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Are brand and customer loyalty only deceptions? Brands struggle with burnout.

Customer Loyalty is repeatedly seen in many policy documents as an important success factor. In the recent past, however, more and more customers are turning away from brands resulting in a massive loss of loyalty.

Customer Loyalty is repeatedly seen in many policy documents as an important success factor. In the recent past, however, more and more customers are turning away from brands resulting in a massive loss of loyalty. More and more brands are threatened with the burn-out syndrome.

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Some reasons for this are obvious, for instance the number of available manufacturer brands has doubled in the last decade but as far as we consumers are concerned, the number of purchased brands per household has remained the same (according to a study conducted by GfK and Serviceplan Gruppe “Vorsicht! Marken-Burnout” (Watch out! Brand burnout)). Another reason is the ever increasing availability of products via an increasing number of channels and at the same time declining marketing investments. And it is also no secret that consumers have adjusted their purchasing behaviour due to the almost unlimited possibilities that also include price offers. The loss of loyalty should really be no surprise.

Marken_Burn_Out_Brand_Nomads

In the above cited study from 2013, four different brand classifications were made:

# Growth Brands (29%); Brands with a gain in market shares and the maintenance/increase of regular customers
# Stable Brands (18%); Brands with a constant market and regular customers
# Retreat Brands (12%); Brands with a loss of market share but stable regular customers
# Burnout Brands (41%); Brands, to a large extent, that have to replace loyal regular customers with disloyal occasional buyers.

The study further shows that within three years, almost every second regular customer is lost.

This data is also no surprise as the development was already predicted in the book ‚The Brand Bubble: The Looming Crisis in Brand Value and How to Avoid It‚ (2008) by the authors J. Gerzema and E. Lebar. Gerzema and Lebar drew a clear picture of the loss of brand loyalty, its causes and consequences. At the time of the financial crises, they still described it as a crisis of confidence in brands. Up to today, this development has continued to intensify and branded products are continuously desperately fighting to maintain regular customers.

From inside/out to outside/in

Currently, many brand strategies are converting from an inside/out to an outside/in perspective. With an outside/in strategy, companies place customers “centrally” in the heart of the brand and make them appear to be the strategic starting point. This resulted in, amongst other things, the currently very widespread topic of Customer Experience or the Service Design in order to “up-lift” the brand and to avoid the threat of burnout.

In reality, however, most strategies are still developed around the product or service itself. Customer orientation means the “packaging” and in this way, customers should easily be incited to purchase. A real “shift” with the customer as the starting point for the strategy is hardly adapted.

If this were the case, then companies would often have to ask a “What if” question. With regard to the subject customer loyalty in an outside/in lead strategy, the question would then be: what if our brand was loyal to its customers?

what if our brand was loyal to its customers?

How exciting it would be, if, for example, a bank presents its brand loyal position to its customers. This would revolutionize the entire product and service profile of the bank. Then the commissions would not drive the business, but the customer!

Banks would especially benefit greatly from this innovative leap because they ultimately have a significant share of the massive loss of confidence of brands. In the financial sector, it is only a matter of time that the business models of the major banks in the many disruptive concepts of the new era will dissolve that, in most cases, is actually driven by the customer benefits. The “all-in-one bank” will then no longer exist.

Another example of the loss of confidence of brands and their background is seen currently with the VW brand. If not now, when? Volkswagen’s great crisis of confidence is an excellent opportunity for the firm to be loyal towards its customers. As a result of the exhaust gas scandal, merely repositioning the product strategy and promoting e-mobility in the core of the brand, is certainly not the ultimate step towards working on building new trust. Whether engine designers and engineers will really become battery and software experts remains the question.

With genuine customer loyalty, Volkswagen should revolutionize every one of its car dealerships, change the way that they deal with customers and develop new services. The brand would then get the chance to develop an authentic core. But in order to answer the question of “what if …” and then to relevantly implement it, obviously requires courage to leave the comfort zone!

Because it is always a well-used brand example: Apple. Yes, “the big game changer” from Apple, iTunes and iPhone, resulted from a “what if” question. Apple demonstrates well how difficult it is to stay on course.

Apple_Store_Brand_Nomads

The company only takes small evolution leaps and an Apple store has not orientated itself for a long time on the customer. The brand wants to dominate the customer and implements a proven old inside/out concept (internally driven) that however has a much stronger and more dominant experience for brands than in the past. Apple dominates in the distribution of hardware and software, services and with data/customer knowledge. Up to today, the success has proven the company right. But whether this is long-lasting will be seen. Even tax deals and complex group structures for the benefit of their own profit maximization are transparent today and cast shadows on a brand. On no account, do they constitute a loyalty to customers.

If the change of the concept of brand loyalty to customer loyalty should show more outside/in, this is a big hoax. A real loyalty of brands to customers is still very rare. And it is often just a courtesy in the area of “goodwill” that should make customers happy. This has nothing to do with customer loyalty, but with the fear of losing regular customers.

If brands want to avoid their burnout, it’s time for a real loyalty shift. Brands should start positioning themselves as loyal to their customers and have the courage to re-invent themselves.

Holger Ambroselli has worked in brand and strategy development as entrepreneur and consultant for many years. His international experience and knowledge in intercultural brand management have made him a sought-after strategy thinker, keynote speaker and brand coach. He is also one of the drivers behind ‚Sam’s Strategy Kitchen‘, which supports a company’s transformation by creating customer and business value through experience design innovation.

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