Consumer brand loyalty declines in hard times, research finds

Amid a cost-of-living crisis, consumers are increasingly abandoning their most-loved brands. But it’s not impossible to retain customers in times of economic strain.

Melinda Lofts is head of customer experience at M&C Saatchi Group

After enduring three years of inflationary conditions and 13 interest rate hikes, it’s unsurprising that media headlines, politicians’ policies and business conference rooms have been dominated by the cost of living.

As marketers, we have always looked to key traditional data points to understand consumer behaviour: interest rates, spending data, inflation levels and consumer confidence. All of these currently paint a complex picture for Australians and businesses alike.

However, ever the curious culturalist, I was keen to dig deeper into the implications of the current economic climate from a more “human” perspective. I wanted to know how Australian consumers were actually prioritising purchase decisions, and businesses were leaning in to help Australians.

In response, we undertook a study to better understand the landscape, beyond interest rates and spending data. Instead, we wanted to direct our attention to an often overlooked corner of the rising cost of living: how it shapes Australian values and how Australians are being forced to sacrifice these values in order to live.

Drawing on data captured between September 2022 and March 2023, it is clear that marketers cannot afford to rest on their laurels.

The study found Australians are ditching brand loyalty, with 71 per cent of consumers now less loyal to the brands they usually use. They are being significantly more promiscuous and intentional with both how they shop and where they shop. We have observed marked change in behaviour, as shoppers are researching more online, visiting multiple stores, increased budgeting and list preparation and even driving further to get discounts.

This means businesses should double down on one of the most effective levers brands can pull to attract and retain customers – customer loyalty programs.

Some are experiencing a surge in customer love, with 81 per cent of Australian consumers using loyalty programs more than ever before. Discounts are a powerful incentive and benefit the customer, while businesses can glean insights about their customers to serve them in a more personal and effective way.

People are also abandoning homegrown brands and products, the study found. Despite the fact 86 per cent of Australians believe that buying Australian-made products is important, 49 per cent of Australians admit to purchasing fewer Australian products or brands as a result of the cost-of-living crisis. Through our research we identified examples of customers purchasing more expensive Australian-owned tomato sauce and refilling it with Aldi alternatives.

Sustainable products are also taking a back seat. In order to cope with rising costs, 58 per cent of Australians are buying fewer sustainable products. Despite younger generations being known for their environmental consciousness and values-driven approach, they are the ones leading the charge in buying fewer sustainable products. On average, 63 per cent of millennials and Gen Z are purchasing fewer sustainable products compared to 48 per cent of those aged 60.

Young people today are facing unique challenges. They’ve grown up in an era of heightened awareness about sustainability, fuelled by movements like Greta Thunberg’s activism. However, economic pressures are now forcing them to make difficult choices for the first time, often at the expense of their values.

Often, younger generations are facing lower incomes and are also less likely to own a home outright – meaning they are feeling the brunt of the surging rental market as well as the rising cost of living.

Also in play here is the action-intention gap. While many young consumers express a desire to support sustainable practices, practical considerations often take precedence when faced with limited financial resources. This dilemma reflects a broader societal tension, where ideals meet economic realities. For brands operating in this landscape, the challenge lies in striking a delicate balance. On one hand, there’s a growing demand for sustainable products and ethical practices. On the other, affordability remains a critical factor, especially for younger consumers facing financial constraints.

Navigating these challenges requires a multifaceted approach. Brands can leverage technology and innovation to reduce production costs without compromising sustainability. Collaborations with influencers and ambassadors can also help bridge the gap between values and affordability, making sustainable choices more accessible and appealing to a broader audience. The fact Australians are resorting to dupes demonstrates how important specific values and brands are to customers.

Lastly, even though the cost-of-living crisis will not continue forever, there are always challenges to be navigated. The most resilient businesses have their eye on the long game; they don’t sacrifice their own values to drive short-term sales.

It’s important to balance the short term (discount-focused environment) with long-term credibility, whether that’s brand building, driving sustainability, or even supporting Australian workers.

Melinda Lofts is head of customer experience at M&C Saatchi Group.