Monday, August 26, 2013

Rant: Wineries, Don't Assume It's Brand Loyalty

A woman makes her weekly stop at a local wine store, buying the same wine every time, a Yellow Tail Pinot Grigio. Every time a man wants to splurge on a higher end wine, he buys a bottle of Caymus Cabernet Sauvignon. To celebrate every special occasion, a woman purchases a bottle of Veuve Clicquot Champagne. Many people might assume that these three examples are indicative of brand loyalty, customers who intentionally support and choose to make repeated purchases of a specific product. However, what if it isn't really brand loyalty that is leading to their repeated purchases?

To marketers, wineries and others, brand loyalty is a significant attribute to their bottom line. Customers who are loyal to a specific brand tend to buy more of that product than anyone else, making them very important to a product's success. Such customers are often treated differently, if possible, to continue to make them happy. The problem is that a number of customers who make regular purchases are incorrectly labeled as "brand loyal." Instead, their purchasing actions are due rather to habit, and that is a much more fragile reason which needs to be addressed differently than if they were brand loyal.  

Neurobranding, by Peter Steidl, provides a fascinating look into consumer behavior, touching on important neuromarketing studies and research. And Steidl indicates that brand loyalty is vastly over estimated. "Too often we assume that consumers who regularly buy the same brand have a strong brand preference. However, most likely these consumers are engaging in habitual buying. They aren’t making purchase decisions but are simply repeating a behavior without giving it a second thought. This behavior is driven by their memories without any conscious intervention." In all three of the examples I provided, it could easily be said that they are buying by habit, not brand loyalty.

Steidl gives additional explanation of this issue. "Ehrenberg, the father of consumer panels, has proven again and again that repeat purchases are typically not a result of brand loyalty but of habit. True loyalty is based on consumers believing that the brand they buy is the best choice for them. Habitual buying means that the consumer doesn’t think about whether the product or brand is the best choice for them; they simply repeat past purchases. This suggests that the brand ‘works for them,’ but we cannot assume that they are loyal to it. Habitual buying allows consumers to simplify their lives by avoiding the need to spend many hours checking all options open to them with each purchase." How many of your own regular purchases are habitual rather than brand loyal? Steidl has an answer for that as well. "The truth is more like approximately 95% of grocery items are bought habitually."

Habitual purchasers are still important to brands, such as wineries. "Research undertaken by Nielsen shows that customers who purchase a brand eight times have a 97% likelihood of buying the brand a ninth time." It becomes so ingrained that it can be tough to change, especially as those consumers really don't think about their purchases. That is good for wineries, except it also can be dangerous as habitual buyers need to be treated differently than those who are brand loyal. If they are not, you may stand to lose those habitual buyers.

The main difference between habitual buyers and brand loyal customers is that the former does not think about their purchasing decision while the latter actively makes a conscious decision that their purchase is the best for them. That is a significant difference and marketing needs to address those differences. To avoid losing habitual buyers, Steidl states: "When consumers buy your brand on a habitual basis, you don’t want them to think about this purchase. If the consumer starts thinking consciously about the purchase, they may well also start to consider alternative brands and products." With brand loyal customers, you want them to think about their decisions, so you can see the how poses a dilemma to wineries.

What can cause a habitual buyer to think about their purchasing decision? "Any significant change in any aspect of your product – for example, its pricing, distribution or promotion – can activate the conscious mind, ..." For a mass brand like Yellow Tail, raising its price a dollar or more, could trigger a significant number of habitual buyers to reconsider and potentially move onto another brand. For the truly brand loyal, such a price change would stop very few of them from changing brands. Steidl also explains that: "Habits can be broken more easily when a change carries low risk, requires low effort and results in immediate rewards."

That also means that habitual buyers can change their habits due to numerous factors outside the control of wineries and marketers. For example, a wine store that has a wine tasting could make a habitual buyer reconsider their actions. A customer might buy the same Champagne all the time, until they taste a few different ones and find they like the taste of another better. Because they got to taste a different Champagne, the risk of change is low, takes no real effort and results in the reward of a wine they prefer more. Or a wine store might be temporarily out of a specific brand that a customer habitually buys, so that customer must think about choosing something else, which could break their habit.

It is safer for wineries to build brand loyalty rather than rely on habitual buyers. However, that also means that first such wineries need to realize that all repeat purchasers of their products do not possess brand loyalty. And that is something many wineries fail to understand, leading to marketing mistakes which ultimately cost them customers. Not all repeat purchasers are the same so treating them as if they were will only cause problems.

Wineries, do you know how many of your repeat purchasers actually possess brand loyalty and how many are merely habitual buyers?


Man About Wine said...

And habits for wine are reinforced by placement. In the instances cited, many consumer will buy another well known brand if it gets the same favorite spot of exposure on the shelf. It is location as much as brand that reinforces buying habit.

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