Originally published here: https://retina.ai/blog/customer-loyalty-during-and-after-covid-19/
Brand loyalty has shifted during the pandemic due to increasing price sensitivity, delayed shipping times, product availability, safety concerns, and more. Consider a product like toilet paper. Before COVID-19, many consumers were very brand loyal, perhaps only buying Charmin Ultra Strong for its superior performance or Cottonelle Comfort Care for its softness.
When the pandemic hit, paper products were one of the first household items to sell out. At the same time, many consumers either lost their jobs or were working less hours or for less pay. Suddenly, the top criteria when buying toilet paper became availability and price.
Brand Loyalty
How have buying trends shifted throughout the pandemic? Across our client data, we saw a shift in consumer behavior starting in June and now we are seeing behavior reach a new normal. Customer acquisition costs have stabilized and brands are starting to spend more on advertising again. A lot of the data we are seeing firsthand correlates well with a study from Selligent. According to the Selligent Global Connected Consumer Index, consumer purchases are driven by quality and price, rather than brand name.
Below are the top five reasons consumers are loyal to a particular brand.
- 26% product / service quality
- 24% pricing / rates
- 15% brand mission and values
- 13% product / service availability
- 8% brand name
The data shows that 50% of consumers focus on quality and price as key drivers of brand loyalty. Due to COVID-19, customers are more likely to make purchases to cut costs, especially on nonessential items. At the same time, customers no longer rely solely on brand names to determine the quality of a product or service.
This shift in buying behavior offers opportunities for smaller brands to earn market share. Whether it’s by offering a superior product or a lower price, or better yet-both, emerging eCommerce and digital-savvy retailers may be better positioned for success.
In order to track this change in buying behavior and understand the true drivers of brand loyalty and repeat purchase behavior, start with a customer model that’s resistant to macro trends like the pandemic. By focusing on customer lifetime value, instead of point-in-time metrics like ROAS, brands can determine who their most loyal customers will be early in the customer journey.
Selligent’s consumer report also provided the top loyalty reasons by industry:
- 37% pricing/rates for travel/airline
- 32% pricing/rates for retail
- 30% pricing/rates for hotel
- 29% pricing/rates for financial services
- 27% product/service quality for restaurants
For non-essential categories like travel and retail purchases, consumers are very price sensitive. Indeed, quality only beat out price as a key reason for brand loyalty in the restaurant category. Given heightened safety concerns during COVID-19, this result makes sense.
Brand Distrust
At the other end of the spectrum, Selligent’s report offered statistics on brand distrust and abandonment. In general, compared with the previous year, consumers are more willing to give a brand a second, third, or even fourth chance to make up for a bad experience.
Below are the number of negative experiences consumers will allow before abandoning a brand:
- 49% said 2–3 experiences
- 21% answered they will abandon the brand after one bad experience
- 18% will endure 5 or more bad experiences if satisfied with the resolution
- 12% will stick it out if the brand makes up for it
During the pandemic, consumers have become more forgiving of brands for making mistakes, whether in product quality, shipping errors or delays, poor customer service, etc.
However, it’s important to consider this trend may not last long. With customer lifetime value, you can prioritize your customer service tickets and shipping based on customer value. If you know which customers are most loyal to your brand, you can serve them first. Beyond that, if you know which customers are at risk of churning, you can use that information to win back their loyalty.
In terms of brand distrust, consumers cited the following reasons:
- 28% bad online customer reviews
- 16% bad feedback from friends and family
- 16% brand / executive misconduct
- 16% not forthcoming about protecting privacy
- 14% glitchy customer experience
Almost half (44%) of consumers named customer reviews, whether online or from family and friends, as the top reason for distrust. This matches with product and service quality being listed as the top reason for brand loyalty. With more shoppers buying online, consumers have easy access to customer reviews.
Customer reviews carry more weight than brand name recognition. It’s important to determine who your most loyal customers are, using customer lifetime value, and then entice them to write reviews. Plus, with CLV metrics available early in the customer journey, you can optimize your marketing campaigns to acquire more high-value customers.
Buying behavior shifted rapidly at the start of the pandemic. We can expect certain trends, like online shopping and price sensitivity, to continue well into the future. Now is the time to start focusing on individual-level metrics like customer lifetime value to keep up with consumer trends and increase your brand loyalty.
Originally published at https://retina.ai on October 9, 2020.
