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?

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Rant: A Wake Up Call To The Food Obsessed

It seems like a staggering statistic based on the amount of restaurants that exist in the U.S. and considering all of the supermarkets and specialty food shops that are around. There are so many thousands of food writers in the U.S. as well as entire magazines and television networks devoted to food. Food seems like an obsession in the U.S. However, if so, then why does the U.S. actually spend so little on food?

In Urner Barry's Reporter (Winter 2013), it is reported that, on average, the U.S. spends 6.7% of its income on food, which happens to be the lowest percentage of the developed and developing world. There is a list of more than 60 countries which spend a higher percentage on food than the U.S. The median income  in the U.S. is approximately $50,000 so about $3350 of that is spent on food, roughly $64 a week. That is less than $10 per day!

During the last one hundred years, Americans have been spending less and less of their income on food. In the 1930s, Americans were spending about 21% of their income on food, which declined to 17% by the 1950s. That percentage has now dropped down to less than 7%, a huge change over all that time. The Urner Barry article does not provide any possible explanation for this low figure so we can only speculate, though various other sources seem to put much of the blame over all the cheap food available.

Chain restaurants like McDonald's and an abundance of cheap, prepackaged foods make it easy and inexpensive to eat. Many people can't be bothered to spend an hour or more cooking at home. They just want the ability to quickly purchase some fast food or pop a premade dish in the oven. The problem, ignored by many of these people, is that those cheap prices can come with a heavy cost, ill health and obesity.

It would be best if many of those people who regularly patronized such chains and bought all those prepackaged foods would cook more at home, from basic ingredients. That can be done inexpensively though even if it might be a bit more expensive up front, in the end it would be less costly as their health would benefit. Convincing those people to change though is an arduous task. Looking at the bottom line is much easier for people than looking forward to the future.

Though all of that may explain why many people spend so little on food, it doesn't explain our cultural obsession with food. The reason may be is that there is a food elite, a percentage of our population which spends a far greater percentage of their income on food. They also tend to be the individuals who cook more at home, while also patronizing higher end restaurants. They also tend to be concerned more with issues such as sustainability. They are the ones who read all about food, who watch television shows about food, who write about food. I would fall into this category, as I certainly spend a higher percentage more than 7% of my income on food.

Such individuals need to properly understand the privilege they possess, the ability to be able to spend a higher percentage on food. Economically, I am strongly within the middle class and have struggled over the last few years to make ends meet. I don't consider myself wealthy by any stretch of the imagination. Of my friends who are similarly food obsessed, none of them are wealthy either. Many of them have struggled during these years of economic turmoil. We are not the 1% yet we have more disposable income than some others.

Our economic woes are nothing compared to so many others in this country. There is a wide economic gap even between the middle class and the poor. The latest figures show that 14.5% of U.S. households are food insecure, the highest total ever. In a country with so much food available, it is a travesty that so many still go hungry. It is a greater travesty that the number of hungry people continues to grow to record levels. We desperately need to help fight this massive problem.

I thus implore the food obsessed, the watchers of food shows, the readers of food blogs, those able to spend so much more money on food than many others:

Get Off Your Ass And Help The Less Fortunate! 

A new year has begun so let it begin on a positive note. Make a resolution to help the less fortunate, to feed the hungry. Skip your $5 coffee, cancel your $25 lunch, forget your $100 dinner. Do something, anything, which will make our country a better and more food secure place. Lend your support to organizations dedicated to alleviating hunger. Individually, we might only be able to make small contributions, but when added together, the impact can be great.

So what are you waiting for? Stop reading my blog and go help the food insecure!

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