Why Brand Loyalty Is a Rare Commodity

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Most B2B companies derive the majority of their revenue from continuing sales to existing customers. So it shouldn't be surprising that customer retention is an important business priority. Many companies are making substantial investments to improve the customer experiences they provide in the hope of enticing their customers to remain loyal.

Unfortunately, it appears that customer loyalty is more elusive than ever. Marketing and customer experience pundits have been proclaiming the demise of customer loyalty for the past several years, and two recent surveys lend support to their point of view.

Earlier this year, Edit and Kin + Carta published the results of a survey of 2,000 consumers in the US and the UK. Over a quarter of the survey respondents (27.4%) said they have no brand loyalty in any industry sector.

In this survey, a nearly equal percentage of men and women (28%/27%) reported having no brand loyalty, but there sere significant differences across generational cohorts. Somewhat surprisingly, Gen Z and millennials were less likely to report no brand loyalty (18% and 28% respectively) than Gen X and baby boomer respondents (34% and 39% respectively).

Research last year by Wunderman Thompson Commerce (a WPP agency) showed that low levels of customer loyalty aren't limited to consumers. The B2B Future Shopper Report 2021 was based on a survey of 604 B2B buyers in the US (202), the UK (201) and China (201).

Remarkably, 55% of the US-based respondents said they had switched suppliers for all business purchases in the 12 months preceding the survey. Another 41% said they had switched suppliers for some business purchases over the same time period. In the 2020 edition of the survey, the comparable percentages were 20% for all purchases and 43% for some purchases.

Why Has Customer Loyalty Declined?

Declining customer loyalty is not a new phenomenon, but a combination of factors have caused the pace of decline to accelerate in recent years.

For example, the abundance of online information enables customers to easily discover and learn about new products, services and suppliers. Pricing information is also widely available, which makes it easy for customers to comparison shop for the best available deal.

This widespread availability of information can reduce some of the risks that are usually associated with buying a product or service - or buying from a supplier - the customer isn't familiar with. In other words, easy access to information lowers the fear and uncertainty that often comes with trying a new product or supplier.

Customer expectations for convenient and frictionless experiences have also risen, and many companies haven't kept pace with these changing expectations. Keeping up is particularly challenging because customers tend to compare the experiences your company provides to the best experiences they've enjoyed with companies of any type. Therefore, your company is always competing against the "best-of-breed" customer experiences provided by all types of businesses.

The COVID-19 pandemic has also contributed to the decline of customer loyalty. During the pandemic, many consumers and business buyers were forced to adopt new shopping and buying behaviors, and in some cases, to change product/service brands or suppliers. Once customers have had good experiences with these new behaviors, products, services and suppliers, they become more willing to "shop around" in the future.

Time to Reset Expectations

In today's information-rich and competitive business environment, where customers are easily enticed to engage in promiscuous buying behaviors, company leaders need to reset their expectations relating to customer loyalty.

First of all, as marketing and business leaders, we need to recognize that exclusive brand/company loyalty by customers - at least over an extended period of time - is an unrealistic aspiration.

Raja Rajamannar, the Chief Marketing and Communications Officer of Mastercard, addressed this issue in his book, Quantum Marketing:  Mastering the New Marketing Mindset for Tomorrow's Consumers (which I reviewed last month in this post). After citing statistics showing that 75% of men and 68% of women have admitted to cheating in some way, at some time in a relationship, he writes:

" . . . if people are not loyal in their committed relationships, are we as marketers and businesspeople realistic in expecting loyalty from our consumers? If they are not loyal in their personal lives, are we fantasizing that we will generate their loyalty to our brands? We are, after all, way down the food chain of attention, as far as people's lives are concerned."

The second necessary aspect of the reset is to recognize that customer loyalty is a fragile phenomenon that requires frequent reinforcement. In this sense, customer loyalty is a little like COVID-19 vaccines. The mRNA vaccines used here in the US are highly effective, but the protection against infection isn't exceptionally durable. As we now know, that protection begins to wane rather quickly. As a result, one "booster" dose has already been recommended, and my personal default assumption is that I'll be lining up for another "jab" sometime in the next few months.

Because customer loyalty is no longer very durable, it requires frequent "boosting" to maintain its potency. In fact, marketing and business leaders should view every interaction with a customer as an opportunity to re-energize that customer's loyalty and commitment.

To be clear, customer loyalty isn't likely to regain the durability it had 30 or 40 years ago, but it can still be a potent competitive advantage if companies focus on consistently delivering outstanding customer experiences.

Image courtesy of One Way Stock via Flickr (CC).

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