There’s been some debate lately about whether brand loyalty is disappearing. Some writers have tried to tie an overall decline in brand loyalty to a similar decline of loyalty in society generally.
It’s a big stretch though to say that a 1% decline in a brand’s loyalty is caused by society’s rising divorce rate. But if brand loyalty is declining, it’s more likely that there are practical market reasons for it.
How Product Category Influences Brand Loyalty
Let’s look at product categories as a possible reason. Every product or service belongs to a product category, defined generally by the shared characteristics of the direct competitors in it. Toothpaste is a product category. Network software is a product category. So are hospitals or educational institutions, in fact.
For each of these categories, we have a long list of brands and types to choose from. All the versions of just Colgate toothpaste are bewildering. And no wonder that Colgate TOTAL is the brand’s best-seller – we don’t have to choose among having whiter teeth or fewer cavities or less sensitivity.
To look at another example, consider hospital foundations appealing to donors. You can give to general hospitals or your community hospital. Or ones that specialize in research, teaching, children, mental health, cancer or rehabilitation. Again, many choices.
So how do product categories affect loyalty? There are three factors at play: consequence, choice and parity. And those in turn should affect how you brand and market to maintain loyalty.
As marketers, we’re all passionate about what we’re marketing. But as consumers, we interact with hundreds of product categories every day. Some are few but have a great consequence – our local hospital, our car or our tax accountant, for example. These product categories have a major effect on our daily lives, and a poor choice can have a large negative impact. When we find one that works well for us, the reward for brand loyalty is high and we don’t experiment.
On the other hand, we interact with far more household goods but they have a minor effect on our everyday lives. Laundry detergent, for instance, does not have a great consequence and a poor buying decision is easily overcome. As a result, the reward of brand loyalty is likely not enough to prevent customers from trying different brands.
A critical factor in successfully building brand and brand loyalty in low-consequence product categories is to build consequence. If I buy this peanut butter, I’m a better mother. If I use this toothpaste, my dentist will approve of me. If I give to this non-profit, I’ll feel like I’ve done something good.
Lots of choice is another enemy of brand loyalty. The more competition in a product category, the more sub-categories, the more choice. Let’s go back to detergent. 50 years ago, there were a few brands, all powders and all promised to get clothes clean. But now we have many — powder, liquid, tablet, sprinkles. Colours and whites. Fresh smell and no smell. Powerful or gentle. And so on. More choice makes it easier for customers to trial and switch, further eroding brand loyalty. This is particularly true if the product category is of low consequence.
A strategy to counteract too much choice is to allow customers to trial within your brand family. Tide, for instance, has brand extensions that cover most of the sub-categories, boosting brand loyalty by encouraging experimentation “in the family.” Even brands with high consequence practice this strategy. Colleges and universities, for example, are constantly expanding their programs so that students can find what they’re looking for at one school without having to move to another.
Quality and benefit being equal, price is often the deciding factor in low-consequence product categories and a significant motivator for switching. If most products and services are generally the same, lowest cost brand will usually enjoy the greatest loyalty until another brand goes lower.
Fighting price competition is always about fighting parity. Don’t be equal. Be different. And not necessarily just better. It’s important to be distinct in a way that increases our perceived consequence of the product or service. We will pay more if our perception of the outcome is more important or beneficial. We won’t pay more for clean teeth, but we will pay more to be more attractive. We won’t donate more to a health charity, but we will donate more to help people close to us. We won’t pay more for tuition, but we will pay more for a better future.
Think Category First
When it comes to understanding how to manage your brand to win the most loyalty, start by considering the product category your brand belongs to. Thinking about what level of consequence your product or service truly has to your customer, the degree of choice that your customer has (and will have in future) and how much your offering is the same as that of your competitors will help you develop a brand that customers just cannot live without.