The Erosion of Brand Loyalty

In my discussions about competitive strategy with many clients, the topic of brand loyalty always arises.  Many companies have experienced a decline in brand loyalty, as this report indicates.  Some of this decline has occurred because of the recent bout of high inflation, as consumers have traded down to lower-priced products including private label goods in many categories.  However, some of this decline in brand loyalty began long before the recent inflationary experience.  The erosion has many causes.

However, I think it is important to think about consumers and brands in terms of both loyalty and desire for variety.  I use this simple 2x2 matrix to illustrate my point.  You may have a brand for which there is a great deal of loyalty or not.  However, you also have to think about the demand for variety in your particular product/service category.  

For some product categories, customers demand a great deal of variety.  They do not want to consume the same good/brand each time they shop.  In some cases, we have low loyalty because customers are constantly trying new things.  They love to explore and discover.  Wine definitely fits in this category. Many people are always trying new wines, and they exhibit very little loyalty.  Craft beer fits here too for many people.  In other categories, there is some loyalty, but the high demand for variety means that the brand sits firmly within the regular repertoire of the consumer.  A product such as M&M's fits in this category.  People love the brand, but they don't always want that type of chocolate.  For Trader Joe's, the brand has a cult-like following, but few people do all their shopping at Trader Joe's. They buy their groceries at several different stores, but Trader Joe's is always in their repertoire.   For companies, they need to think about where their products fit in this matrix.  Do they have a product that is not sufficiently differentiated?  Is it a commodity product, and is that the reason competition always seems to revolve around price?  Or, is the challenge that consumers want variety and love to try and to discover new things?  The response to that competitive challenge can and should be very different than the problem of a lack of differentiation.