Why consumers are breaking bonds with their favorite brands
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
A number of legacy retailers and classic consumer packaged goods brands are struggling — some exiting the marketplace — despite the pull of nostalgia that might have protected those brands in the past.
Santiago Gallino, a Wharton professor of operations, information and decisions whose research focuses on retail, said the idea of a family tradition of buying in a certain store as part of a certain routine is still very relevant. But one countervailing factor now is the abundant and easy availability of information about what other stores are offering.
“Years ago, if you were a Sears customer or a Macy’s customer, you might have known what other companies were doing, but it was not as prevalent as it is today,” Mr. Gallino noted. “If you were offering not-so-great service or not so up-to-date stores, you could get away with that easier than today. I think as much as we like to keep our traditions and routines, nowadays with all the information and reviews out there we can quickly learn that a company is cheating us.”
If legacy brands were once efficacious to consumer fidelity, then social media has added an element of “promiscuity” to the retail environment, said Americus Reed, Wharton marketing professor and identity theorist. “It’s like being on Tinder — there are thousands of objects you can get connected with,” he said, referring to the dating app.
Other factors competing for customer affection with the nostalgia-legacy factor have multiplied in recent years: concerns about a company’s politics and ethical behavior, its policies on environment concerns and child labor, or the sourcing and composition of ingredients.
It’s shocking to see big legacy brands like Gillette and Johnson & Johnson struggling, said Barbara E. Kahn, Wharton marketing professor.
New business models challenged some, according to Ms. Kahn, citing the impact of Dollar Shave Club and Harry’s on Gillette’s. But in many cases, legacy brands have failed to meet digital natives. She said, “Digitally native vertical brands go to millennials with an emotional, branded story that speaks to their lifestyles. Legacy brands didn’t see the change and didn’t change fast enough.”
DISCUSSION QUESTIONS: Has access to online information and social media weakened the traditional bonds consumers have with legacy retailers or brands? What advice would you have for legacy brands adapting for the digital age while maximizing their nostalgic connections?
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19 Comments on "Why consumers are breaking bonds with their favorite brands"
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President, founder and CEO Interactive Edge
What happened is that many of these brands/CPG companies were too greedy. They thought their multi-billion dollar brands “were too big to fail” and they remained greedy. They did not see the newer competitors coming or they did not care until it was too late. Now they are desperately trying to change their tune but are finding that younger consumers are seeing through their attempts to fit in or be more empathetic, etc. What can they do? They are finding that the only way to not be left behind is to buy the smaller upstarts as we have seen with Gillette and many other categories. It’s the nature of the business and it will, in my humble opinion, start to balance out over the next five to 10 years, but big CPG be aware – your lunch will be eaten unless you wake up and see that the consumer of today doesn’t care that your brand has been number one for the last 150 years.
President, Spieckerman Retail
Digitally native brands may have a more relevant, Millennial-resonant story to tell but they also possess reams of robust user data. As such, it’s far easier for these brands to enter traditional retail environments (brick-and-mortar) through their own branded stores or via partnership, than it is for traditional brands to build digital strategies. Many legacy brands’ business models also rely heavily on category expansion and line extensions for growth. Before you know it, they are cannibalizing their own brand and product portfolios (or those of their mega-corporate owners). Digitally-native brands tend to be more focused. It isn’t always about old school vs. new school. It’s the fundamentals.
Managing Partner, Advanced Simulations
I’m not sure it’s fair to blame digitalization for a retailer or brand’s poor performance. If I were a shaver, Harry’s or Dollar Shave Club might have a compelling story for me – and no guy love’s his razor that much. Gillette, as an example, used to be, “the best a man can get.” That’s no longer true and we shouldn’t be surprised that somebody’s come along with a better story. Retailers are the same – give me a reason to shop your store and not your competitor’s store – you used to do that.
Principal, KIZER & BENDER Speaking
Whoa. I never though of the fact that customers would conclude that the retailers have been “cheating” them. But on second thought, with the information available to consumers today, I guess that could happen. The presence of the internet has really educated our customers with perceived (and actual) better values, as well as with emotional connection strategies. What can legacy brands do? Work hard on presence where their customers are and create compelling reasons/programs and stories about why their products are important to the customer. I’m not motivated when I see a bland ad on television for shaving cream … wait a minute, I don’t remember when I last saw one. Perhaps that is part of the legacy brands’ problems. Get the messages out where the customer resides and shops.
Principal, Retailing In Focus LLC
There are several issues at play here, all threatening the market share of legacy brands:
CPG companies are guilty of too many brand extensions. (See this week’s WSJ article about trouble in the yogurt aisle, which has become unshoppable.)
I could go on, but the perceived “moat” around national brands is in danger of drying up.
Chief Executive Officer, The TSi Company
Today we have become accustomed to looking for information on just about every item we buy before we make the purchase. Competition is intense, and companies have tried everything they can to win over the customer. Unfortunately, some have misled customers not to mention the fast-talking salesperson who stretched the truth or just flat out lied. So yes, the internet allows us the opportunity to judge for ourselves before buying the item. Knowing that, it’s incredible to see how many manufacturers and retailers don’t use that to their advantage. Companies should be doing everything they can; not scamming the customer with false testimonials, but obtaining positive product reviews from genuine and satisfied customers. The internet is an excellent tool for social media and when used correctly can be a huge success.
Chief Customer Officer, Incisiv
The DNVBs are the ones who were smart enough to leverage online information and social media to build their brands while traditional retail and CPG stuck to their traditional go-to-market strategies and were left out. Many of these brands have certainly pivoted to make efforts to connect with consumers in these new channels but their authenticity is in question and that’s where younger retailers and brands win. Not all is a losing proposition – look at what Levi’s has been able to do. Leverage nostalgia as well as connect through authenticity with younger generations.
Principal, Anne Howe Associates
For the past 10 years, the shopper mindset has been “what I want, how I want it, when I want it” – but many legacy brands turned a deaf ear. It’s always wiser to meet the shopper head on and work harder to deliver to where they’re headed, even if that change is uncomfortable.
Global Industry Architect, Microsoft Retail
This is an amazing phenomenon. It illustrates how Gen X and Gen Z no longer follow older generations.
What I do see as highly relevant here is that these emerging brands all have something in common – they either offer something different or highlight something different. This could be that they solve a problem for the consumer (the hassle of re-purchasing blades – Dollar Shave Club) or they focus on ethical credentials (Ben & Jerry’s ice cream).
“Legacy” brands may not need to change the product – just how it is delivered or messaged. What is interesting is that another approach is to buy the emerging brand out – Unilever did with the two examples above.
However – what they don’t seem to have done is expand the credentials or know how to expand other parts of the organization.
Managing Partner Cambridge Retail Advisors
Digital distraction from competing brands is much more prolific today than years ago. While this can deter consumers from your brand, there are bigger issues that usually cause customers to switch their brand loyalty – declines in product quality or a bad customer experience.
The best approach for maintaining brand loyalty is to take care of your most loyal customers – the 20 percent that represent approximately 80 percent of sales (traditional rule of thumb). Monitoring the activity of this important customer segment is imperative. If there is any drop in visits or spending, it is a sign of a problem. If a customer had a bad experience or is disappointed with a product, its critical to promptly follow-up with them to learn why they are not visiting or spending and if there was a problem, fix it in a way that makes the customer happy.
Loyal customers don’t leave based on an online or social media ad, they leave because of a bad experience.
Global Retail & CPG Sales Strategist, IBM
Beyond all the trends pointed out in this article is the driving force that I see with younger generations. This force is driving toward the best choice at the moment. There is no long-term loyalty with most young people that lasts as long as Baby Boomer loyalty. Boomers are stubborn. Millennials are far more agile.
Founder, CEO, Black Monk Consulting
Times change. For the past five decades Americans have become less and less attached to institutions of all kinds than their parents and grandparents were. The values first surfaced in the 1960s — authenticity, an ethical approach to life, distrust of large institutions, a lack of reverence for historical authority, and the celebration of the individual — have gradually morphed into the value of Millennials and Gen Z — rejection of traditional brands, demands for ethical corporate policies, environmental concerns, authenticity, appreciation for customized, artisanal products, etc. Did the Internet accelerate the process? Probably. Would it have happened anyway? Just as likely, if a bit more slowly. I think my only advice is that nostalgia is O.K. … sometimes … but only when it is presented in an authentic way that is relevant to contemporary consumers.
Consumers have always been brand promiscuous. Stores they were loyal to were often for accidental reasons like geography (closest to them) and not for the over-hyped loyalty theories we’ve been fed.
I didn’t agree with the reasoning here, or the ending theory about digital natives being Gillette’s problem (rather than how Dollar Shave bought customers away from them by subsidizing threateningly low prices). Here’s my blog post laying out the seamier truth about Dollar Shave.
Information about other stores and brand is more easily available now and that is a threat. But to suggest it’s why the mentioned brands are suffering is to miss the true economic reasons. Department stores lost most of their departments to warehouse and specialty — to be left as a skeleton of clothing. (I bought my first fly rod in 1971 at J.C. Penney. Wouldn’t even think of doing that today.)
Vice President, Research at IDC
Brands are being tested in today’s market – because the earlier advertising and PR-driven messaging is now supplemented by access to tons of data and millions of customers, all of whom had different experiences with a brand. In the past it was what you and perhaps your neighbors or work colleagues knew about a brand. Today it’s what a family on the other side of the planet knows about it. Brands have to reinvent themselves and be more diligent in managing their relationships with the public. PR is becoming a more important and less controllable environment. The digitalization is on the consumer side — with access to far deeper information about brands, including where the bodies are buried. Legacy brands have to re-establish themselves or risk losing business. The best brands are rebuilding their customer relationships including highlighting successes from their nostalgic past.
Head of Trends, Insider Trends
Young adult consumers are not developing loyalty to the brands they grew up with. As adults, they don’t want their mother’s or father’s brand anymore. New brands that challenge established heavyweights are cool and offer something truly innovative for the digital generation.
Some big brands react by just purchasing these upstarts rather than developing cool new brands for a new generation of consumers. That is not long-term strategy for success.
President/CEO, The Retail Doctor
Of course the joke is many of these digital native brands are being swept up by legacy retailers into their portfolio so have things really changed that much from the old CPG ways?
Chief Marketing Officer, Impact 21
One of the biggest drivers of this trend is that the barriers to entry are much lower than when Walmart, Macy’s, Procter & Gamble, etc. were growing significant market share. We’ve talked about consumers having much more information and can easily explore what’s new and different. At the same time, entrepreneurs that see whitespace have easier access to what they need to get a company up and running. It’s still not easy, but it is much easier than it used to be.
Chief Amazement Officer, Shepard Presentations, LLC
What’s happened is the customer is smarter because of access to information. Also, there is more competition than ever before. Traditional brands now compete with micro-brands. Look at Ivory Soap. At one time they “owned the market.” Today they have good share compared the others, but the smaller “boutique” style brands are making inroads. I would hardly say they “own the market” today. The beer business used to be about several major brands. Today there are so many micro-breweries that there are stores devoted to just beer. Advice is to understand today’s customer is not yesterday’s customer. Know how they think and buy. Understand what is needed to cultivate loyalty.