Like Janet Jackson, more consumers are asking brands, “What have you done for me lately?” In the past three months, more than 80% of consumers purchased a different brand from the one they normally buy and 44% said they would repurchase the new brand even if the original preferred brand was available again. 1 Devenyns, Jessi. Brand loyalty is eroding under supply chain and price pressures, survey finds. Food Dive. September 14, 2021.
“This is a huge opportunity for emerging brands.”
Jared Kligerman, President, The Think Tank
Although brand loyalty has been in decline in recent years, it has eroded even more since the start of the pandemic. Last year, 36% of U.S. consumers changed brands, which is double the rate in 2019. 2 Charm, Tamara Charm, Becca Coggins, Kelsey Robinson and Jamie Wilkie. The great consumer shift: Ten charts that show how US shopping behavior is changing. McKinsey & Company. August 4, 2020. Among them, 73% intend to continue to incorporate the new brands into their routine, with Gen Z and high earners being most likely to switch brands. 3 Charm, Tamara Charm, Becca Coggins, Kelsey Robinson and Jamie Wilkie. The great consumer shift: Ten charts that show how US shopping behavior is changing. McKinsey & Company. August 4, 2020. Two-thirds of consumers have switched brands “often” or “very often” in the past three months. 4 Devenyns, Jessi. Brand loyalty is eroding under supply chain and price pressures, survey finds. Food Dive. September 14, 2021.
While shifting consumer loyalty could represent a market threat to incumbent category leaders, “This is a huge opportunity for emerging brands,” said Jared Kligerman, President, The Think Tank. Agility, supplier diversity, and relevant products can distinguish up-and-coming CPG players.
It pays to earn consumers’ devotion. According to Bain & Company, a 5% increase in customer retention correlates with an increase in profit of at least 25%. 5 Amaresan, Swetha. 42 Interesting Stats about Customer Loyalty You May Not Know. HubSpot. November 16, 2020. Accenture found 57% of consumers spend more on brands to which they are loyal. 6 Morgan, Blake. 50 Stats That Show The Importance Of Good Loyalty Programs, Even During A Crisis. Forbes. May 7, 2020. Repeat purchases among loyal customers help brands maximize sales and lifetime value per customer. Loyal consumers also make the best sales force, as they are more likely to share positive word-of-mouth and reviews, which boosts brand reach and trust, and lowers customer acquisition fees.
Let’s see why loyalty is in flux and how consumer packaged goods (CPG) brands can keep shoppers coming back.
Why consumers are no longer loyal to brands
Several factors often contribute to shoppers’ decision to walk away from certain CPG brands.
Economic pressures
Since the 2008 recession, consumers started to look for brands and products that offer better value for money. Many consumers retained this habit even when the economy recovered. Now the pandemic and rising inflation are giving consumers new reasons to stretch every dollar, as value shopping continues to rise. In the past three months, lower-priced substitutes led 65% of shoppers to switch brands. 7 Devenyns, Jessi. Brand loyalty is eroding under supply chain and price pressures, survey finds. Food Dive. September 14, 2021.
Private label power
While COVID-19 swept the globe in early 2020, 25% of consumers switched to private labels. Store brands’ growth have outpaced the retail market as their quality continues to rise while often offering good value for money. Most (80%) shoppers who started using a private brand during the pandemic plan to keep using it when the pandemic subsides. 8 Charm, Tamara Charm, Becca Coggins, Kelsey Robinson and Jamie Wilkie. The great consumer shift: Ten charts that show how US shopping behavior is changing. McKinsey & Company. August 4, 2020.
Abundant choice
Now that more brands of all sizes now sell online, unique and innovative products may inspire consumers to experiment with new goods. In tandem, influential social media platforms like TikTok and Instagram spark awareness of new brands. Since there are a lot of CPG fish in the retail sea, half of loyal customers have left a brand for a competitor that was better at satisfying their needs. 9 Amaresan, Swetha. 42 Interesting Stats about Customer Loyalty You May Not Know. HubSpot. November 16, 2020.
Negative experiences
Frustrated shoppers will look elsewhere. One-third of Americans say they would consider switching companies immediately after a single instance of poor service, and 60% would leave after two to three negative experiences. 10 Amaresan, Swetha. 42 Interesting Stats about Customer Loyalty You May Not Know. HubSpot. November 16, 2020. In the past three months, out-of-stocks motivated 51% of respondents to switch from their original brand. 11 Devenyns, Jessi. Brand loyalty is eroding under supply chain and price pressures, survey finds. Food Dive. September 14, 2021.
How brands can rebuild loyalty
Several qualities can make CPG brands so alluring that smitten, committed consumers gladly resist the temptation of other CPG brands’ offerings.
Availability
A McKinsey survey revealed the top two reasons consumers tried a new brand were that the products were in stock (48%), and conveniently available where they were shopping (34%). Closely monitoring inventory fluctuations helps brands avoid bottlenecks, keep products on shelves, and drive sales and loyalty. 12 Charm, Tamara Charm, Becca Coggins, Kelsey Robinson and Jamie Wilkie. The great consumer shift: Ten charts that show how US shopping behavior is changing. McKinsey & Company. August 4, 2020.
Value
A McKinsey survey cited better prices or promotions (30%), better value (25%) and better shipping or delivery costs (15%) as factors driving consumers to try new brands. 13 Charm, Tamara Charm, Becca Coggins, Kelsey Robinson and Jamie Wilkie. The great consumer shift: Ten charts that show how US shopping behavior is changing. McKinsey & Company. August 4, 2020. Sending coupons to consumers on a regular basis is one way brands can encourage repeat purchases.
Stellar service
Most (93%) customers are likely to make repeat purchases with companies that offer excellent customer service and 69% would spend more on a brand offering better customer service. 14 Redbord, Michael. The Hard Truth About Acquisition Costs (and How Your Customers Can Save You). HubSpot. May 9, 2018 , 15 Amaresan, Swetha. 42 Interesting Stats about Customer Loyalty You May Not Know. HubSpot. November 16, 2020. It’s a global trend, as 59% of consumers worldwide now have higher customer service expectations, including 82% of Brazilians and 50% of Germans. 16 What do Customers Want? – 37 Customer Service Statistics. SmallBizGenius. August 10, 2020. Treating customers like a VIP and pampering them helps brands surpass consumers’ expectations and retain their business.
Rewards
Today 7 in 10 U.S. consumers belong to a customer loyalty program while half of consumers say they joined mostly to earn rewards on everyday purchases.17 What Benefits Do Premium Loyalty Program Members Value? Marketing Charts. August 5, 2021. , 18 Charm, Tamara Charm, Becca Coggins, Kelsey Robinson and Jamie Wilkie. The great consumer shift: Ten charts that show how US shopping behavior is changing. McKinsey & Company. August 4, 2020. Three in five consumers say unexpected rewards are the biggest reason they’ll stay loyal to a brand, while 48% of people expect special treatment for being a good customer. 19 What do Customers Want? – 37 Customer Service Statistics. SmallBizGenius. August 10, 2020.
Personalized service
One survey found 44% of consumers say they are likely to become repeat buyers after a personalized shopping experience. Half (49%) of shoppers bought a product after a personalized recommendation although they didn’t plan to and 40% said they purchased something more expensive than they originally intended due to the personalized experience. 20 What do Customers Want? – 37 Customer Service Statistics. SmallBizGenius. August 10, 2020.
Emotion
It’s lucrative to give consumers all the feels. In comparison to regular satisfied customers, emotionally connected customers have a 306% higher lifetime value. They will spend $699 annually with the brand (vs $275) and 71% of them will recommend the brand (vs 45%). 21 Amaresan, Swetha. 42 Interesting Stats about Customer Loyalty You May Not Know. HubSpot. November 16, 2020.
Listening
Monitoring direct consumer feedback, as well as product reviews and brand mentions on social media helps brands connect with consumers and learn from them. This feedback can help brands adapt, build meaningful relationships with consumers, and grow as a company.
Overall, boosting loyalty involves building relationships that last by getting closer to consumers, fulfilling their needs, and even becoming a part of their regular habits. Ultimately, these loyalty-building actions come down to being reliable and trustworthy, as consumers will return to brands that show they care more about serving rather than simply selling.