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Why Customers Are Switching Brands More Often


Woman carrying multiple shopping bags.

Driven by cultural shifts that were heightened by the COVID-19 pandemic, more American consumers are switching brands than ever.

The trend has reached the point where some observers are calling it “the death of brand loyalty.”

It didn’t used to be this way. Back in the day, if you banked at a certain financial institution, it might very well be your bank for life. Same with your family doctor or dentist.

That was partly because what are known as the “switching costs” for moving to a new brand – money and time spent – were considered such a hassle that people rarely did it.

Today, in most industries, those costs have eased. The result: it’s easier for consumers to pick up and leave their brand or provider. Millions of them are switching brands, research shows.

All of which reinforces the importance of providing good customer experience to build loyalty – and make people want to stay rather than seeking out a limited-time promotional offer from a competitor.

If leaving is easier than ever, it stands to reason that customer experience is more important than ever.

Related: Being Responsive To Customers Is The Secret To Loyalty

Here is some elaboration on these important customer experience trends:

Brand Loyalty Is Becoming A Thing Of The Past

It was, in many ways, a simpler time in America: people had their favorite brands, and often stayed with them for life. Switching brands wasn’t really a thing.

Related: Why Do Customers Love Certain Brands?

“In the old days, consumers would find a brand that did what it promised: perhaps Tide detergent to erase grass stains, Bounty paper towels to wipe up spills, or Frosted Flakes to start the school day right,” according to Forbes. “In the absence of a particular brand failing or a dramatic price disparity from a branded competitor, consumers would continue to purchase the same brands week after week, month after month, year after year.”

Today, due to a myriad of cultural and related shifts – ranging from far fewer people working for the same company for years to a societal embrace of change – many observers say such loyalty has permanently eroded.

“Marketing teams have been battling this problem for decades,” according to Insider Intelligence. “The emergence and growth of national retailers, private labeling, competitive pricing, and ecommerce-driven convenience shopping have chipped away at brand loyalty over time.”

The pandemic has accelerated the trend as the shift to online shopping exposed consumers to new brands and many companies disappointed the public with their initial pandemic response.

Related: How To Respond to Customers And Employees During A Pandemic

U.S. Consumers Are Switching Brands At A Rapid Pace

Less loyalty means more movement.

McKinsey & Co. research shows that consumers “are switching brands at unprecedented rates… in response to economic pressures, store closings, and changing priorities.” Driving the change above all are Generation Z and high earners.

A report from Emplifi, the customer experience platform, shows that 86 percent of consumers will leave a brand they had been loyal to after two to three bad customer service experiences. The findings “highlight just how critical (customer service) is to brand perceptions and outcomes.”

Even more stark: data from Acquia shows that 72% of consumers agree with the statement: “I am loyal to certain brands, but as soon as I have a bad experience with them, I move on.”

A single bad experience. This leaves brands today with very little room for error in the customer experience arena.

Lower Switching Costs Accelerates Brand Exodus

Switching costs are the costs incurred from switching brands, products, services, or suppliers. While they commonly refer to financial costs, they also include psychological, time and effort costs – the general hassle of making the switch.

For years, that hassle helped prevent many people from moving to new brands. Over time, however, switching costs have lessened for most industries.

Mobile phone carriers, for example, used to lock in consumers with two-year contracts that carried high fees for leaving early. Now, experts say switching carriers is easier because the industry has moved away from two-year contracts and early termination fees.

And in the credit card industry, if a card was lost or stolen, customers traditionally had to contact the merchants that charged the card automatically. Now, credit card companies will often list those automatic charges for customers and sometimes even notify the companies making the charges.

The lesson here for brands is clear: take care of customers. Brands can no longer assume that customers will put up with pain points or other difficulties and stay loyal. Those days are over.

It’s time to zero in on giving consumers the helpful and fulfilling customer experience they need – or they will bolt and try to find it somewhere else.

 

Photo by freestocks on Unsplash.

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