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The impact of the cost-of-living crisis on brand loyalty

Consumers are more open to shopping around than ever before. Even of those who define themselves as brand loyal, 76% say they would still buy from competitors if it were cheaper of more convenient to do so. McKinsey report much of this behaviour shift began during the pandemic: 39% of consumers changed brands or retailers and 79% of those intend to continue exploring retailer options as the new normal. Unlike pre-COVID, consumers across all income groups are now inclined to seek lower prices and greater convenience.

The cost-of-living crisis is set to compound these shifts in consumer behaviour, with past recessions resulting in declines in brand loyalty. However, this does not always mean the lowest price will win. There are a number of other factors that brands can focus on to gain a competitive advantage and build connections with their audience. Customers often shop with brands out of habit rather than loyalty; 70% of customers state they frequently buy from the same company but are not necessarily loyal to them. Convenience plays a big role in brand choice and highlighting this in messaging is an important way to establish habitual shopping amongst new customers. Easy purchase options, delivery, returns or a convenient location often keep consumers coming back.

Beyond habits, brands should also assess whether their branding aligns with the main brand loyalty influencers. Consumers have always been responsive to emotive branding, but they now expect brands to be ethical, sustainable and demonstrate how they value their customers. However, authenticity is key when delivering purpose-driven branding and marketing. Brands must be able to substantiate their claims, and shifts must start from within the business, not from their comms strategy.

Loyalty schemes and customer reviews are a key opportunity for brands to show value. Programmes that offer discounts, exclusive rewards and personalised recommendations are sought out most. Joining incentives should be clear and illustrate long-term benefits rather than one off sign-up discounts. Tesco are a fantastic example: their Clubcard scheme saw significant uplift in the last 12 months due to consistent member pricing and perks to drive long-term loyalty. ASOS also show the impact of using AI learning, with their app generating personalised suggestions based on user engagement onsite. This combined with their service offering means that customers continue to return shop in-app instead of browsing multiple retailers online.

Shifting consumer behaviour coupled with increasing financial uncertainty means the coming year will be a pivotal time for brands. With loyalty decreasing and price becoming increasingly important, it is crucial that marketing communications focus on meeting the needs of the customer. Purpose-driven messaging and convenience can deliver greater differentiation, but it must be credible, and brands must follow-through on the total customer experience.

Watch this space - look out for our whitepaper on this topic coming soon.