Brand Loyalty is eroding, reports Financial Times, based on a study done by CMO Council and Catalina Marketing’s Pointer Media Network. Just look at the picture below - these are some of the top brands in US. A two-year analysis of 685 grocery and pharmacy-stocked brands using data from 32 million consumers supermarket loyalty cards found that in 2008 the average brand lost a third of its formerly highly loyal customers.

Brands left to ponder the price of loyalty

Image Credits: Financial Times

Highly loyal customers are a brand’s most profitable ones and their defection will have an impact on both top line and bottom line. The prolonged recession in US, for sure, played a role. So, what are the driving factors? - price and promotion. I feel that there is more than price and promotion in play. As competitive products, including store brands, sit next to a brand at store shelves, price comparison is very easy, visual, and quick. You don’t need google for this. Just a little nudge that’s motivated by an economic condition might help a consumer to reach and try the no-name brand. As these non-brands make inroads in quality, just one try might make a brand lose its highly loyal customer - forever.

I realize that you cannot avoid brand erosion under trying economic times. However, I strongly believe that brands need to engage their customer base on a constant basis both in good times as well as bad. Further, this engagement should use multiple marketing channels rather than just a broadcast medium. Now, the top brands listed above definitely have the wherewithal to fund the cost of such an engagement. How about those second or third tier brands?

What can online retailers, those selling their own brands, learn from this and react to changing economic or usage conditions? I strongly believe in collecting rich consumer or buyer’s behavioral data and update these on a consistent basis. An increased effort in data collection, RFM analysis, and segmentation will help online retailers gain insights into these changes on a regular basis and roll-out strategies to retain their user base.