New thinking about brand loyalty

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New thinking about brand loyalty

By Louisa Hallett - 09/21/2018
Retailers and CPG firms need to know that the drivers of brand loyalty today are radically different from what worked in the past.

Retailers and CPG firms need to know that the drivers of brand loyalty today are radically different from what worked in the past.

The [email protected] radio show on SiriusXM invited two professors from the Wharton School to talk about what works, what doesn’t and how lifestage is a more important driver of consumer behavior than demographic group. Americus Reed is a marketing professor at Wharton, and Erik Gordon is a professor at the University of Michigan’s Ross School of Business. The following are five key points from their conversation.

Gordon wonders whether brand loyalty ever really existed, or if companies simply mistook loyalty for laziness. Perhaps consumers stuck with a brand out of habit, even if the brand wasn’t adding much value to their lives. In the past, that purchasing pattern created a tenuous sense of loyalty. Now, companies are realizing that the speed of modern communication means their image can change within a matter of hours, along with the public’s perception of the brand.

For example, It was big news in the cereal aisles earlier this year when Lucky Charms revealed a major innovation. The iconic General Mills brand added a unicorn to the blend of colorful marshmallow shapes found in the cereal that has been described as “magically delicious,” since the 1960s.

No one’s life will be changed by the shape of a marshmallow in box of cereal, but the move and how it was executed with marketing helped reinvigorate a brand in an otherwise growth-challenged category. It also helped General Mills deliver on an often heard expectation retailers have of major branded suppliers.

“Just showing up as a brand isn’t enough anymore. You have to go to market very differently and you have to continue to innovate,” was the advice Walmart Chief Merchandising Officer Steve Bratspies shared in August at the annual meeting of the Grocery Manufacturers Association (GMA).

Walmart needs brands to innovate because its everyday low price business model is dependent on brands remaining relevant with shoppers so Walmart can showcase its value proposition.

However, younger generations may not be solely to blame, as the professors caution against using the catch-all term “millennial” to define youth. From a marketing perspective, each of the younger generations is distinct and segmented. Millennials, roughly defined as those born between 1980 and 1996, hold different values, beliefs and desires from Generation Z behind them. Marketers must figure out what resonates with different age groups if they want their products to be enticing to them.

“This word ‘millennials’ gets thrown around a lot, and marketers seem super-hot on this word,” Reed said. “I think the real analysis comes into diving into what are the cultural, what are the political, what are the value-based … kind of ideologies that exist within these generational groups that we can then potentially tap into, and try to make some statement with respect to our brand?”

Gordon said it “drives [him] crazy” when companies use data in unsophisticated ways, such as breaking down customers into the age category of 18 to 35. There’s a lot of variation within that group, he said.

“We used it because that’s the data we had on hand, but it’s also very superficial,” he said. “Is it really that they’re 23? Or is it that their life, their values, their social sense of self is the same? And if you’re an advertiser, if you’re a retailer, what you want to tap into is not that they’re 23, because they’re not going to be 23 five years from now. It’s enduring values or at least more enduring values.”

To read Knowledge @ Wharton’s full article, click here.

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