Ben Cooper

RESEARCH: Drinks top loyalty charts

By | 31 January 2007

A new report from Business Insights suggests that alcoholic and soft drinks brands retain the strongest consumer loyalty across all food and drinks sectors, but in today's highly competitive and commercialised marketplace, brand loyalty is under greater pressure than ever before. Ben Cooper reports.

Rampant consumerism may have provided the conditions for major brands to grow and prosper, but a new report from Business Insights suggests that highly evolved consumerism also provides the stiffest challenge to brands - or at least to brand loyalty, on which a brand's prime objectives depend.

According to the report - Winning Strategies for Food and Drink Brand Loyalty: Effective Consumer Engagement, Communication and Innovation - the three key strategies for continued revenue growth are repeat purchases, increasing customer spend and customer acquisition, and two of these strategies are either entirely or partly dependent on maintaining and growing customer loyalty. But loyalty is getting harder to maintain, the report contends.

However, the good news for the drinks sector is that, according to Business Insights' research, brand loyalty is considerably higher in the drinks market than in the food sector.

A survey of food and drinks executives conducted by Business Insights revealed that some 40.3% of industry executives rate loyalty towards food brands as 'high' or 'very high', but 41.7% expect that loyalty will 'decrease' or 'significantly decrease' over the next five years.

In contrast, 56.9% rate loyalty towards drinks brands as 'high' or 'very high', with 66.7% believing loyalty to drinks brands will at least stay the same or improve over the next five years. Indeed, alcoholic and soft drinks enjoyed the highest levels of consumer loyalty across all categories, according to the report, with canned, frozen and chilled foods experiencing the lowest.

Nevertheless, the report concludes that, across all food and drink sectors, loyalty is becoming harder to sustain, as consumer choice broadens. "Today, in developed markets at least, consumers are quite literally spoilt for choice, leading to 'choice paralysis', and making people less satisfied with the choices they do eventually make," the report states. "In addition, consumers today are more resistant to marketing and advertising. This is partly a protective response to the sheer volume of advertising messages to which they are exposed and partly due to their increasing cynicism about those messages. They trust less, having had that trust abused in the past."

The report suggests that, where the consumer's emotional involvement with a brand is low, what brand loyalty exists is more about inertia, or habit, rather than true loyalty. And in this context, brand loyalty is more easily disrupted in today's highly commercialised environment. "Repeat buying behaviour, driven by inertia, or habit, rather than true loyalty, is easily disrupted, by promotional activity for example," the report notes. "True loyalty increasingly requires companies to think about creating desire and involving emotion. But consumers are increasingly uninterested in developing relationships with brands."

Although the report identifies differing dispositions towards brand loyalty among demographic groups, with older consumers seen as the most loyal, it warns that consumers will only remain loyal to brands if those brands continue to meet their expectations, their needs and wants, as consumers become better informed about their choices and more demanding. This means that brands have to work harder than ever to achieve even the same levels of loyalty.

The report also contends that, for multi-brand companies, focusing on priority brands is more important than ever. One trend is streamlined portfolios, where often it is the umbrella brands, rather than the individual products, that are promoted - often via a 'lighthouse' idea, making the brand stand for something above and beyond product. For example, successful brands are taking positions reflecting current trends such as Fairtrade, organic production, and health and wellness.

In addition, companies must keep track of consumers' perceptions of where the brand is and how it is performing, and innovate continually to be sure to keep up with - or ahead of - evolving consumer needs and wants, looking to add value through product development.

Authenticity is also key. "Owning a great idea allows a company to create powerful stories about the brand that consumers will want to be part of. But no marketing practitioner succeeds in telling a story unless the credibility to tell that story has been earned," the report states. "Brands today and going forward into the future must commit to being 'true to themselves' - and it must be a commitment for the long haul."

On a more practical level, the report stresses that better targeting, "creating a dialogue with the right people", is vital. "It is possible today to harness the power of highly refined consumer targeting to be sure that a company is talking to the potentially most receptive consumers," the report says. Meanwhile, leveraging technology is crucial in giving a brand an edge in knowing its customers. Online media has become an important element in the marketing mix, and to that repertoire has now been added the idea of brand blogs, where companies can interact with their consumers "on a direct one-to-one basis that is entirely new".

However, the report concludes that in spite of a company's best efforts, brand loyalty alone cannot be guaranteed to deliver ongoing organic growth. The reality of what drives exceptional performance in organic revenue growth is a balanced approach across all three sets of growth levers: retaining existing customers, getting customers to spend more, and acquiring new customers.

To find out more and to purchase the Business Insights report Winning Strategies for Food and Drink Brand Loyalty: Effective Consumer Engagement, Communication and Innovation, click here.

Sectors: Beer & cider, Soft drinks, Spirits, Water, Wine

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