Brand loyalty not enough to guarantee custom

05 July 2017

Top companies holding onto customers through brand loyalty alone are facing an uphill challenge, according to a new report. The research suggests digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly outdated, strategies as modern customers wield an increasingly impressive array of digital tools and online databases, and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The paper from McKinsey & Company, titled ‘The new battleground for marketing-led growth’, considers whether one of the traditional ways of keeping customers buying a particular product or service, which largely involves creating loyalty-reward programmes, is still feasible in the 21st century.

Waning loyalties

The strategy consulting firm has tracked consumer behaviour in relation to their consumer decision journeys (CDJs) since 2009. These journeys, which tend to be relatively complex and continent on a number of external factors, have a number of key ‘battle ground’ points in which brand decisions are made.

The consumer decision journey has four key battlegrounds

The first is the initial consideration, of a set of possible brands to choose between, followed by the second, the evaluation of the set of possible choices. The third is the ultimate selection of the product or services, and finally the fourth is the consumer repurchasing current brands without shopping for others.

One of the traditional methods to secure the fourth step is brand loyalty schemes. These schemes, are continuing to be deployed by companies, with the number of users increasing 26% between 2013 and 2015. The programmes may, however, not be having the planned effect. Research shows that over the same period, active engagement in programmes has fallen 2 percentage points, which 58% of those in loyalty programmes are not engaged. Digital disruptions, according to the firm, are changing consumer behaviour.

Purchase in most categories are driven more by shopping than loyalty

To better understand consumer behaviour across a range of shopping categories, in relation to loyalty, the firm used its CDJ database – which include 350 brands and the choices of 125,000 consumers regarding their recent purchasing decisions regarding those brands across 30 categories.

According to the research only three of the thirty categories are loyalty driven, with mobile network providers and auto insurance companies both well positioned to retain customers through brand reputation. In other categories, however, consumers are considerably keener to shop around before making a definite decision. 67% of consumers surveyed shopped around for new cereal options, 31% for personal-care retail item sellers, and 25% for telecom handsets. Shoes shoppers were particularly fickle, with 97% not tied to a particular brand, while for a number of high-value items consumer loyalty remains almost out of reach; 90% of consumers shopped around for a new automobile manufacturer and 88% for laptops.

The most important list

When it comes to the definitive decisions of the shoppers, as an average, across the categories considered, the research found that 13% of respondents are loyalists, while a further 29% - after shopping around – decided to return to their previous brand choice. The majority of consumers (58%), however, decided to switch brand.

Loyalty is elusive in today’s market

According to the research, following the decision to switch or re-research a brand choice, consumers again find themselves needing to make an initial set of brands to consider. The firm notes that being in the set of initial brands is key to the likelihood (more than twice as likely) of making it through the active evaluation to final selection. In total almost 70% of the brands purchased by consumers who switched brands were part of their initial consideration set when they started shopping.

Correlation between initial set and growth

The paper further sought to identify in how far brands that found themselves in the initial set for consideration, were able to achieve growth. The research found that in most shopping driven categories, the ratio of being in the initial consideration set to market share explains 60% of the variance in growth - with particularly strong correlation in automobiles and personal computers.

Summarising the findings in the report, McKinsey concluded, “Every company we know is sweating out efforts to increase revenue from their brands. Earning a spot in consumer’ highly valuable initial consideration sets has never been more crucial. Measures like the initial consideration index can help companies understand how their brands stack up against those of competitors while offering a way to track progress as they encourage consumers to consider their brands first.”

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Branding the modern consultancy: why reputation hinges on it

03 April 2019

The reputation of firms and brand strength remain a key aspect of business in the management consulting industry. Karla Alexander, Brand Manager at Propero Partners, below reflects on the state of reputation management in the consulting industry.

In a time where public perception is enough to make or break a company, the wise are reminded that when it comes to brand and reputation, the strength of one does not necessarily equate with the quality of the other. Nowhere is this more clearly demonstrated than in the impact a spate of recent issues has had on firms that form the backbone of the industry, including KPMG and Grant Thornton.

Such was the damage to KPMG’s reputation last year, that the Bank of England took the decision to investigate its viability following a string of high-profile corporate scandals. Whether or not the sum total of the firm’s track record is enough to restore its image remains to be seen.

This proves that brand and reputation are not only among the most valuable intangible assets – they are also among the most fragile. And their reach extends into the centre of any firm, regardless of its size or market share.

The lesson here for challenger firms and smaller consultancies is two-fold. As well as learning from the mistakes of their peers, it’s also important not to conflate brand with reputation. While they both share the same objective – to win the hearts, minds, and wallets of clients – brand provides the opportunity to differentiate, whereas reputation provides the opportunity to demonstrate credibility. Far from being the same thing, it’s this very difference that binds them together.

Branding the modern consultancy: why reputation hinges on it

Reputation is the driving force behind a person’s decision to award a firm their business, based on values that align with their own – be it honesty, transparency, integrity, accountability. However, none of these characteristics are particularly compelling or distinctive on their own. To carve out key points of difference, to stand out, and to become known, liked, and trusted among a sea of competitors offering similar services, companies should turn to their brands.

Brand is the culmination of culture, vision, values, and identity, which when used consistently and religiously, can create fresh opportunities for firms. People no longer buy services in isolation but look for a purpose or a lifestyle to buy into. Strong brands create an appetite for themselves and command a higher price tag because people will pay for them. The more pulling power and emotional resonance a brand has, the more successful the firm will be.

Protecting a brand

That’s why, regardless of abundant choice, there is still only one Deloitte, one PwC, one EY – and there’s a reason why the Big Four audit nearly 100% of UK’s top 100 corporations. This relentless focus on building and protecting their brands and reputations on the basis of being the best, has, over time, resulted in a market monopoly. However, problems arise when one is given more weight than the other. This point is particularly relevant in the case of KPMG, and in others where firms have flaunted their reputation for being untouchable in the face of the client.

Brand and reputation working together are directly attributable to significant business outcomes (such as financial performance, loyalty, awareness) and should be treated as such. Focus too much on brand and you risk alienating the people who value credibility, such as prospective and existing clients, shareholders, and the best talent. Focus too much on reputation and you risk stagnating in the market, with a service that no one knows or cares about.

In order to overcome these challenges, the first step for many firms will be to take a step back. Before any meaningful work can begin, consulting firms need to assess the current state of their brand and reputation, and establish key characteristics for both. For brand, this might be relevancy, consistency, positioning, identity, and appeal. For reputation, this might be staff turnover, service quality, growth rate, client relationships, leadership, and diversity and inclusion.

Regardless of the findings, there’s always room for improvement. An uptick in the performance of brand and reputation can be achieved by measuring the impact that one has on the other, integrating business and marketing strategies, and setting strict KPIs.

Guardianship and getting results from this activity isn’t the job of one person or one team. People at all levels of the firm should be thought of as brand ambassadors, and should be willing to do what it takes to protect the reputation of the business no matter the cost. After all, everyone benefits when good things are said about a firm when it’s not in the room.

Related: Why building trust and brand belief is key for consulting firms.