What ever happened to brand loyalty? In bygone days, retailers were powerful brands, but today that power has been supplanted by Google. When shoppers turn into searchers, what do you get? Check out this month’s Biznology Newsletter to find out.
“We’re going to the store.” Those of us of a certain age remember our moms and dads making this announcement on Saturday morning. My how times have changed! Because you’re reading this newsletter, you are more aware than most of how frequently people buy things nowadays without going anywhere. With the Web, the store can come to you.
But there’s a less obvious change that’s also occurred. If you grew up in a small town, you might really have gone to the store—maybe you had just that one Wal-Mart that satisfied most of your needs. But even if you lived in the largest city, you probably had a specific store you visited for each item you had to buy. You bought your tools at Sears, your cookware at Macy’s, and “you know what” at Toys “R” Us. The Web has changed that forever.
You no longer have to visit a “store near you”—on the Web, all the stores are equally close. And if you don’t like the store you’re in, a few clicks of the mouse gets you to another one. Economists like to talk about “switching costs”—the drawbacks of changing from frequenting one business versus another. Those living in small towns served only by Wal-Mart had very high switching costs. They might have been forced to pay more to shop elsewhere and also suffer from less selection—perhaps having to drive further as well. But on the Web, switching costs are extremely low.
Few shoppers leave their half-full carts in the aisles of physical stores, but some Web sites find as many as half of their shopping carts are abandoned. The reason is low switching costs. It takes just a few minutes for a shopper to find a desired item at a rival Web site, while driving to another physical store takes considerably longer (and so is not worth the time).
Low switching costs, coupled with a seemingly unlimited choice of stores has created a situation where more than 20 percent of shoppers have no stated preference for anyparticular store, up sharply in recent years (and shown by more than one study). In such a world, brand loyalty is a thing of the past for many customers. In fact, some say there are no more “customers,” only “prospects.” By that they mean that you can no longer count on your customers to return to buy from you again. You need to win them back to your business each time they are looking to buy. To some extent, of course, that has always been true, but it has never been more true than today.
Moreover, the Web is clearly a cause of this shift in shopper attitudes toward brands. In a1999 study, 82 percent of Web shoppers were looking for detailed product information, 62 percent wanted price comparisons, and just 21 percent desired information about the vendor! Since 1999, people have become even less wary of shopping online (so vendor concerns would seem to be fewer today). And, obviously, the number of shoppers exposed to the Web has exploded, resulting in a huge increase in brand-agnostic shoppers.
By now you might be convinced that shopper attitudes toward brands are shifting, but could be still wondering whether actual shopper behavior is changing. After all, it is healthy to be skeptical about whether what people say reflects what they really do. Perhaps shoppers express brand cynicism when polled but are subconsciously influenced when it’s time to choose where to buy.
No such luck. When Web shoppers’ actual behavior is monitored, it demonstrates that brand loyalty is on the wane. The best evidence for this is the rise in use of Internet search engines for shopping—92 percent of all Web users employ search engines such as Yahoo! and Google to shop or purchase online according to NPD Group. Amazon.com may be one brand name that people do visit without using a search engine, but you might be hard-pressed to think of many more.
OK, you might say, perhaps they are using search to decide where to shop, but couldn’t they be searching for the very brand names they’ve been taught? If they are searching for the brand names, then brand loyalty still has some life in it. Unfortunately, the facts tell the exact opposite story. According to DoubleClick, 92 percent of searchers never use brand names in searches before making a purchase. And even those who do use brand names don’t start there—they start by using generic names at the outset. Only after their generic searches find some brand names do they search for brands (as they get closer to an actual purchase decision).
Clearly, today’s typical Web shopper behavior is not to head to a favorite online store—shoppers go instead to their favorite search engine and let fly. Whatever sites are shown in the search results become the consideration set for that purchase. If your well-known brand name appears in the search results, it triggers more clicks than a “nobody,” but that is the extent of brand value today—it doesn’t draw people to your Web site the way it drew them to your physical store.
What’s more, these trends also apply to business-to-business commerce and to sales consummated offline—it’s a universal lessening of loyalty. 93 percent of businesses use the Internet at some point in the purchasing process—for online and offline sales. In fact, 64 percent start that process with a search in Google or another Internet search engine.
Some might argue that brand loyalty is not actually dead, but when loyalty is finally put to rest, its gravestone might say “I told you I was sick.”
