It’s a widely-held belief that winning new customers costs you more than it does to keep existing ones. You’d only need to turn to Forrester Research to confirm it as fact. According to the market research company, it’ll cost you five times more. Knowing that makes it that much more vital for you to guard against the problem that is brand switching.
What is brand switching?
Brand switching is a situation where a brand loses a once loyal customer to a competitor. In other words, a shopper changes their buying habits, choosing deliberately to purchase another brand instead of their usual choice.
As a side note, it’s worth pointing out that this isn’t the same as a customer who is brand agnostic and thus regularly switches between different products within a particular category. In that case, there is no threat of lost loyalty since there isn’t any to begin with.
But we digress. To truly understand the problem that is brand switching, it’s worth looking at its long-term effects on a brand. The easiest way to do that is to present a practical example. Like Brand X that you might find at a specific FMCG retailer.
Let’s say Brand X is found in the Carbonated Soft Drinks category and it’s set up as the retailer’s house brand, which means it’s also a competitor to the brand leader. Within this particular category, Brand A has been the best selling item for a while. However, since the introduction of Brand X, which is 30% cheaper and tastes very similar to Brand A, there has been a noticeable drop in sales for the brand leader. Of course, since Brand A’s parent company could be selling its products in multiple locations across the world, they might not notice the drop.
However, if this trend moves to other retailers, something would need to change, be that their price point, positioning or something else. Even if it doesn’t spread, they’d still need to monitor the situation.
That said, besides a loss in sales, the other long-term effect is a loss in market share. The example here, is BlackBerry smartphones. At one point, they were the darlings of the smartphone market. However, as time went on and more smartphone brands entered the market, they suffered. Today, BlackBerry is non-existent.
In fact, according to research and advisory firm, Gartner, the company had a 0% market share for the fourth quarter of 2016.
Why brand switching happens (and how to fight it)
1. The price of your product doesn’t match its value
There is little doubt about the fact that your customers want value for their money. You only need to consider anyone who walks into your store to shop. Let’s say you’re a convenience store and a customer pops in on their way home from work to pick up a few items.
For the sake of this example, their shopping list includes Bread, Milk, Cereal, and a variety of other smaller items. Notice how it’s a list of products and not brands? Of course, they might have an idea of what type of Cereal brand they want to buy. However, until they reach the shelf, there is every possibility for them to change their mind.
The probability of them changing their mind increases when they get to the shelf and find a product that is priced far higher than they had expected. Or, if their preferred choice is out of stock. That hesitancy, is the first step towards switching to an alternative product. It has them thinking. The second step is if there is similar product merchandised nearby at a lower price, and the customer sees it as equal. If their preferred choice is out of stock, they need a viable alternative.
That said, there are a few actions you can take to stop this from happening. Most efforts, quite naturally, revolve around reevaluating your pricing strategy.
In this instance, the first action to take would be to look at your target market. Who is your customer? What are they able to spend? More importantly, what are they willing to spend on the product? Are they driven by a lower price or the value of the product?
Once you’ve established that, it’s time to turn to your competitors. What are they charging for your equivalent brand? What does their offering include in comparison to your product? Does the value they offer beat your product? Then, of course, there are the economic and market conditions to consider when calculating the most appropriate retail price.
It’s also worth reading this piece about how to find the perfect price point.
2. Your level of customer service is either poor or lacking
The level of customer service you offer goes a long way to helping you attract new customers, and continue to satisfy your regulars. More specifically, it can mean the difference between gaining loyal customers or struggling with fair-weather ones.
In a medicinal environment such as a pharmacy retailer, for example, many of your customers might not have the ability to come in and collect their medicines. Thus, good customer service could include setting up a delivery service for all customers who need chronic medication. Besides pleasing your customers, you’re establishing a personal relationship with them and encouraging them to return to you for their medicinal needs.
The above example speaks more to a store’s overall retail brand. You could also look at customer service from a product level point of view.
For example, after buying a specific item, a customer might want to return it for whatever reason. It’s at this point where your level of service can either lead to a satisfied customer (a brand advocate who sings you praises) or an unhappy customer who will never buy your products again. You only need to visit Hellopeter or any similar website to read up on the different complaints that brands receive.
That said, it’s worth adding a caveat here. There is a big difference between poor customer service and service that is perceived as non-existent by a customer. While the first is your fault, the second has nothing to do with you.
To prevent customers from switching to a competitive brand, it’s worth setting up a process chain with as many resources as possible. At the same time, you’d need to empower the right people to make decisions without having to wait for permission.
Also, place the appropriate people in charge. Like people persons. After all, the last thing you’d want is to have an unfriendly person dealing with a customer who is angry and frustrated before they even arrive.
3. Your customers are suffering from brand fatigue
There is truth in the matter that overexposure can harm a brand or product. It’s especially pertinent to the retail industry where there are always new products coming out to compete for market share. If your customer becomes tired of your brand, there is always another to replace it.
That means that you can’t rest on your laurels. While you may enjoy a large market share today, that can all change at any time. Kodak is the perfect example here.
In 2007, Kodak was fourth in U.S. digital camera sales with a market share of 9.6%. This, even after it was slow to anticipate the demand for digital cameras. By 2010, however, it had slipped to seventh place. In 2012, it filed for bankruptcy and also announced it would stop making digital cameras.
On the other hand, there is Canon, who continually innovates and brings out different ranges and add ons in a bid to excite customers. That said, as much as they innovate, they also ensure that they don’t stray too far away from their core range. That’s to ensure that the brand doesn’t become unrecognisable to their customers.
And that’s the key. As much as innovation is good, it can become too much. You run the risk of changing the whole purpose of your brand. An inconsistent brand image can be a product killer.
What can you do to safeguard your brand so that your customers don’t suffer from brand fatigue?
First off, you need to admit to yourself that it could happen to you. That doesn’t mean that it will, but as soon as you accept the possibility that it can happen, you’ll be better prepared. More importantly, you won’t take anything for granted.
Then, as soon as you notice a drop-off, be that in sales or profit, understand the causes of why it’s happening.
Why is your customer no longer interested in buying the brand? It could be that a new product has entered the market and your customers are curious enough to try it. It could be that your customers don’t recognise your brand anymore. Or, that you aren’t listening to what your customers want or expect from your product.
Once you understand the cause, you can start rectifying the mistakes to build your brand up again. If you don’t think a brand can “come back from the dead”, here’s a little inspiration.
4. You don’t understand your customers well enough
If you don’t understand why you customer is buying your product, you also won’t know why they switch to a different brand. After all, if you can’t satisfy their needs, they’ll buy something else, elsewhere.
Fortunately, there is a lot you can do to stop this. Better yet, there is a lot you can do to prevent it from happening. All it takes is a willingness to engage with your customer directly.
Surveys, online or in-store, are always good barometers of customer sentiment. Listening to social media is also good, as is the introduction of a loyalty programme. On the loyalty programme, it’s a rich source of information and insight and can help you to offer your customer exactly what they need.
Let’s take the example of a Brand B, which happens to be a unisex deodorant but isn’t selling as well as your initial market research had indicated. Why is that? On social media, you might find comments around the fact that women aren’t buying it because it’s usually merchandised in the men’s section and they feel uneasy going there. Likewise for men if you only stock it in the women’s section.
On the other hand, you might conduct a survey, and the most common criticism revolves around the main ingredient, which many customers perceive to be dangerous to their health. Or, you test the product on animals.
With this information, your company can look at creating a better image of the product, by substituting that specific ingredient for another, demonstrating that you’re listening. More importantly, you can show that your customers are more than just opportunities for you to make money.
Do that, and you will reduce the risk of once loyal customers turning away from you and your brand.