Brand Loyalty Takes a Hit
There are no atheists in foxholes, goes the old saying—and, these days, there aren’t too many brand loyalists there either.
This realization was underscored by an article in Sunday’s New York Times, noting that a Lucky Charms-consuming family is now enjoying something called Millville Marshmallows & Stars for breakfast, while another has substituted Briargate steak sauce for A1.
In an era of $4 a gallon milk, in other words, brand loyalty goes out the window.
(For most people, anyway. I still stand in awe of those among us who continue to frequent Exxon for gasoline, not just because the conglomerate seems to consistently sock consumers with the highest prices around, but also because they never satisfactorily dealt with that whole Exxon Valdez situation.)
Not that Exxon or General Mills or Kraft are going away anytime soon, but they’re definitely starting to feel the pinch. (Well, maybe not Exxon, with its net income of $40.6 billion—a new record!—in 2007. Part of the company’s branding campaign is its motto: “Taking on the world’s toughest energy challenges.” Not just taking them on, but wrestling them to the ground and making unkind remarks about their mother, I’d say.)
But while the executives at Exxon continued laughing up their sleeves, consumer confidence fell for a third straight month in April, hitting its weakest point in more than a quarter century, according to the Reuters/University of Michigan Surveys of Consumers.
High fuel and food prices, shrinking income gains, falling home values, and general unease have “had a devastating impact on buying plans, with consumers citing these uncertainties three times as frequently as they did a year ago,” the report said.
And if a rising economic tide floats all boats, what happens when low tide hits?
We’ve all seen the near-panic state that Starbucks seems to be heading into, desperately trying to reinvent itself in a number of ways to make sure those frappucinos keep selling. Most high-price retail sectors are also beginning to hurt, as consumers increasingly swing towards Target and T.J. Maxx and away from Neiman Marcus and Nordstrom.
And that’s where branding seems to be headed: in Wal-Mart we trust. If Saks Fifth Avenue is still around when we dig out of the rubble, terrific; if not, well, you had a good run. Brand names—at least, the higher-priced ones—aren’t going to matter as much … and the laughter in the boardrooms behind those brands may yet sound like the voice of increasingly despairing consumers: the whimper of whipped dogs.
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Hi Kevin
I am not disputing there will be trickle down contractions at all points in the brand spectrum - but we seem to forget that this has happened with every economic cycle.
Like I said - the smarter folks will use this time to revisit and retool their brand value propositions, come to learn more about social marketing, proximity advertising and customer engagement.
But instead front line jobs will be cut, aggressive promotional activity will ensue, customer service will suffer which will then set the stage for a new round of customer centric mea culpa's
As an aside - I wonder how many Americans feel this economic downturn was precipitated by the sub-prime fiasco and if they will harbor any long-term ill will to the 'responsible parties' for bringing the hardship/uncertainty upon them.
could prove to be a fascinating marketing/branding problem if the circumstances weren't so tragic
Thanks for the input, Miro; I'm intrigued by your Haagen-Dazs experience. Nevertheless, I maintain that the Times article's illustrating that average consumers are already jettisoning brand names for cheaper alternatives doesn't exactly bode well for higher-end brands, especially with $4-plus-per-gallon of gas still on the horizon. There will always be someone in the market for a Maserati, but I'm wagering the two-Mercedes households may start taking a look at Hondas.
Kevin
have to disagree
its not the brand/brand loyalty that's at stake - its the value proposition
in tougher times - people will always circle the wagon and the higher end of the market will suffer some slowdowns
the smarter CEO's out there will take this opportunity to re-tune their brand propositions for the next run.
I can also add then when I was a market analyst on HagenDazs in Canada - one of the biggest surprises was the U shaped demographic profile - peaking at the lower and higher income levels - clearly some people will continue to buy premium brands in certain categories - if only as a brief escape from the hard realities.
cheers
Miro