Tuesday, June 23, 2009

Brand loyalty down during recession

"A study from Catalina Marketing and the CMO Council finds that for the average brand, more than half of consumers - 52% - who were highly loyal to certain package-goods brands in 2007 became markedly less so last year." Click here to see the complete article on Ad Age.

Popular package-goods such as Crest, PineSol and Tylenol lost more than a third of their highly loyal customers. It's been a tough period for brands. Buyers are much more price-sensitive during the recession. Even Coke, which held more than 60% of its loyal consumers, saw its revenue decline 6%. And it gets worse. Researches show that customers who traded down to store brands in past recessions tend not to come back to the major brands.

So the question is: what to do? The first and easiest thing everyone thinks about is to cut off the price, but that's the last thing you should think about. Reducing the price could have the opposite effect. Instead of getting customers back, you may encourage brand switching in a long term scenario. Companies should think of marketing actions to reward the loyal customers, showing that being loyal to your brand pays off. Doing some direct marketing, with special coupons, could be an alternative, and I'm sure there are many others. With a 15 minutes brainstorm companies could have hundreds of possible solutions. Most of times the easiest solution is not the best one. In situations like that, you should always see the big picture and look for long term solutions.

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