There is this big myth still lurking around among marketers - that loyalty is something real, worth striving for and worth investing in. Yet, consumers are as promiscuous as they get.
In the last post I talked about how we love the status quo, fear losses and stay away from big innovations that require significant changes in behavior. So you might be thinking cool… If I don’t really change much, if familiarity breeds comfort - surely a customer is going to purchase again my brand. Quite wrong.
As all things that have to do with the brain - there is never a simple answer: there are two factors involved here: one is our dopamine-fueled tendency to seek out novelty and the other is the famous regression to the mean effect.
Our paradoxical brain
Our brain has some very interesting quirks: like a built-in trigger to look for novelty, presumably because it was dangerous to rely on a single source of food, back in the cave days :). So our brains treat novelty as some kind of reward (actually, it’s been proven that novelty generates dopamine - the feel good hormone) which also explains why push notifications and blinking emails prove irresistible.
But, coming back to marketers - this fact explains why there is no loyal consumer and that on average 50% of a brand’s buyers do not go on to buy your brand the second year, as GfK Consumer Panel Services analysis shows:
This pattern holds for all CPG brands and across all territories. For services and utilities - where lock-in mechanisms are norm, you might see higher stick rates, but you wouldn't call that loyalty.
Another very insightful analysis that I haven’t seen as often as I would've liked in brand marketing is the duplication of purchase law - again showing that all brands share consumers in a dangerously high proportion - too high to be able to claim that you have loyal customers. In addition, the duplication rate is proportional to market share. As professor Byron Sharp notes: “loyalty is more of a marketer’s dream than a consumer’s reality”
Our brains have issues with statistics
The second factor that explains this philandering behavior is the regression to the mean concept that states than over a longer period of time, variables that were extreme will tend to return to the mean of the series. For example, you know that cool new pub that opened in May in your town, where all your friends gather? You went there like 3 times in the past month. And then suddenly some new bar opens, or you have a busy period at work, or you move out of town or...you get the idea. So over the course of 1 year, on average that bar only gets 3 visits from you even though the bar owner, in the month of May, was very happy to see you so often and to think that he really has a loyal customer.
Trouble is, we don’t easily get statistics, and given our tendency of assuming that good things will continue to happen (optimism bias) we naturally assume we have very loyal consumers, until we don’t!
Online, things are a bit better
Arguably, in the e-commerce sphere things are a bit better. Kantar Panel data for UK shows that for dog food - share loyalty offline is 21% while online is 33%, significantly higher. This happens for a number of “hacks” that play to our brain’s innate mechanisms:
Items you bought are saved into lists that you just repurchase with a click - no need to go looking for that brand again and risking the chance of encountering another juicy brand (as it happens in stores where the shelf displays the entire offer at a glance)
You have the mighty search button - you just type what you want, as specific as you want, and bingo! You’ve got it!
1-click-purchase and other smart “tie-in” mechanisms like Amazon Prime programme, make it easy for you to use that retailer again as opposed to going through the hassle of creating a new account, entering your credit card details again etc.
You get the constant weekly newsletter that ensures the retailer brand is kept top of mind.
What this means for marketers
There is no customer loyalty - only (1) opportunities to make that same consumer more likely to decide to buy your brand again and (2) in the process of doing that, make it terribly attractive to new consumers to choose your brand. And it’s a constantly moving target, by the way.
Keep your communication familiar - but do add a slightly novel angle every time, to make sure you play to customers familiarity bias but also to catch their attention. A paper published by Shapiro and Nielsen showed that when presented with the same ad, over time it tended to “wear out” - people didn’t pay attention anymore. Yet, when they changed the logo placement or a product description, people showed a greater preference towards that product. The best part is that the people weren’t even aware of these small changes! Needless to say - do not change your ad style, your characters or you pack-shot each and every time!
Change your packaging slightly - but be very careful what you change - do not go the Tropicana way . A good starting point for a packaging change is to understand what are the diagnostic cues that consumers use to recognize a pack at a glance. These depend on the brand of course, and also on the context - say we already associate light blue with semi skimmed milk and red with full fat, but in another context red also means stop or danger. If you get these cues wrong and change them too much - people won't recognize your brand in a instant, subconscious way...there won't be any cognitive fluency (meaning you'll make people think and in marketing, making people think even slightly means you made it too hard)
As a side note, I love Selgros for their produce, but I'm really skeptical about this abrupt change in identity without a good communication campaign that anchors this new red logo with some justifications.
- Focus on contextual behavioral nudges - create "defaults" that entice consumers so much they wouldn't bother to think twice: like the IKEA sweets window that very conveniently comes first when you are very hungry, waiting in line, with an empty tray in your hands. The lure is too much to resist - so that TART CHOKLADKROKANT gets bought more than it's fair share, had it been presented after the main course (as it should be, since it's dessert). Another example is the Google study that aimed to help employees make better food choices. The design was simple: previously there were large bowls filled with M&Ms around the offices, easily accessible. Then Google installed lids on this bowls, adding a little friction in the process. Now, you'd think that a simple lid wouldn't stop someone from grabbing a handful, right? Well..actually it led to 3m less M&Ms consumed in a month!
To sum up:
- consumers are not loyal to your brand: 50% will buy another brand in 1 year's time
- this fact is led by our novelty-seeking impulse as well as general laws of statistics
- if you want your brand to grow, you have to seduce customers over and over again
- one key to seducing customers is keeping things familiar yet with a twist
- second key is to look at context changes that can ease the purchase decision
- be very careful and test what you are about to change
- Kakade, Dayan (2002) - Dopamine: generalization and bonuses, Neural Networks
- Shapiro, S.A., Nielsen JH (2013) “What the blind eye sees: Incidental Change Detection as a Source of Perceptual Fluency”
- GfK - Consumer Panel Services Romania 2013 - 2014