June 27, 2007
Switching Brands at the Speed of Shopping
New research from TNS Retail Forward presents some sobering insights for CPG brand marketers. Consumers generally will not give a second thought to switching to another brand.
Sandy Skrovan, senior vice president with TNS Retail Forward and author of the Shopper Update, Food Drug Mass – Shopping Influencers, said in a press release, “Few brands are immune to switching behavior. Shoppers can be swayed by everything from promotions to packaging to product placement to pressure from their own family members.”
According to the study’s findings, three out of four shoppers consider different brands when purchasing and are open to making a switch. The categories (18 were studied) where a switch was most likely to be considered were snack crackers, shredded cheese and potato chips.
Categories where consumers were most likely to stick with a brand were pain relievers, laundry detergent and carbonated beverages. Even in these product categories, more than half of those surveyed said they consider purchasing other brands during shopping trips.
Discussion Questions: What are CPG manufacturers to take from TNS Retail Forward’s research? What should this mean for how retailers purchase products and how they visually merchandise stores?
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Is it that consumers are fickle, or is it that manufacturers have not done enough to differentiate from competition, establish a relationship with consumers, and create a bond that is not easily broken with shoppers?
It is a wake up call to the industry that likely was well aware that the alarm was about to go off anyway (doubt too many are slumbering when it comes to awareness of this issue). What is to be done though is not to wring hands and wear furrowed brows at those dastardly shoppers who just won’t buy brands out of allegiance, legacy or fidelity–but to provide a compelling reason for those shoppers and consumers to want to buy the brand over other alternative products. Easier said than done in many instances, but that is the challenge.
I guess it depends on how you ask the questions…Synovate’s R&D shows that, regarding CSDs 75% of shoppers agree “they have a favorite brand they strongly prefer” and that shoppers who say that, in fact buy their favorite brand over 80% of the time. On shredded cheese and on canned vegetables, our research would be in agreement that there is lots of switching. We didn’t study cigarettes, but my belief is that purchase to purchase repeat rates are around 95%. To me, the more interesting phenomenon is that those who are brand loyal can still require deals and will even switch stores to get them. This results in great variance between marketing mix modeling results and brand research as a brand that is promoted in one store is often cannibalizing its own sales from another store.
Retail Forward’s research reinforces one of the dominant trends in retailing today–that retailers are increasing their relative strength in the market vis a vis suppliers. The brands no longer dominate they way they did a decade ago. And many retailers have disrupted national brands with extremely effective private label brands.
What should consumer good manufacturers do? They should take more care to differentiate themselves from the pack. But even better they should go into retail themselves. That way they’ll learn what it takes to be successful and how to earn customer loyalty.
I think you have to be careful about what consumers SAY they will do, and what they actually do. Look at in-store advertising–every survey of consumers on the topic says they detest it. But as Nielsen and others are proving, it works–they do actually respond to it.
I think brands suffer from the same comparison when it comes to surveys–consumers SAY they’ll switch at the drop of a hat, but what they really do at the shelf is different. That’s why packaging design is so key–an easily recognizable brand is a short cut for a consumer faced with too many decisions at the shelf. They pick the one they know. If everyone completely re-evaluated every brand choice they make in a store while at the shelf, grocery shopping would take all day. No one has time for that!
Asking consumers whether they are loyal, have a favorite brand, are likely to switch, or ever try a different brand will generate different results. That is clear. What we learn from this one individual study is limited information.
However, studies by the POP organization over time have indicated that companies have trained consumers well by spending more on promotions and less on advertising: many brands are parity products and promotions offer brands at lower prices. This information results in increasing switching behavior.
Research indicates that consumers are willing to pay more for a brand IF and WHEN they believe that the brand offers value they are willing to pay for. Loyal consumers who strongly prefer a brand may purchase another brand or private label when they think they will get the same value for a lower price. With many brands and private labels presenting themselves to consumers as being just as good if not better than the leading brand and offering the product at a lower prices or a promotion to make the price lower, consumers are willing to try a new brand. With the increased money spent on consumer promotion, CPG companies have trained consumers to look for “good deals.” They have not trained the consumers to believe that the brand always provides more value to them.
When a customer is “loyal” to a brand’s product over a period of years it is because they have been satisfied with the product’s taste, consistency and performance. The product has, in effect, stood the test of time and one expects that the product will always be the same from purchase to purchase with no surprises. Recent examples show that manufacturers can and do change formulas and ingredients at will. There has been an uproar lately about a change Kraft made in Miracle Whip. Many say the taste and texture has changed and they are very unhappy about it, citing family recipes that have used Miracle Whip for generations. Several historic chocolate brands are experimenting with alternatives to cocoa butter. The pet food recall scandal demonstrated that ingredients in well known brands are not consistent and sometimes not even labeled properly, not to mention poorly sourced.
Is it any wonder then, that if brands are not loyal to customers the reverse is also true?
Where to begin? Well let’s pin down a few concepts first. Re-patronage (voluntary or coerced) is not loyalty. Even habitual purchase is not reliable evidence of loyal affect. CPG brands who wring their hands over the disloyal behavior of consumers should step back and ask themselves: “What loyalty has our brand shown to them?”
As observed above, asking shoppers to tell us what they would do in a hypothetical situation is not as dependable a method as measuring what they actually do. Of course, T-log analyses cannot reveal what a shopper was thinking just prior to the moment of decision. I think ethnographic-type research (interviewing shoppers as they shop) could shed some light on their decision processes.
I suspect that the proliferation of new product introductions (most of them trivial in consumer value and doomed to fail) may have unanticipated cumulative effects on shopping behavior. My hypothesis: The excess of new products puts shoppers off balance. Of course part of the game is for new brands to dislodge shoppers from old habits. But at some point the line is crossed between welcome novelty and at-shelf assault. I suspect the lasting solution would be fewer programs, better implemented.
As many have noted, it isn’t so much what people say they will do as what they actually do. So, assuming that people actually switch brands more frequently today (something which research seems to support), there are many implications for CPG companies and retailers. One quick one is whether you really should spend a lot trying to develop a brand and a connection to the brand. I think most in marketing would still answer with a strong yes. If you can do so, it is a really big win. The interesting part is to what extent consumers are allowing retailers to select the brands, and then consumers simply choose based on pricing and other immediate issues rather than searching among retailers for the particular brand the consumer wants. If that shift is happening, retailers will have substantially more power and CPG companies will face the tough challenge of determining how to win the favor of the right retailers.
Brands mean nothing to me any more (and you can thank Macy’s for that).
First, I look for features. It doesn’t matter to me whether corn is from Delmonte or Green Giant or whomever. It just must be sweet corn in a smaller can with an easy-to-open pop top which doesn’t require a can opener. I don’t care who makes shredded cheese. It just needs to be finely shredded medium to sharp cheddar in a zippered, resealable bag. I don’t care who makes laundry detergent. It just needs to be formulated for cold washing and preferably scent-free.
Second, I look at the price. Where there are two or more similar products, price is the deciding factor.
Brands were originally built up with advertising, first through print magazines and newspapers, then radio, then television that reached mass audiences. But with the Internet, the audience has fragmented and it is nearly impossible for advertisers to blanket the country with their brand messages. Exceptions exist, like the iPod, but they are very rare.
In a society where 50 percent of marriages end in divorce, we may be asking too much for consumers to be loyal to products or the companies that make them. Instead, let’s change our word usage from loyalty to preference. Consumers like myself may strongly prefer a certain brand, a personal example being Peet’s Gaia organic coffee blend. I purchase it all the time and really enjoy it. That doesn’t mean that I don’t look to see if something else worth trying is on the shelf.
Branding is about telling a story. If you tell a better story, you will have a stronger brand. CPG manufacturers must continue to tell compelling stories about their brands, and make certain that the stories are meaningful, and stay true to the brand promise. Axe tells a great story; spray the body with Axe, get more women. It may be sexist and a bit crude, but the story stays true to the brand, and the brand continues to grow globally.
Retailers that tell great stories also create great retail brands. We overuse the example, but Whole Foods tells a great story. It’s fresh, organic, natural, better, and by the way, not inexpensive. But people will drive miles to get to a Whole Foods, and will pass numerous other supermarket brands.
It leads to the question that I ask every CPG manufacturer. Who owns the customer? Does the retailer or the CPG brand? The brand owner thinks they own the customer, the retailer thinks they own the customer, and most importantly, today’s information influenced consumer says that they make decisions based on recommendations, trial, word of mouth, and no one owns them at all.
Creating loyalty…Good Luck!
I’m thinking that we need to re-visit this ‘loyalty’ thing. Gallup has told us forever that engagement between supplier and customer is virtually non-existent. Something like 80% of B2C and 88% of B2B relationships are fragile at best.
Are we really talking about how to establish loyalty to a box of crackers and to shredded cheese? What we need to realize that there may be no loyalty hook in the product itself. Even differentiation is limited as a loyalty hook. So where do we look for the hook?
We relate to products economically or ecologically. On the economic level we look for the discounts, the word “FREE” and the “40% more” signage. There is no loyalty here so get used to it.
When we relate ecologically, the product has a personal and intimate impact on our life or on the world we care about. You’re loyal to Bayer aspirin because it’s helping your heart and keeping you alive. You buy Paul Newman products because the company is helping disadvantaged kids. Loyalty requires some significant redeeming value beyond the economy and often beyond the product itself.
Unfortunately, most manufacturers and retailers are stuck in economic thinking.
It’s critical to know just how loyal your brand’s customers are. That’s your brand’s value. If your customers desert you for a penny, you’re selling a commodity, not a brand. If your customers are willing to pay extra, you have an opportunity for superior return on investment. Are you really selling a commodity pretending (unsuccessfully) to be a brand?
How many things are likely wrong with this study? Asking consumers whether they are likely to switch is so filled with demand characteristics that we can’t begin to count. The question is not who says they’ll switch–it’s whether they (a) do indeed switch brands and (b) whether they are loyal to a set of brands rather than one brand. A simple example–people often switch pasta sauce brands to get to different flavors. This is especially true of upscale brands. (I want Emeril’s Kicked Up Tomato, Rao’s Putanesca, Patsy’s Vodka, etc.)
I would be interested in seeing an Advertising/Marketing expenditure overlay to the bar graph figure presented in the TNS Report. I suspect that customers perceptions concerning those name brands categories which are highly susceptible to customer change are, at least in the customers minds, simply commodity products.
It is most interesting to note that for those items I believe are highly marketed (carbonated sodas, pain relievers and laundry detergents), that 50% or more of the customers would consider another brand.
If this same survey had been conducted over the last twenty years (and perhaps it has) it would be interesting to see how it has changed over the years. I suspect that the rise of store and private brands has made brands in certain categories less relevant than in the past.
Developing and marketing new products within their brands is one way for CPG companies to combat the commoditization of categories and compete against private label/store brands, which tend to occur in predictable commodity product lines.
If you look at the growth of Private Label sales, trade marketing resources/spending, and in-store promotion spending over the past twenty years there is no doubt that many shoppers are category conscious and brand neutral.
The ability to influence shoppers at the point of purchase is a tremendous advantage for smart retailers…the growth being seen for premium private label products is also a strong indicator for this trend. With media advertising and couponing becoming so fragmented, time starved shoppers look for the easiest choice, which is often price based. The more technically differentiated products (e.g. laundry detergent) have a bit of an advantage as there are often fewer direct substitutes in the shopper’s mind versus more commoditized products such as chips or crackers.
Retailers who use sophisticated price modeling in conjunction with strong category management programs are well positioned to continue to take advantage of this trend!
This is a natural outcome due to the many years of advertising decay by CPG companies. Over the past 20 years we’ve seen a dramatic decrease in the level of advertising for brands and at the same time a dramatic increase in the level of trade spending. When the focus of marketing is on price reduction instead of brand image it’s only natural for consumers to be willing to switch brands. Until CPG companies are willing to begin focusing their efforts on their brand image, we’ll only see this continue. Compounding this has been the emphasis on line extensions as a way to grow the business. Although this can be good for most CPG companies, their line-extensions were not supported by brand distinguishing advertising to help create a compelling reason for the line extension. All of these problems are a direct result of the profitable 1980s for CPG companies which then attracted a tremendous amount of attention from Wall Street, which in turn has created a level of shareholder expectations that have required CPG companies to make short-term investment decisions, resulting in today’s environment of declining brand loyalty.
This research certainly underscores the difficulty and value of building brand equity. It also points out the increasing importance of in-store merchandising in the marketing mix.
However, our research suggests it is not always easy to generalize measures of brand loyalty across broad categories. For example, the decision to switch brands in a category may be driven by the need state or shopping mission. One is more likely to switch brands when buying for a less important purpose. For example, in the case of soft drinks, the shopper may switch brands for a kids drink, but be brand loyal for her own diet cola. Similarly, it the case of potato chips, the shopper buying for a party is more likely to buy a trusted brand than take a chance on an off label.
That said, it is clear that marketers need to do more to differentiate their brands and increase their focus on supporting the brand at the point of sale.
Shopper loyalty will be increasingly toward the retail outlet, rather than a particular CPG brand. Whether it’s a specialty retailer with lots of private label, like Trader Joe’s, or a discounter like Aldi’s or Food4Less, consumers vote with their feet (or more accurately, their cars).
Therefore in order for any CPG to maintain or increase loyalty, product innovation isn’t always enough–it must be coupled with a uniquely valuable shopping experience. In this sense, private label is poised to swallow whole categories.
Perhaps the new question is how to drive loyalty that is outlet-agnostic? I believe the answer is digitally.
It all depends on your definition of loyal. To some, a consumer who purchases a brand more than once is loyal…to others the consumer must purchase the brand exclusively. The definition of consumer loyalty is as varied as those who seek define it.
What is not mentioned in the article is that many of the categories have such low levels of involvement among consumers and a lack of product differentiation that it would be next to impossible to build any semblance of loyalty.
Marketers have failed to differentiate themselves in an incredibly crowded marketplace (one they, themselves have made too crowded by the incessant launching of new products with little regard for what is already available.
I think this research is right on and says really good things about the general intelligence of the average consumer. Of course we are willing to switch brands — consumers are smart enough to make adjustments to their buying habits as time goes by. Admittedly, I go for the same flavor of Dorito’s every time I hit the market. But, as soon as my taste buds change, or I see something potentially better (or, as soon as I realize the fat content), I switch!
This fact necessitates good research by CPGs (and retailers). Understanding one’s customer is crucial, as is understanding the market, changing needs, alternatives, etc. There is no rest for the weary, especially in the name of consumer behavior.
I think it’s very much a case of what’s the category and what’s the consumption occasion?
Let’s take tomato ketchup – here in the UK the leading brand (Heinz) is in a very dominant position. People literally shop the category on autopilot and don’t even consider switching between brands in many cases. This is because past experience has told them that the product ticks all the boxes for the consumption occasion it is intended for. Its dominance on shelf just helps to blinker the shopper so that the competition doesn’t even get noticed.
In this category promotions may well cause a shopper to switch between formats but it’s unlikely to have a massive impact in terms of brand switching. Other categories however are less cut and dry. Shoppers may have a repertoire of a handful of brands they would consider and within this there may well be a preference hierarchy (which itself may vary according to the specific consumption occasion or a desire for variety) but brand switching between this set can be prompted if promotions and marketing are sufficient to upset the preference hierarchy.
At the other end of the scale are categories where there is either no discernible difference between brands in the eyes of the shopper or for which consumption and purchase frequencies are very low and so the shopper has not built up a preference based on previous consumption experience. In these categories it’s much easier to drive switching through effective marketing and promotion.
Ultimately what this boils down to is that effective brands provide a shortcut to the purchase decision in-store and this is something that as shoppers we are all keen to embrace as we want to spend as little time shopping for groceries as possible. The notion that 70% of purchase decisions are made in store is a fallacy – if that were the case we’d never get out of there. However purchase decisions can be influenced in-store to a greater or lesser degree from one category to the next depending on our familiarity with the SKUs available and our need for variety.
Lesson learned is that retailers need to offer consumers choices. Don’t be beholden to only a few manufacturers for product placement. Consumers are not as loyal any more and shop at several stores and switch most brands easily.
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Is it that consumers are fickle, or is it that manufacturers have not done enough to differentiate from competition, establish a relationship with consumers, and create a bond that is not easily broken with shoppers?
It is a wake up call to the industry that likely was well aware that the alarm was about to go off anyway (doubt too many are slumbering when it comes to awareness of this issue). What is to be done though is not to wring hands and wear furrowed brows at those dastardly shoppers who just won’t buy brands out of allegiance, legacy or fidelity–but to provide a compelling reason for those shoppers and consumers to want to buy the brand over other alternative products. Easier said than done in many instances, but that is the challenge.
I guess it depends on how you ask the questions…Synovate’s R&D shows that, regarding CSDs 75% of shoppers agree “they have a favorite brand they strongly prefer” and that shoppers who say that, in fact buy their favorite brand over 80% of the time. On shredded cheese and on canned vegetables, our research would be in agreement that there is lots of switching. We didn’t study cigarettes, but my belief is that purchase to purchase repeat rates are around 95%. To me, the more interesting phenomenon is that those who are brand loyal can still require deals and will even switch stores to get them. This results in great variance between marketing mix modeling results and brand research as a brand that is promoted in one store is often cannibalizing its own sales from another store.
Retail Forward’s research reinforces one of the dominant trends in retailing today–that retailers are increasing their relative strength in the market vis a vis suppliers. The brands no longer dominate they way they did a decade ago. And many retailers have disrupted national brands with extremely effective private label brands.
What should consumer good manufacturers do? They should take more care to differentiate themselves from the pack. But even better they should go into retail themselves. That way they’ll learn what it takes to be successful and how to earn customer loyalty.
I think you have to be careful about what consumers SAY they will do, and what they actually do. Look at in-store advertising–every survey of consumers on the topic says they detest it. But as Nielsen and others are proving, it works–they do actually respond to it.
I think brands suffer from the same comparison when it comes to surveys–consumers SAY they’ll switch at the drop of a hat, but what they really do at the shelf is different. That’s why packaging design is so key–an easily recognizable brand is a short cut for a consumer faced with too many decisions at the shelf. They pick the one they know. If everyone completely re-evaluated every brand choice they make in a store while at the shelf, grocery shopping would take all day. No one has time for that!
Asking consumers whether they are loyal, have a favorite brand, are likely to switch, or ever try a different brand will generate different results. That is clear. What we learn from this one individual study is limited information.
However, studies by the POP organization over time have indicated that companies have trained consumers well by spending more on promotions and less on advertising: many brands are parity products and promotions offer brands at lower prices. This information results in increasing switching behavior.
Research indicates that consumers are willing to pay more for a brand IF and WHEN they believe that the brand offers value they are willing to pay for. Loyal consumers who strongly prefer a brand may purchase another brand or private label when they think they will get the same value for a lower price. With many brands and private labels presenting themselves to consumers as being just as good if not better than the leading brand and offering the product at a lower prices or a promotion to make the price lower, consumers are willing to try a new brand. With the increased money spent on consumer promotion, CPG companies have trained consumers to look for “good deals.” They have not trained the consumers to believe that the brand always provides more value to them.
When a customer is “loyal” to a brand’s product over a period of years it is because they have been satisfied with the product’s taste, consistency and performance. The product has, in effect, stood the test of time and one expects that the product will always be the same from purchase to purchase with no surprises. Recent examples show that manufacturers can and do change formulas and ingredients at will. There has been an uproar lately about a change Kraft made in Miracle Whip. Many say the taste and texture has changed and they are very unhappy about it, citing family recipes that have used Miracle Whip for generations. Several historic chocolate brands are experimenting with alternatives to cocoa butter. The pet food recall scandal demonstrated that ingredients in well known brands are not consistent and sometimes not even labeled properly, not to mention poorly sourced.
Is it any wonder then, that if brands are not loyal to customers the reverse is also true?
Where to begin? Well let’s pin down a few concepts first. Re-patronage (voluntary or coerced) is not loyalty. Even habitual purchase is not reliable evidence of loyal affect. CPG brands who wring their hands over the disloyal behavior of consumers should step back and ask themselves: “What loyalty has our brand shown to them?”
As observed above, asking shoppers to tell us what they would do in a hypothetical situation is not as dependable a method as measuring what they actually do. Of course, T-log analyses cannot reveal what a shopper was thinking just prior to the moment of decision. I think ethnographic-type research (interviewing shoppers as they shop) could shed some light on their decision processes.
I suspect that the proliferation of new product introductions (most of them trivial in consumer value and doomed to fail) may have unanticipated cumulative effects on shopping behavior. My hypothesis: The excess of new products puts shoppers off balance. Of course part of the game is for new brands to dislodge shoppers from old habits. But at some point the line is crossed between welcome novelty and at-shelf assault. I suspect the lasting solution would be fewer programs, better implemented.
As many have noted, it isn’t so much what people say they will do as what they actually do. So, assuming that people actually switch brands more frequently today (something which research seems to support), there are many implications for CPG companies and retailers. One quick one is whether you really should spend a lot trying to develop a brand and a connection to the brand. I think most in marketing would still answer with a strong yes. If you can do so, it is a really big win. The interesting part is to what extent consumers are allowing retailers to select the brands, and then consumers simply choose based on pricing and other immediate issues rather than searching among retailers for the particular brand the consumer wants. If that shift is happening, retailers will have substantially more power and CPG companies will face the tough challenge of determining how to win the favor of the right retailers.
Brands mean nothing to me any more (and you can thank Macy’s for that).
First, I look for features. It doesn’t matter to me whether corn is from Delmonte or Green Giant or whomever. It just must be sweet corn in a smaller can with an easy-to-open pop top which doesn’t require a can opener. I don’t care who makes shredded cheese. It just needs to be finely shredded medium to sharp cheddar in a zippered, resealable bag. I don’t care who makes laundry detergent. It just needs to be formulated for cold washing and preferably scent-free.
Second, I look at the price. Where there are two or more similar products, price is the deciding factor.
Brands were originally built up with advertising, first through print magazines and newspapers, then radio, then television that reached mass audiences. But with the Internet, the audience has fragmented and it is nearly impossible for advertisers to blanket the country with their brand messages. Exceptions exist, like the iPod, but they are very rare.
In a society where 50 percent of marriages end in divorce, we may be asking too much for consumers to be loyal to products or the companies that make them. Instead, let’s change our word usage from loyalty to preference. Consumers like myself may strongly prefer a certain brand, a personal example being Peet’s Gaia organic coffee blend. I purchase it all the time and really enjoy it. That doesn’t mean that I don’t look to see if something else worth trying is on the shelf.
Branding is about telling a story. If you tell a better story, you will have a stronger brand. CPG manufacturers must continue to tell compelling stories about their brands, and make certain that the stories are meaningful, and stay true to the brand promise. Axe tells a great story; spray the body with Axe, get more women. It may be sexist and a bit crude, but the story stays true to the brand, and the brand continues to grow globally.
Retailers that tell great stories also create great retail brands. We overuse the example, but Whole Foods tells a great story. It’s fresh, organic, natural, better, and by the way, not inexpensive. But people will drive miles to get to a Whole Foods, and will pass numerous other supermarket brands.
It leads to the question that I ask every CPG manufacturer. Who owns the customer? Does the retailer or the CPG brand? The brand owner thinks they own the customer, the retailer thinks they own the customer, and most importantly, today’s information influenced consumer says that they make decisions based on recommendations, trial, word of mouth, and no one owns them at all.
Creating loyalty…Good Luck!
I’m thinking that we need to re-visit this ‘loyalty’ thing. Gallup has told us forever that engagement between supplier and customer is virtually non-existent. Something like 80% of B2C and 88% of B2B relationships are fragile at best.
Are we really talking about how to establish loyalty to a box of crackers and to shredded cheese? What we need to realize that there may be no loyalty hook in the product itself. Even differentiation is limited as a loyalty hook. So where do we look for the hook?
We relate to products economically or ecologically. On the economic level we look for the discounts, the word “FREE” and the “40% more” signage. There is no loyalty here so get used to it.
When we relate ecologically, the product has a personal and intimate impact on our life or on the world we care about. You’re loyal to Bayer aspirin because it’s helping your heart and keeping you alive. You buy Paul Newman products because the company is helping disadvantaged kids. Loyalty requires some significant redeeming value beyond the economy and often beyond the product itself.
Unfortunately, most manufacturers and retailers are stuck in economic thinking.
It’s critical to know just how loyal your brand’s customers are. That’s your brand’s value. If your customers desert you for a penny, you’re selling a commodity, not a brand. If your customers are willing to pay extra, you have an opportunity for superior return on investment. Are you really selling a commodity pretending (unsuccessfully) to be a brand?
How many things are likely wrong with this study? Asking consumers whether they are likely to switch is so filled with demand characteristics that we can’t begin to count. The question is not who says they’ll switch–it’s whether they (a) do indeed switch brands and (b) whether they are loyal to a set of brands rather than one brand. A simple example–people often switch pasta sauce brands to get to different flavors. This is especially true of upscale brands. (I want Emeril’s Kicked Up Tomato, Rao’s Putanesca, Patsy’s Vodka, etc.)
I would be interested in seeing an Advertising/Marketing expenditure overlay to the bar graph figure presented in the TNS Report. I suspect that customers perceptions concerning those name brands categories which are highly susceptible to customer change are, at least in the customers minds, simply commodity products.
It is most interesting to note that for those items I believe are highly marketed (carbonated sodas, pain relievers and laundry detergents), that 50% or more of the customers would consider another brand.
If this same survey had been conducted over the last twenty years (and perhaps it has) it would be interesting to see how it has changed over the years. I suspect that the rise of store and private brands has made brands in certain categories less relevant than in the past.
Developing and marketing new products within their brands is one way for CPG companies to combat the commoditization of categories and compete against private label/store brands, which tend to occur in predictable commodity product lines.
If you look at the growth of Private Label sales, trade marketing resources/spending, and in-store promotion spending over the past twenty years there is no doubt that many shoppers are category conscious and brand neutral.
The ability to influence shoppers at the point of purchase is a tremendous advantage for smart retailers…the growth being seen for premium private label products is also a strong indicator for this trend. With media advertising and couponing becoming so fragmented, time starved shoppers look for the easiest choice, which is often price based. The more technically differentiated products (e.g. laundry detergent) have a bit of an advantage as there are often fewer direct substitutes in the shopper’s mind versus more commoditized products such as chips or crackers.
Retailers who use sophisticated price modeling in conjunction with strong category management programs are well positioned to continue to take advantage of this trend!
This is a natural outcome due to the many years of advertising decay by CPG companies. Over the past 20 years we’ve seen a dramatic decrease in the level of advertising for brands and at the same time a dramatic increase in the level of trade spending. When the focus of marketing is on price reduction instead of brand image it’s only natural for consumers to be willing to switch brands. Until CPG companies are willing to begin focusing their efforts on their brand image, we’ll only see this continue. Compounding this has been the emphasis on line extensions as a way to grow the business. Although this can be good for most CPG companies, their line-extensions were not supported by brand distinguishing advertising to help create a compelling reason for the line extension. All of these problems are a direct result of the profitable 1980s for CPG companies which then attracted a tremendous amount of attention from Wall Street, which in turn has created a level of shareholder expectations that have required CPG companies to make short-term investment decisions, resulting in today’s environment of declining brand loyalty.
This research certainly underscores the difficulty and value of building brand equity. It also points out the increasing importance of in-store merchandising in the marketing mix.
However, our research suggests it is not always easy to generalize measures of brand loyalty across broad categories. For example, the decision to switch brands in a category may be driven by the need state or shopping mission. One is more likely to switch brands when buying for a less important purpose. For example, in the case of soft drinks, the shopper may switch brands for a kids drink, but be brand loyal for her own diet cola. Similarly, it the case of potato chips, the shopper buying for a party is more likely to buy a trusted brand than take a chance on an off label.
That said, it is clear that marketers need to do more to differentiate their brands and increase their focus on supporting the brand at the point of sale.
Shopper loyalty will be increasingly toward the retail outlet, rather than a particular CPG brand. Whether it’s a specialty retailer with lots of private label, like Trader Joe’s, or a discounter like Aldi’s or Food4Less, consumers vote with their feet (or more accurately, their cars).
Therefore in order for any CPG to maintain or increase loyalty, product innovation isn’t always enough–it must be coupled with a uniquely valuable shopping experience. In this sense, private label is poised to swallow whole categories.
Perhaps the new question is how to drive loyalty that is outlet-agnostic? I believe the answer is digitally.
It all depends on your definition of loyal. To some, a consumer who purchases a brand more than once is loyal…to others the consumer must purchase the brand exclusively. The definition of consumer loyalty is as varied as those who seek define it.
What is not mentioned in the article is that many of the categories have such low levels of involvement among consumers and a lack of product differentiation that it would be next to impossible to build any semblance of loyalty.
Marketers have failed to differentiate themselves in an incredibly crowded marketplace (one they, themselves have made too crowded by the incessant launching of new products with little regard for what is already available.
I think this research is right on and says really good things about the general intelligence of the average consumer. Of course we are willing to switch brands — consumers are smart enough to make adjustments to their buying habits as time goes by. Admittedly, I go for the same flavor of Dorito’s every time I hit the market. But, as soon as my taste buds change, or I see something potentially better (or, as soon as I realize the fat content), I switch!
This fact necessitates good research by CPGs (and retailers). Understanding one’s customer is crucial, as is understanding the market, changing needs, alternatives, etc. There is no rest for the weary, especially in the name of consumer behavior.
I think it’s very much a case of what’s the category and what’s the consumption occasion?
Let’s take tomato ketchup – here in the UK the leading brand (Heinz) is in a very dominant position. People literally shop the category on autopilot and don’t even consider switching between brands in many cases. This is because past experience has told them that the product ticks all the boxes for the consumption occasion it is intended for. Its dominance on shelf just helps to blinker the shopper so that the competition doesn’t even get noticed.
In this category promotions may well cause a shopper to switch between formats but it’s unlikely to have a massive impact in terms of brand switching. Other categories however are less cut and dry. Shoppers may have a repertoire of a handful of brands they would consider and within this there may well be a preference hierarchy (which itself may vary according to the specific consumption occasion or a desire for variety) but brand switching between this set can be prompted if promotions and marketing are sufficient to upset the preference hierarchy.
At the other end of the scale are categories where there is either no discernible difference between brands in the eyes of the shopper or for which consumption and purchase frequencies are very low and so the shopper has not built up a preference based on previous consumption experience. In these categories it’s much easier to drive switching through effective marketing and promotion.
Ultimately what this boils down to is that effective brands provide a shortcut to the purchase decision in-store and this is something that as shoppers we are all keen to embrace as we want to spend as little time shopping for groceries as possible. The notion that 70% of purchase decisions are made in store is a fallacy – if that were the case we’d never get out of there. However purchase decisions can be influenced in-store to a greater or lesser degree from one category to the next depending on our familiarity with the SKUs available and our need for variety.
Lesson learned is that retailers need to offer consumers choices. Don’t be beholden to only a few manufacturers for product placement. Consumers are not as loyal any more and shop at several stores and switch most brands easily.