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How Product Categories Influence Brand Loyalty

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How Product Categories Influence Brand Loyalty

There’s been some debate lately about whether brand loyalty is disappearing. Some business and marketing observers have tried to tie an overall decline in brand loyalty to a similar decline of loyalty in society generally.

It’s a big stretch though to say that a 1% decline in a brand’s loyalty is even partially caused by society’s rising divorce rate. But if brand loyalty is declining, it’s more likely that there are practical market reasons for it, particularly the nature of product categories.

How Product Categories Influence Brand Loyalty

Every product or service belongs to a product category, defined generally by the shared characteristics of the direct competitors in it. Toothpaste is a product category. Network software is a product category. So are hospitals or educational institutions, in fact.

For each of these categories, we have a long list of brands and types to choose from. All the versions of just Colgate toothpaste are bewildering. And no wonder that Colgate TOTAL is the brand’s best seller – we don’t have to choose among having whiter teeth or fewer cavities or less sensitivity.

To look at another example, consider universities and colleges. Public and state, private, religious, specialized. Ones that focus on intensive research and others that focus on job training. Again, many choices.

So how do product categories affect loyalty? There are three factors at play: consequence, choice and parity. And those in turn should affect how you brand and market to maintain loyalty.

Factor 1: Category Consequence

As marketers, we’re all passionate about what we’re marketing. But as consumers, we interact with hundreds of product categories every day. Some are few but have great consequence – our hospital, our car or our tax accountant, for example. These product categories have a major effect on our daily lives, and a poor choice can have a large negative impact. When we find one that works well for us, the reward for brand loyalty is high and we don’t tend to experiment.

On the other hand, we interact with far more household goods categories but they have a minor effect on our everyday lives. Laundry detergent, for instance, does not have great consequence and a poor buying decision is easily overcome. As a result, the reward of brand loyalty is likely not enough to prevent customers from trying different brands.

A critical factor in successfully building brand and brand loyalty in low-consequence product categories is to build a sense of consequence. If I buy this peanut butter, I’m a better mother. If I use this toothpaste, my dentist will approve of me. If I give to this non-profit, I’ll feel like I’ve done something good.

Factor 2: Category Choice

Lots of choice is another enemy of brand loyalty. The more competition in a product category, the more sub-categories, the more choice. Let’s go back to detergent. 50 years ago, there were a few brands, all powders and all promised to get clothes clean. But now we have many — powder, liquid, tablet, sprinkles. Colors and whites. Fresh smell and no smell. Powerful or gentle. And so on. More choice makes it easier for customers to trial and switch, further eroding brand loyalty. This is particularly true if the product category is of low consequence.

A strategy to counteract too much choice is to allow customers to trial within your brand family. Tide, for instance, has brand extensions that cover most of the sub-categories, boosting brand loyalty by encouraging experimentation “in the family.” Even brands with high consequence practice this strategy. Colleges and universities, for example, are constantly expanding their programs so that students can find what they’re looking for at one school without having to move to another.

Factor 3: Category Parity

Quality and benefit being equal, price is often the deciding factor in low-consequence product categories and a significant motivator for switching. If most products and services are generally the same, lowest cost brand will usually enjoy the greatest loyalty until another brand goes lower.

Fighting price competition is always about fighting parity. Don’t be equal. Be different. And not necessarily just better. It’s important to be distinct in a way that increases our perceived consequence of the product or service. We will pay more if our perception of the outcome is more important or beneficial. We won’t pay more for clean teeth, but we will pay more to be more attractive. We won’t donate more to a health charity, but we will donate more to help people close to us. We won’t pay more for tuition, but we will pay more for a better future.

Think Category First

When it comes to understanding how to manage your brand to win the most loyalty, start by considering the product category your brand belongs to. Thinking about what level of consequence your product or service truly has to your customer, the degree of choice that your customer has (and will have in the future) and how much your offering is the same as that of your competitors will help you develop a brand that customers just cannot live without.

Contributed to Branding Strategy Insider by: Corien Kershey, Ph.D., Founder, Brand Clarity

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