Zero-Sum Risk, Growth in the World of Brand Switching

Brand switching is more prevalent than ever in history. In a recent study by McKinsey & Company on the phenomenon of “switchers,” only 42 percent of customers shop consistently with their favorite brands. While 58% of customers are essentially in constant flux, shopping around. How then do brands cope with a general customer base that’s seemingly disloyal, lured away by competing brands via social media, highly personalized ad targeting, price matching algorithms, etc.?

On First Impression

The job of the Brand Strategy agency is to create distinction between their client and its competitors. They do this by identifying a unique characteristic they can exploit. Typically the attributes of choice are price, quality, service, reputation, history, sometimes an iconic founder, and sometimes nostalgia. If all else fails, they resort to fear, sex, or humor. The process appears strategic. They identify the aim of their attack, their objective, the target consumer, by age, race, gender, income, geography, ethnography, and family status. Depending on the “target” and the product or category, and the gap in the competitive set, they arrive at their message, which comes in the form of a big campaign idea, the bigger the better (read why Big Ideas Don’t Work).

Advertising agencies are a more tactical, version of branding agencies in that they are laser focused. Their job is to take the defined target along with the predetermined message and make it memorable. Their specific task is to tease out opportunity in the creative process.

Finally, there is the general services Creative agency. These agencies provide the resources required to deliver the various assets in the various mediums they’ll be deployed.

These are all perfectly excellent services in the quest creating shiny objects that get attention. That’s the game, to garner attention in crowded, noisy environments of distracted, overwhelmed consumers, aka switchers. Not easy. Also, not strategic.

Consumers today are exposed to 4-10k messages a day. Breaking through that cacophony is an obvious challenge. Good branding and advertising creative will win a would-be target customer’s interest. True. It will win interest. Unfortunately, winning interest is only the first step of a much more involved process of sustaining a regular buying habit from a potential buyer. This is why brand, advertising, and creative agencies are not strategic. They are key to tactical execution and especially adept at the first phase of creating a foundation for growth: the first impression.

Engendering a Following

Understanding how resonance—the connection between us—happens is the foundation to understanding how to engender a following. It is the key to how relationships form: a relationship between two people, a company and a customer, or an organization and its constituents. Every human relationship happens in simple steps. A first impression leads to validation of that first impression, which leads to deeper understanding and an alignment of beliefs: Blink. Test. Bond. Love. We move from a superficial introduction to a deep state of resonance. This is how loyalty works. It’s a Progression of Resonance. Along this path, the customer transcends mere loyalty and can become an advocate for the brand, its beliefs, and its services. It’s how customers say I love you, through their advocacy, and it ultimately leads to greater sales velocity and sustainable growth.

A Look at the Numbers

A typical company receives 65% of its business from existing customers (The Loyalty Effect, Haughey & Reichheld). While, on average, those companies will lose between 10 and 30% of their existing customers each year, maintaining only 50% of customers year over year (Customer Loyalty is Overrated, Lafley & Martin). As a result of this lack of stickiness, businesses spend 88% of their marketing budget on customer acquisition and brand awareness (McKinsey & Company). And so it goes, the average company spends the vast majority of their resources on chasing new customers making that first impression.

On the flip side, satisfying and retaining current customers is 3 to 10 times cheaper than acquiring new customers, and repeat buyers on average generate 10-12 times more revenue than first-time buyers. These customers will pay a 20-25% premium for their favorite brand before switching to another, recruit and advocate on behalf of their favorite brands, and buy on their own volition; hence, their lower cost requirements and greater margin contribution over time. And, to make this equation even more interesting, it is the recruitment of new customers via loyal advocates that has been proven to be the driver of growth (The One Number You Need to Grow, Harvard Business Review and Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth, Thomson).

Just Leaving Crumbs Doesn’t Make Sense

The data reveals the exercise of focusing the majority of the brand communication effort strictly on the first impression is, in the long run, a fruitless affair, equating to feeding a mouse a crumb. Keeping the mouse’s attention requires crumb after crumb. Crumbs are expensive.

Why then do Brand Managers focus their resources employing Brand Strategy and Advertising agencies to craft messages devised to position their brands relative to the competition chasing new customers rather than devising a holistic business strategy that attracts and retains customers at a higher rate than their competitors? Because marketing plans are driven by sales goals and financial plans, which do not account for the financial windfall repeat buyers contribute (The Loyalty Effect, The Hidden Force Behind Growth, Profits, and Lasting Value, Haughey & Reichheld).

That may sound flippant, but the reality is organizations that scale—and realize a profit in the process—lean on holistic strategy rooted in cultivating repeat buyers.

Building a Meaningful Connection

Focusing only on the shiny object that attracts new customers is a zero-sum game. True strategy is a comprehensive undertaking that activates the soul of the organization across the entirety of its operations, not just marketing (read It’s all Simon Sinek’s fault.). Actions speak louder than words. Loyalty is based on relationship. When there is no depth of connection with the consumer (only crumbs), there is no relationship. When there is no storytelling ability, there is no relationship. When there is no purpose, there is no reason for loyalty: Less connection, less relationship, less loyalty, less growth—A painful daisy chain.

“When you look at a platform like Amazon, no woman has ever told me that their criteria for best mascara was what was fastest or cheapest. That’s not how people are buying emotional things – like a fashion or beauty product, but the leading paradigm of what an e-commerce experience gives you is one of efficiency, and one of breadth of product. When what users are actually doing and wanting is one of breadth of connection.” — Emily Weiss, CEO Glossier

More Than Marketing

Understanding the inspiration that drives the organization as a whole motivates consumer behavior. By knowing your purpose, by piecing together seemingly disparate experiences and bits of information and knowledge, customers are armed with the context to make deeper and deeper commitments. Hence why engendering a following from consumers/switchers is a holistic undertaking, it is about every single point of interaction.

This is absolutely how a successful relationship between your customer and your brand can be formed. Because there are specific people in the world that believe what you believe, that want what you do specifically the way you do it.

The risk is in the zero-sum game of targeting a particular demographic with a single-faceted campaign rather than recognizing beloved brands are loved because of everything they do. Becoming a beloved brand is about clearly articulating your perspective and then sharing the nuances of that perspective so that your customer, who is looking for the product or service that you provide, will understand your worldview. If there’s agreement on that worldview, and your product or service performs and meets expectations, you’ll have an aligned platform upon which to forge a long-term sustainable relationship with that person as your customer. This is strategic because it’s holistic. The entirety of activities brought about by the organization is what matters most. Not just the crumbs.