Ian Gibbs
Director of Insight, Data & Marketing Association (DMA UK)
Amid a worsening cost of living crisis, we have seen some important consumer habits develop in response to brands competing for their loyalty.
Consumers have become increasingly price-sensitive over recent years, with a huge surge in the past year, as revealed by recent research by the Data & Marketing Association (DMA UK) and Tapestry Research, the ‘Customer Engagement: How to Win Back Customers and (Re)Build Loyalty 2023’ report.
Consumers prioritise saving money
Indeed, discounts and promotions are an increasingly important driver of consumer demand in a challenging economic climate, with 51% of UK adults using them to trial new brands and products (up from 44% in 2021). Despite the state of the world around them, consumers are feeling personally empowered by their ability to shop around for the best deals to stretch their tight household budgets.
Consumers want a brand that’s reliable
and provides value for money.
Cost of living impact on brand loyalty
The downside of more consumers becoming hooked on discounts and offers is a considerable decline in brand loyalty: 63% of consumers claim they often change their mind about what brands/shops/sites to use as a result of deals and offers. Almost half (48%) would even stop buying from a brand if they stopped offering deals, suggesting price sensitivity is increasingly impacting brand loyalty.
Loyalty is on a significant decline in the past 12 months, with 61% of consumers feeling less loyal to brands now than they did a year ago (from 41% in 2022). About 48% of consumers are even diversifying their brand repertoires by using cheaper alternatives alongside their favourite brands.
Customer service can drive brand loyalty
Price promotions are vital in helping businesses hit their short-term KPIs. However, overuse will result in consumers becoming hooked on deals and offers, displaying higher levels of price sensitivity that, ultimately, eat into profit margins.
Therefore, businesses need a cost of living crisis exit strategy whereby they look to reduce the use of price promotions in the marketing mix and, instead, refocus on brand and customer service-led reasons to drive loyalty to their brand.
A great deal might be good news for a consumer, of course, but we have seen concerns over lower prices possibly meaning worse customer service — which is not good for anyone in the long run. Consumers want a brand that’s reliable and provides value for money. Brands cannot afford to be unfit for purpose while household budgets are under pressure, especially with competition for their loyalty fiercer than ever.