Is Brand Loyalty Dead?

Last Updated Feb 19, 2010 11:24 AM EST

The signs, not to mention the headlines, are everywhere:
Wall Street Journal: Is Brand Loyalty A Thing of the Past?

Forbes: Is Customer Loyalty Dead?

NY Times: For Car Buyers, the Brand Romance Is Gone
But is it true? Is brand loyalty dead or at least mortally wounded? Have consumers become too shrewd, too fickle, or both? Will we never hear brand names used as verbs again, as in "Did you Tivo the game?" or "Can you Xerox that for me?"

And if customer fidelity is indeed a thing of the past, why the change of heart? I mean, what caused the separation of consumers from their favorite brands, or did they just grow apart over time?

Some say Google search - aka e-commerce, the great equalizer - killed brand loyalty. But isn't Google's dominant market share in search evidence of brand loyalty? I mean, is it really a better product than Yahoo search? Not to me it isn't.

The NY Times says the days of brand loyalty for car companies are numbered. I would have agreed until I saw the number of people who stuck up for Toyota in response to Can Toyota Avoid Brand Disaster? It really surprised me.

How about instead of looking at populist opinion and media hype for answers, we approach this analytically.
The concept of "brand loyalty" postulates, for example, that an existing customer with consistently positive experiences and interactions with a company and its products will be more likely to buy from the same brand than to switch to a different one.

Now, that statement should still hold true. It certainly seems logical. I mean, if you're a happy camper, why waste valuable time shopping around? Wouldn't you rather spend that time shopping for a product you're on the fence about?

So the essence of brand loyalty seems to be intact. After that, things begin to fall apart.

In the Forbes article, Mike Linton, the former CMO of eBay and Best Buy said, "Procter & Gamble taught me that it's easier to sell more to people who are already using your brand than it is to convert them from a competitor. I still believe that theory."

Aha! But the P&G theory is only valid if the experience is positive. If it's negative, then it works against the brand. In fact, Linton went on to say, "However, consumers are more demanding than ever and earning their loyalty gets more difficult every day."

And why is that? Because we're in the information age. That's what's changed. Gigabytes of news and reviews delivered right to our iPhones at lightning speed. Why blindly trust a brand when we can so easily compare product performance and prices, reviews and recalls, features and faults?

Given the choice, and there's plenty of that these days, people will always choose information over blind trust, data over advertisements, reviews of like-minded consumers over sales pitches.

So, let's talk about what that means. Does it mean that companies should think about trimming their marketing and sales budgets and putting that money to work in product development, customer service, or quality assurance?

Let me put it this way. Brand loyalty isn't dead. The concept still holds, still makes sense. But for products and services anybody really cares about - we're not talking detergent here - brand loyalty in the absence of differentiation, a value proposition that's consistently delivered upon, is definitely a thing of the past.

So where do you think your company's focus should be? Brand marketing or real product differentiation? I think that's a no brainer. What do you think?

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