Customer Loyalty – Dead or Alive?

The “customer experience” blogosphere has served as the forum for a raging debate about whether “customer loyalty” has died and should be long forgotten.

I have championed the side of the argument that posits “customer loyalty” is ONLY wounded and will recover. However, my belief in customer loyalty should be looked at through a suspect lens, since I tell my teenagers that children who don’t believe in Santa Claus, don’t receive presents.

As much as I would like to share information that only supports my view of the viability of “customer loyalty,” I have to hand over ammunition to the opposition. A recent survey conducted by comScore ARS, a specialist in consumer trending research for online activity, shows a significant decline over the past two years in consumer loyalty. According to Gian Fulgoni comScore’s chairman, “A decline in loyalty to consumer goods brands is typically one of the byproducts of a recession as consumers give greater consideration to price. Research we’ve conducted at comScore ARS has quantified the impact of the ‘trading down’ effect within a number of different product categories, highlighting consumers’ increasing willingness to switch brands in the face of pocketbook constraints.”

Some of the findings listed below, suggest that ‘trading down’ is spreading into categories (such as over the counter medication) typically resistant to the phenomena.

Consumer Sentiment on “Trading Down”
March 2010 vs. March 2008
Total U.S. Source: comScore, Inc.
Category Net Shift 2008 to 2010

Health & Beauty Aids
“I buy the brand I want most” -14%
“I sometimes buy a different brand if it is on sale” 7%
“I buy less expensive brands to save money” 7%

OTC Medications
“I buy the brand I want most” -15%
“I sometimes buy a different brand if it is on sale” 10%
“I buy less expensive brands to save money” 5%

Apparel
“I buy the brand I want most” -15%
“I sometimes buy a different brand if it is on sale” 3%
“I buy less expensive brands to save money” 12%

Food
“I buy the brand I want most” -7%
“I sometimes buy a different brand if it is on sale” 4%
“I buy less expensive brands to save money” 3%

Consumables
“I buy the brand I want most” -5%
“I sometimes buy a different brand if it is on sale” 4%
“I buy less expensive brands to save money” 1%

Housewares
“I buy the brand I want most” -11%
“I sometimes buy a different brand if it is on sale” 7%
“I buy less expensive brands to save money” 4%

The comscore ARC group further reinforces the notion that this ‘trading down’ trend is worthy of our attention by demonstrating that brand shifting could not be explained simply by people buying off-brands because they were ‘on sale.’ Instead the results suggest that people are truly repositioning themselves to buy lower cost brands.

So I guess we should all just abandon the “customer experience” ship and put on our “cheap as possible” life preserver. But wait, analyzing the data more closely Mr. Fulgoni added: “Despite these shifting consumer dynamics, research has repeatedly shown that premium brands which invest in marketing and promotion activities aimed at maintaining buying at ‘preferred’ levels are able to minimize short-term erosion of share to less expensive brands and position themselves for a bounce-back when the economy improves.”

So it is not about abandonment at all….. it is about targeting the experience of high value customers and relying on relevant experiences for those loyal customer to keep you afloat as the economic pendulum arcs back. So what are you doing to “market and promote activities aimed at maintaining buying at ‘preferred’ levels to minimize short-term erosion to less expensive brands and position your company for a bounce-back when the economy improves?”

Yes Virginia, there is customer loyalty it is just playing “hide and seek.”