstick? Sounds to me like a consultant doing specious research probably to prove a point for commercialization."

Joel Rubinson

President, Rubinson Partners, Inc.


"Brand loyalty as we once knew it has been dilluted by a fixation on price and by industry consolidation, both arguably driven by the extended recession. Many suppliers have tinkered with product formulation to lower cost, and consumers have noticed."

Dan Raftery

President, Raftery Resource Network Inc.


Discussion Questions

Do you think brand loyalty is on the wane for both national brands and private label? What does it take today for a product to achieve and maintain brand loyalty?

Poll

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Dick Seesel
Dick Seesel
8 years ago

Brand loyalty is no different than store loyalty: It’s not about the price. CPG marketers (and retailers) need to aspire to an emotional connection that will move customers from “satisfied” to “committed,” even if the process starts with a price incentive. Eventually the customer needs to decide “they designed this product (or store) with me in mind” in order to become a loyalist.

Dr. Stephen Needel
Dr. Stephen Needel
8 years ago

Remember first that this is a survey and there is a bias to say yes in any survey asking whether you want healthy products and whether you are brand loyal (connotes rigid thinking). Nationally-branded items demonstrate a weakness when the maker assumes they are good because they are a national brand. As more chains like Aldi and Trader Joe’s and Whole Foods push their versions of products that are as good as or better than national brands, national brands are going to take a hit. And yes Mr. Nanda is right, it’s not always price, it’s value, which is a combination of price and quality.

Joel Rubinson
Joel Rubinson
8 years ago

I am suspicious of surveys like these. Why wasn’t this analysis done using frequent shopper data which would give a truth yardstick? Sounds to me like a consultant doing specious research probably to prove a point for commercialization.

Cathy Hotka
Cathy Hotka
8 years ago

I think the recession changed everything.

For a sustained period of time, consumers felt under pressure to save money and looked for new ways to spend their household budget more frugally. For many, this meant taking a second look at store brands and off-price outlets like Aldi and T.J. Maxx, and they liked what they saw. If the $7.99 detergent works about the same as the $11.99 detergent, why spend more?

While this is a challenge for established brands, it’s also an opportunity.

Roger Saunders
Roger Saunders
8 years ago

It depends upon the category of merchandise, acceptable alternatives and the consumer segment the brands intend to reach, in addition to about a dozen other influencing factors that are registering with the unconscious as well as the conscious mind of the consumer. The later items flow along the line of brand image, product quality, price/value and personal taste.

The Prosper Monthly Consumer Survey asks consumers about the reasons they purchase CPG brands and private label products in categories from hair care, snack items, cereals, beverages, cleaning products, storage bags/wrap/containers, oral care, baby products, etc. With the exception of two categories out of 20, “It’s the brand I trust” is the number one reason called out by respondents. In the snack food category, “Tastes best” tops “It’s the brand I trust” by a couple of percentage points. Likewise in the storage bags/wrap category, “Lowest price” tops “Brand I trust” by 2 percentage points. However, even in that category brand is rising compared to four years ago vs. the price issue.

Don’t give up on the brand. The investment pays off in the minds of the consumer as well as the value provided to CPG company and retailer alike. Do take a close look at the reasons that different market segments are purchasing your brand. It won’t be the same for all segments. Localized marketing and in-store will play outsized roles in making the brand edge off of the shelf into the basket.

Dan Raftery
Dan Raftery
8 years ago

Brand loyalty as we once knew it has been dilluted by a fixation on price and by industry consolidation, both arguably driven by the extended recession. Many suppliers have tinkered with product formulation to lower cost, and consumers have noticed. This is almost a given after an acquisition. It’s a slow death because it’s done behind the scenes. Can’t wait to watch the latest in-the-spotlight change that Hershey has announced.

Grace Kim
Grace Kim
8 years ago

Products need to provide an intrinsic VALUE and a lasting, memorable experience to maintain brand loyalty. And brands really need to focus on delivering a great customer experience and service. A brand might have an inferior product, but if they treat me well and go the extra mile to make me feel valued as a customer, I will be loyal.

Gene Detroyer
Gene Detroyer
8 years ago

There are multiple dynamics in play, all of which add to the decline of brand loyalty.

Once upon a time, brand loyalty was based on advertising. The advertising world has changed with the change in TV habits and the internet. Today reviews and word of mouth often trump anything a company claims. CPG companies that were once help in high esteem are looked at with a questioning eye. The most brand loyal demographic is dying, the least is growing. Private label marketers are making better products. Online provides a myriad of choices.

I could go on …

Richard J. George, Ph.D.
Richard J. George, Ph.D.
8 years ago

I’ve never been a big fan of the term brand loyalty. Instead brands need to be loyal to their customers. How? By consistently delivering on their promise. The challenge has always been to offer the market a positive differential advantage vis-à-vis competitive offerings. Going forward, whether the claim is health, natural, value, etc., brands need to communicate and deliver on these claims better than their managers. Doing so will result in continuity of purchase.

Mark Heckman
Mark Heckman
8 years ago

It’s difficult to respond to survey results like these unless you have access to the cross-tabs and see how responses vary among socio-economic groups. With that caveat, my sense is that there is little affirmation of an economic recovery for MANY consumers as they have seen their wages stagnate and food costs (and other costs other than fuel) have risen fairly significantly since the recession of 2008.

Any focus on non-price attributes to engender brand loyalty to these folks will likely be unsuccessful unless the brand represents true innovation or value. This is very difficult to accomplish with CPG products, given the abundance of existing reasonably high-quality, lower-cost items in the marketplace. With only 25 percent willing to pay more for convenience and healthy products despite 86 percent of shoppers preferring those types of items, that sends a very clear message to brands and retailers about where their consumers’ priorities lie. Innovate away, but keep it cheap.

In addition, retailers are forcing CPG brands to strategize on how to stay relevant and grow sales without proliferating and extending their brands with new formulas and flavors. Retailers (especially Walmart) are poised to charge the brands for slotting allowances that will further punish, not promote new product development. These same retailers are migrating to smaller footprints with less shelf space to accommodate a brand’s entire array of SKUs.

The future in food retailing appears to be trending towards fewer brands and line extensions and more focus on cost containment to keep prices in line with the shopper’s budget.

Tim Cote
Tim Cote
8 years ago

Emotional connections to CPG food brands are pretty much dead. The younger customer sees no purpose in it. Can they make themselves appear more successful by using Heinz ketchup versus Hunt’s ketchup? If the answer is no, the default quickly moves to price. Emotional connections require the individual to feel elevated by the use of the brand. You cannot market Hunt’s ketchup in a way that gets that done. It is just ketchup (or mustard, or a cookie, or a candy bar, etc.). This may work for more badge-oriented items like a smartphone or a car, but in commodity goods? No way.

J. Peter Deeb
J. Peter Deeb
8 years ago

I totally agree that loyalty has declined on branded products and that the increase in acceptance of store brand items by consumers who are stretching their budgets is a major factor in the decline. Store brands declining is, in my mind, a temporary issue and one that is impacted more by two factors: 1.) CPG brands increasing spending to take back sales gains at most traditional retailers and 2.) Consumers who are more price conscious and switch back and forth from branded items on sale to store brands when they are more attractive in price. The recession exposed many more consumers to store brands and many of them liked what they tried. The strongly committed store brand retailers (e.g., Wegmans, Publix etc.) are still growing in sales and loyalty.

Bill Hanifin
Bill Hanifin
8 years ago

Loyalty will wane for any of these brands if they fail to clearly communicate their product advantages.

The comment in the article that brands should be, “Focusing more effort on non-price related triggers might seem risky in the short-term, but may improve long-term brand health, loyalty and margins” is something to consider.

One area of improvement could be packaging and labeling. I believe that consumer trust in the information conveyed by product labels is low. Can brands be trusted to let us know whether they are “healthy”, “improved”, “new”, or does every label need to be researched and dissected for accuracy? No wonder many purchase decisions are made at the shelf.

Li McClelland
Li McClelland
8 years ago

Well loved brands, even the most durable ones, have not been immune to ingredient and production process “tampering”. Sometimes it’s done for their own bottom line cost savings and sometimes it’s because government regs have forced changes. But most often the changes are noticeable and are not appreciated by longtime, loyal buyers of that item. If consumers believe they are no longer guaranteed to get the expected taste, look, consistency, and/or cleaning result, etc. of their favorite product, they are much more likely to try a cheaper private label version.

Also, many people are doing more fresh, limited ingredient, from-scratch food preparation for their families. More people are looking closely at the preservation chemicals and other additions in many canned and packaged goods and are saying “no thank you”. I don’t see this trend reversing.

Ralph Jacobson
Ralph Jacobson
8 years ago

I actually think there is a bifurcation of shopper sentiments happening as we speak. While there is a definite pulling away from brand affinity across many product categories with SOME consumer demographics, I can say that there are definitely some consumer groups that are true “Brand Enthusiasts” and will migrate toward their favorite brands.

Thaddeus Segura
Thaddeus Segura
8 years ago

Great information, and I really do think that it is extremely relevant right now. In my opinion what we are seeing is that consumers now have access to more perfect information. It is not a matter of just learning a few brands and sticking to them because we trust them. Through the internet and access to ratings and being able to shop and sort and research before we are in the store, I think that consumers are more comfortable branching out to other brands that they would have been hesitant to try before.