Through a special arrangement, presented here for discussion is an excerpt of an article from the Joel Rubinson on Marketing Research blog.
Catalina Marketing shared data with me two years ago on laundry detergent and bottled water showing that the brand bought most often by a given shopper is still only bought about two-thirds of the time.
Worse, these loyal customers aren't automatically retained. My own published brand equity paper in the Journal of Advertising Research shows that of those who are loyal to a brand in a given year (50 percent plus share of requirements) only half are still loyal to the same brand one year later.
From modeling loyalty distributions for many years from household purchase panel data, I have estimated that only 15 percent of brand buyers can be considered truly loyal and engaged with a typical CPG brand that they buy.
But I wonder if marketers and ad agency execs generally realize how much customer sharing, conquest and churn there is. I don't think they do.
Why do marketers form such hardened incorrect beliefs? For this answer, I turn to some of the principles in Nobel Prize winner Daniel Kahneman's best seller, Thinking, Fast and Slow. The behavioral economist notes that telling stories is easy for humans, while doing math is hard. We have a bias towards creating and believing stories that give a cohesive explanation.
In marketing, I think the culprit is the power of persuasive stories as told by marketing gurus. Social media zealots will point to the success of Old Spice. The cautious observer will note that if we had more success stories like that, indicating we knew how to engineer success and virality, we would not be mentioning Old Spice at every conference.
Branding gurus use great stories to preach that brands are expressions of self-narrative where consumers find the brand to which they will form deep attachment with no regard to actual purchasing data or the constant threat of private label. We need to create stories that deliver correct assessments from hard data in unforgettable ways, not imagine hard data from the interpretive stories consultants construct to explain individual marketing cases with false certainty.
For 85 percent of consumer/brand relationships, the data suggest that brands function as simplifying heuristics, in the way that behavioral economists might use the phrase. They help shoppers get through a big shopping trip in half an hour rather than two hours. This is not to denigrate the value of branding, as the recognition, trust, perceived fit to purpose, and familiarity that someone has towards a brand is a tremendous asset. But it does not produce exclusive brand buying patterns.
Final words of advice by Prof. Kahneman in Thinking, Fast and Slow: when faced with an important choice, he advises us to slow down our decision processes and force ourselves to use "System 2" (rational, calculating). I think these are wise words for marketing teams. Get grounded and prove your beliefs before making them the basis of decision-making.