Cost, Convenience, and Loyalty

I stumbled across some notes from a couple of very informal experiments - Marketing 101 type of stuff - that got me think about the way in which we consider brand loyalty.   In brief, discussions on the topic tend to take too binary approach, suggesting the customers are either loyal or they are not, with little room in between.   Some refinements to that theory are measurement of share of wallet, or calculating the percentage of the time a customer buys a given brand when they buy a particular product.   I think those are closer to the mark.

But before I digress further ... the first study looked at scanner-panel data comparing the sales of the two major cola brands (need I even name them?) to demonstrate that when the price of one was as little as a dime less than the other, a significant number of customers purchased the cheaper brand.  This suggests loyalty does not exist for a large number of customers, as they buy whatever brand is cheapest.

That much is very well known, but what the researcher also considered was that the price of generic or store-brand cola did not seem to waiver - even though, in blind taste tests, the results are clearly random, and in spite of the fact that consumers are well aware of this, there is still loyalty to the two major brands - a person may switch from one to the other, but never to the generic cola, even though there is no perceptible difference in product quality.

The second survey was completely new to me: it was an informal study that posed two questions.   First, if you went to a restaurant that did not sell your cola of preference, would you leave and go to one that did?  84% indicated they would not do so.   Second, if you went to such a restaurant with a friend, and they did not serve his preferred brand, do you think it would be reasonable to expect your friend to accept whatever was on offer, contrary to his preferences?  88% indicated that they thought this would be a reasonable expectation.

This sparked an idea: that it is likely loyalty to brand has much to do with the consequences of switching, primarily the negative consequences in terms of effort or inconvenience rather than price.   And this is likely best considered in degrees.

• If the two choices are side-by-side on a supermarket shelf, it is very easy to switch from one brand to the other.  Zero inconvenience, for all intents and purposes.
• If the supermarket were out of a customer's preferred brand, this means they would have to drive to another store to get their preferred brand.  I don't think any surveys or experiments have investigated this, but I expect consumers would take whatever was on offer for that trip.
• While deciding which restaurant to visit, a customer might take into account whether it serves his preferred brand of soft drink.  But I expect that in most cases that other elements of the meal figure more greatly than the beverage, so I likewise expect a person would compromise on brand rather than go to two different places to assemble his meal.
• By the time the customer has been seated in a table, he has already invested considerable effort into getting there, and if his preferred brand was not on offer, chances are slim he would leave rather than accept another brand.
• Add to this a social element: if a person is seated with a group of friends, and the choice to go to a different restaurant meant leaving his companions behind, there's even less a chance he would do so to be loyal to his preferred brand.
• And to turn the pressure up a little further, if a customer had brought his family, spent some time corralling the kids into the place and getting them seated and relatively calmed, leaving to go to another place that served their preferred brand would require a great deal of effort.

It also occurs to me that all of this is likely quite obvious, and I might be a little embarrassed at spending even this much time poring over it - except that marketers keep doing studies on the topic, so at least I am not the most tedious person on the planet.   But just because something is painfully obvious doesn't mean that it is taken into consideration.

And that gets back to the point, when I still seemed to be making one:  measures of loyalty seem to assume that customers must be fiercely and absolutely loyal to their brand of preference, in spite of the incentive that a competitor might offer them to switch, and in spite of the non-monetary costs that they will have to undertake in order to remain loyal to a given brand.

With that in mind, simplistic measures such as how often a customer purchases a brand, or how much of their budget is spent on one brand versus another, seem woefully insufficient to explain the degree to which customers have brand loyalty.  It remains a phenomenon that stubbornly defies quantification.