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    True Loyalty Remains Strong Despite Economic Upheaval

    Report: What drives consumers to seek out preferred brands amid tight finances
     

    In the CPG world, brand loyalty is the golden ring for which everyone strives. But attaining and holding onto the loyalty of shoppers is difficult; it requires skill to understand consumer needs.

    SymphonyIRI Group’s current Times & Trends Report, “Brand Loyalty: How Understanding Brand Equity Impacts Brand Loyalty and Delivers to the Top and Bottom Line,” uncovers insights into what drives consumers to seek out their preferred brands and highlights recommended strategies for winning the hearts and minds of today’s savvy shoppers.

    An environment marked by consumers strapped for cash and current events, such as the S&P downgrade of the U.S. credit rating, make addressing brand loyalty even more complex than normal. Consumers numb from a vacillating economy have embraced frugal ways and continue to make purchases deliberately and cautiously. Despite a period of prolonged economic difficulty, brand loyalty is strong and growing across a number of CPG categories.

    “While most retailers and manufacturers will instinctively pull the lever to compete on price, it’s important to understand that consistently leading with price has significant negative impacts on brand equity,” says John McIndoe, senior VP of marketing, SymphonyIRI. “Rather, CPG leaders must harness the power of value. The battle for the shopper’s loyalty should not be dictated by low price, and winning CPG marketers are clearly getting this message.”

    In fact, brand loyalty has actually increased across 45 of the top 100 CPG categories during the past three years. For instance, brand loyalty is quite high, 87.6 percent, in the sports drink category. During the past three years, loyalty increased 6.5 points despite economic conditions and conservative purchase patterns.

    “Interestingly, nearly all of the categories in which brand loyalty gains were highest already have fairly high levels of brand loyalty,” says Susan Viamari, SymphonyIRI’s Times & Trends editor. “In fact, loyalty is more than 50 percent in nine out of 10 categories shown—a striking reminder that true loyalty can survive even prolonged economic upheaval.”

    Across categories where loyalty fell most sharply, private label loyalty has grown. The notable exception is the creams/creamers category, where loyalty has been negatively impacted by increased brand switching behavior. Today, 14 percent creams/creamers buyers make less than half of their category purchases from a single brand versus 8 percent in 2008.
    Across the top 100 CPG categories, the largest drop in loyalty is seen in the refrigerated salad/coleslaw category. While brand loyalty is strong in this category, at 54 percent, private label loyalty has increased sharply during the past three years.
    Another critical finding of SymphonyIRI’s latest loyalty research is that, generally speaking, consumers are less sensitive to price changes as brand loyalty increases. In sugar and butter, where loyalty is fairly low, substantial price hikes have led to sharp drops in loyalty during the past three years. On the other hand, relatively high loyalty has continued to grow in the blades and dish detergent categories despite rather sizable price increases.

    CPG manufacturers and retailers seeking to protect and grow brand loyalty in today’s volatile and competitive marketplace should consider the following action items:

    Innovation: Manufacturers should innovate in a highly-targeted manner, addressing specific needs across key and target shopper segments, such as addressing a specific nutritional need, while offering a new/experiential flavor and/or texture. Retailers should constantly evaluate the new product development pipeline, and be on the lookout for opportunities to bring in highly-targeted products that address specific needs across key and target shopper segments.

    Price & Promotion: Manufacturers and retailers should develop a keen understanding of price elasticity across key categories and brands, and use that knowledge as the basis for all pricing strategies, including everyday and promotional strategies.

    Measure & Monitor: Manufacturers and retailers should leverage market-level models to understand expected impact of pricing changes before implementing changes, carefully monitor actual impact versus expected, and make real-time course corrections as warranted.

    “Brand Loyalty: How Understanding Brand Equity Impacts Brand Loyalty and Delivers to the Top and Bottom Line,” is a free report available at www.symphonyiri.com/Insights/Publications/TimesTrends/tabid/106/Default.aspx.

    SymphonyIRI Group, formerly Information Resources Inc., helps companies create, plan and execute forward-looking, shopper-centric strategies across every level of the organization.
     

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