Customerland

The 2025 Consumer Loyalty Engagement Index - Big Changes in the Ways We Interact with Brands

• mike giambattista • Season 3 • Episode 4

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Unlock the secrets of brand loyalty transformation with insights from Robert Pasikoff, founder and CEO of BrandKeys. You'll discover why emotional engagement now eclipses traditional rational marketing methods, reshaping how we predict consumer behavior and market dynamics. Learn why the days of brand wars like Coke vs. Pepsi are fading, as modern loyalty strategies pivot towards fostering emotional connections to drive sales and secure market share.

Brand loyalty isn't what it used to be—it's better. Explore how the old-school marketing tactics centered around product, place, promotion, and price have evolved into a nuanced focus on emotional resonance. As Robert explains, neglecting the emotional aspect could turn brands into mere commodities. We'll unpack the high stakes of customer retention versus acquisition and highlight industries like banking, where emotional loyalty can translate into significant financial gains despite digital disruption.

From the automotive industry to the fast-paced world of news media, the episode shines a light on how understanding and meeting consumer expectations are more critical than ever. Toyota's strategic maneuvers during economic hardships and the viewer dynamics of major news networks illustrate the power of emotional value in brand success. With insights drawn from over a hundred categories and data-driven predictions, Robert reveals how brands like Amazon continue to dominate by staying ahead of consumer trends. Don't miss this opportunity to comprehend the intricate dance of loyalty, emotion, and market leadership.

Speaker 1:

If you're reliant only on the rational aspects that are driving a category and again, cross-category, you can quibble with me about the precise percentage, but do you really want to market with information? That's only giving you 20% of why someone's doing something, why someone's doing something.

Speaker 2:

Two days ago, brandkeys released the 27th Annual BrandKeys Loyalty Customer Loyalty Engagement Index, the CLEI. First thing I wanted to kind of note about that is it's the 27th year for that. Interestingly, as you're going to hear in just a few minutes, there were a lot of changes to the impact loyalty has on brand affinity and, ultimately, sales. Here to explain what that means is Robert Pasikoff, who was founder and CEO of BrandKeys, the author of this research. Robert, thanks for joining me. Appreciate it Well, thank you very much.

Speaker 2:

So let's look at this. We have a unique opportunity to unpack this with the person who's responsible for all this. So I'm going to just set this up because I've seen some of the data and some of the highlights, but I think if you can illuminate what's really behind this, that's going to be a big deal. So a couple of things, and I'm just going to read right here Brands which will dominate the categories in 2025 and reveal dramatic differences in how loyalty operates as the most accurate predictor of consumer purchasing behavior, sales, brand market share and profits. That's a lot of stuff packed into brand loyalty.

Speaker 1:

Yes, but it's I don't know if this is a phrase it's an axiomatic chain of events that takes place. We're so demanding about what marketing does for a brand or you know, or a product or a service. If you can engage someone which means emotionally engaging them, not just getting their attention and you can get them to be loyal to you. A 21st century loyalty, I always point out, you know, the era of I only drink Coke, I will never drink Pepsi. I'm leaving the restaurant if you don't have my Coke doesn't exist anymore.

Speaker 1:

There are, as we will see, hierarchies in terms of categories and loyalties that people hold, and if you can find a 1963 Coke-Pepsi paradigm for yourself, then jump on it and make it your own, but that really doesn't exist anymore.

Speaker 1:

Own, but that really doesn't exist anymore. What it is is I'm going to be engaged and I'm going to be generally loyal to someone, and the minute that you have that loyalty, you have positive behavior, which equates to sales, egregious financial mismanagement on the part of the brand or the corporation notwithstanding, you really ought to make money. And so what we've seen more and more is that when we're looking, we're essentially looking, in 95% of the categories that we track, at national brands, it tends to reflect their ownership of a category, I mean their share in a category, and, as you and I have talked about in the past, it's not 100% correlation, because the engagement process itself is really more emotional than it is rational, and so but, as you've pointed out a bunch of times in the past as well, it may not be 100% correlation, but it's still really, really strong.

Speaker 1:

Oh, we're absolutely amazed at the numbers that we see. I mean, if we look again you're looking cross category and product and services the correlation between the high degrees of loyalty and what we see as market share or market ownership is probably 0.87 plus. I mean that's extraordinarily high. It happens to be one of the reasons that we decided this year to look at, you know, the top three in a category, to call them, you know, a gold, a silver and a bronze, because they're able to associate that with rankings. And you know what we see is that, yeah, it's not perfect, but if you look at the top three you kind of go yeah, these are the top three in a category.

Speaker 2:

Right, you can suss that out. I'm interested longitudinally, 27 years is a pretty good view of brand loyalty. And, as you said, we don't have and it doesn't exist really in the marketplace the Coke, pepsi affinities that used to before my day. Frankly they're not there really in general. But can you put numbers to? Is this even possible? Put numbers to the differences in how brand loyalties have changed and the meaning of that, the power of that over the years.

Speaker 1:

Yes, before I do that, if I may, I'd want to point out that you're also seeing a dramatic change in terms of how marketing has developed. Marketing has developed. Um, if you go back to, I guess they always say you know, modern marketing was really really happened in the in the late 40s and early 50s of last century. Um, you really probably wouldn't do very badly if you just based all of your attention on the four P's you know, the product place, promotion, you know, and price. As the marketing world changed and as consumers changed, things became more emotionally dependent rather than rationally dependent. And we see, we call it out now it's probably 80% emotional and 20% rational Across the board if you had to just kind of lay that.

Speaker 1:

Yeah, and there you know I mean partly the reality. I mean you don't really need to be an experienced researcher to understand that. There are two key things. One is if all you're doing is selling on price, terrific, but then you're a commodity, I mean, that works for that. The other side of it is if you're reliant only on the rational aspects that are driving a category and again cross-category, and you can quibble with me about the precise percentage, but do you really want to market with information? That's only giving you 20% of why someone's doing something.

Speaker 2:

Right, not only that, but you're at risk with your competitors kind of going wait a second. There's another 80% of the factors here that I can play with.

Speaker 1:

And so, from an economic perspective I mean, we did this in the late 90s we extracted all of the buying behavior numbers and we came up with things and we you know it was about what did it cost you as a brand to get, to get a customer? I mean, it was one of the arguments actually coming out of an old paradigm of satisfaction. Why? Why wouldn't you want to keep someone happy and satisfied? Right, you know, because the history, the history unfortunately shows that a lot of brands went yeah, what the hell? We don't care, you know we'll, we'll just get someone else to take your place as a customer. And we look at it now and, depending on the category, it will be anything from it costs 15 to 22 times more to recruit a new customer than it does to keep, keep, keep when you already have um, and that's up. That's up about 20 percent from. So the 90s.

Speaker 2:

Those statistics have been around for years. Nobody ever really knows who authored those statistics and I've had conversations with some really intelligent people in margaret research that go listen, it's the statistic everybody has and knows. So I don't even know where it came from, but there it is. But what you're saying is and I think it was a percentage difference or a small multiple difference what you're saying is it now costs 15X to 22X multiples to recruit a new customer than to keep an existing one. That has to get somebody's attention. Marketers have to finally be paying attention to that.

Speaker 1:

And, interestingly enough, where they are able to, I want to say kind of put a dollar figure on it. They do, because I would bet that you have more than once in your life received some sort of postcard or email you know mailing that says, hey, if you come over and open up your bank account here at XYZ Bank, we'll put $750 into your account, into your checking. Now, they ain't doing that out of the goodness of their heart. What they've done is they've done a calculation that says, when we do all our marketing I mean this is and this is, of course is looking at everything that they're doing I mean it's to get to Mike GM Batista, what do I need to do in terms of my newspaper, my radio, my online, my social, my TV advertising advertising? You know what did? What did that come down to? And the answer is it's probably closer, on a bank basis, this, having some experience in this category, uh, on the brand side, uh, years ago, it probably costs them, from a marketing perspective, about twelve thousand dollars to acquire me as a customer.

Speaker 2:

It's the best I've felt about myself in a long time. There you go.

Speaker 1:

Yeah, that's what you well, that's what you're worth to them, although, although not to not to burst your bubble, but they're only willing to give you $750.

Speaker 2:

But there's some negotiating room in there, Right? You know this deal's not done yet.

Speaker 1:

Right, so so, yeah, I mean, though, you know these, this is the stuff that we looked at back in the nineties and we said okay, what would this? You know what would happen? Um, what would happen when, when, when you invested in a customer rather than trying to acquire a new customer. I mean, there were the three aspects, which was and you hear people talk about it all the time, and most of the time, brands don't have the numbers I mean, it was always what would a 5% increase in loyalty result in terms of lifetime loyalty costs? And we've seen that too. I mean, now I will say that is still high. It's still in the high 80s, but it's down 9%. It's down 9% from the initial valuations that we took, but it's still in the high 80s.

Speaker 2:

So, in essence, who cares if?

Speaker 1:

it's down and you weren't faced with digital, you weren't faced with online, you didn't have the kind of brand diversification that we've seen over the past 20 years, marketing approaches, marketing strategies into account and look at what's changed, you know, over the past 30 years.

Speaker 2:

Well, if I'm reading this right, that the prol, huge diversity in channels and the messaging out there, that's everything's proliferated to such an extent and since 1997 that number is only down nine percent, right, that's, that's a big deal.

Speaker 1:

That that to me means that these measures hold true me means that these measures hold true longitudinally, like almost no other brand measure does. Yeah, we see this all the time. I mean again, the last one that we looked at was what happens if you increase loyalty. In terms of what effect does it have to your costs, in terms of cost reductions and so forth? And we see that that's equivalent to almost a 30% cost reduction if you can get a 2% increase in terms of loyalty.

Speaker 1:

And let me just be clear, it isn't so much and I need more people. It could be more people, but it could just be two percent more option of you doing something that benefits my brand. Right, you know the our, our rule of six, about six times more likely to pay attention, six times more likely to buy you, six times more likely to recommend you, six times more likely to buy your stock if you're publicly traded. The six times more likely to give you the benefit of the doubt when things go upside down, and not walk away and just say, okay, fine, I can go get you know, I can go buy something else, right, right, I mean that's where you're seeing the biggest effects. And we would always I'm sorry, we would always think that you know if you were a COO or a C cmo. This is what you're interested in, I mean that's.

Speaker 2:

That's actually another rich conversation we should have because, uh, anecdotally, so many of the conversations I'm having with cmos lately and people of that uh orientation and level, so much of what they have to deal with on a day-to-day basis is coming from the CFO it all. And CMOs, many of whom are not naturally predisposed to looking over spreadsheets and financial charts, are being forced to consider the hard financial realities of the stuff they're putting out there. Having said all that, that's another 10 conversations away, and one thing I think we should do for the people who are listening to this is at least hit the high level of a couple of categories, just so you can see what's in this. And then I do want to say and you'll see a link to this below the actual podcast you can find the actual report and the highlights of it at brandkeyscom. Look for the link that says the 27th Annual Brand Keys Customer Loyalty Engagement Index. Within that there are three categories. I think it would be, and there's many categories, I've seen this but three top-level categories are worth talking about.

Speaker 2:

And you said earlier you've got them broken down into gold, silver and bronze. Good, simple minds like mine can get that In automobile, gold is Hyundai. Silver is Ford, bronze is Toyota.

Speaker 1:

Tell us what that means and what it doesn't mean it means that, from a perspective regarding the brand, that, given the kinds of expectations that people have for their ideal in the category, in this case automotive, that Hyundai does better at meeting those expectations than Ford. Who does better than Toyota? And my guess is that what I said before is that it is reflective of how people are going to behave. So not a perfect correlation, talking human beings and what available share numbers. So I think that it is very, very close to reflecting what the share market is. I will say I mean I have to. I say this in all candor years ago, when the economy was imploding and no one was doing anything, we did some work for Toyota and we did not write the advertising. I wish I could claim this in this instance, but I did not. But we identified a value, an emotional value for them that has become the tent pole for all of their work. And if you remember what it was we, we committed.

Speaker 1:

So you know people are worried about that. They've lost their money. The banks are falling, the homes are going and but they need their cars to go to work. The hyundai they took that and I don't know. Literally a week later they came out with the bring the cup. Don't worry about it was their buyback program that they instituted and that turned them around. I mean they would they did. They would had saw a 14 increase in sales in an industry that had a lot, that had seen a 37 drop in in sales.

Speaker 2:

And that's still. That idea still plays strong in all their brand messaging and attributes. Now it's not so much a buyback problem, but they have a 100,000 mile plus, I think warranty which is the strongest in the industry. And I'll tell you again anecdotally I know people who have bought that brand. That's one of the biggest reasons they bought it.

Speaker 1:

And you know, because the rational stuff, the rational stuff is kind of a given. You know it's the car, it's, the handles are not falling off the doors, the car runs. You know the MPG, you know there are equal levels within any of the brand, the major brands that we're looking at. You know, even from a price perspective, you're not talking about the difference between buying a Hyundai and buying a Rolls Royce. I mean, you know a Ford and a Toyota are going to run about the same. Distribution is about the same. Distribution is about the same. And ultimately, I think you know you can slice and dice. This is one of my little bête noires. I mean you can slice and dice satisfaction to your heart's content and talk to me about the car that has three doors and one windshield wiper and has the highest satisfaction rating known to mankind versus the four-door car that has one, you know, one, uh, windshield wiper. I mean the the rational stuff is really price of entry these days.

Speaker 2:

I wouldn't call it table stakes, but it almost is. Anybody who sells cars knows that it just is that way. Let's move over to cable news. This gets a little more interesting. And just a quick disclaimer none of this is political, this is data.

Speaker 1:

No, no, no, I mean it's, it's, that was a preemptive, so it doesn't go there.

Speaker 2:

You know, let me just say say let's talk rankings and then I'll, then I'll let you explain that, because I think that's that's. It's going to be fun to talk through gold box. It's going to be fun to talk through um gold box silver, cnn, bronze, msnbc Go ahead.

Speaker 1:

Um, well, again, it comes down to uh, what, what does one expect? Uh, you know, you have to understand it's. It isn't political, because, because you're actually looking at balanced samples, I mean one thing if we said, okay, let's just talk about, you know, with folks who have right-wing philosophies, we're not doing that. This is an issue of. These are people who watch these channels three or more times a week, and now what you're seeing is someone is telling you among the Fox audience well, what you're presenting the content actually isn't the issue my expectations and my desires better than a group of folks who are watching someone in some other other network and this one, you know. Actually, I'm glad you brought this one up because I think there was a story on the news just late last week that was talking about how MSNBC has lost 57% of its viewership.

Speaker 2:

Yep, and yes, there are probably explanations regarding and, more recently than that, their director of news along with it.

Speaker 1:

Yeah, yeah, yeah, rashida Jones, yeah, yeah, rashida Jones, yeah, she left. And CNN, who had, I don't well I'm sure, was never number one, although I, just in all candor, they called me up once to yell at me about the fact that they were not number one, about the fact that they were not number one, had not been, probably would have always had been a perennial number three. When we were looking at this over the years, they certainly were not number two last year and they've moved up and again from a behavioral basis about the loyalty metrics, again from a behavioral basis about the loyalty metrics, you can at least see a correlation between between how these rank and viewership numbers. I mean even, even, because I don't have access to, uh, to any of these, uh, you know any of the detailed data from these?

Speaker 2:

these? No, but it's not hard to see. That's not a tough leap to make, that's pretty easy. So there are how many categories in total that you reviewed this year?

Speaker 1:

We did 104. We ended up posting about 100 of them. We have some categories that don't want to just prefer not to give out the information, so we're okay about that, but yeah, they're about 100. And there I will say that there are a handful of categories where, because we this is research, not opinion you know there are a couple ties in terms of loyalty evaluations, at the third level, in terms of the hierarchy. But there, you know, when you look at a large category, for example, like apparel retail or online retail retail or online retail, yeah, I, you know, again, I don't you know, if someone turns around and goes, wow, amazon was number one, you really surprised me. I mean, you know the answer is no, okay, it's not a surprise, but but it wouldn't be for that.

Speaker 2:

Well, it wouldn't be in If it was a surprise. That would be surprising in itself.

Speaker 1:

In the real world. It's not a surprise. It's just that these data are showing you why. I mean they're showing you ahead of time. These are predictive because we see changes in how people look at the various categories 12 to 18 months ahead of showing up on a brand tracker or someone saying something in a focus group. Articulating something in a focus group, I mean. Sometimes we're able to absolutely understand. We've had clients who have turned on a dime on the basis of wow, we need to address this. This has changed. We need to address this. This has changed. We need to address this now.

Speaker 2:

I'll just say, because I've seen past reports and I've seen the data breakdown from past reports I've not seen them for this year that what this becomes really fascinating and, I think, really instructive when you get to see the drivers and the percent contribution they each make in relation to the ideal in that category and the fluctuations between the brands and the fluctuations year to year, how people consumers are viewing the things that go into their expectations for brand Like watching that change year to year is, I think, again just really interesting. But as a brand, somebody who's got a view to what's happening in their category landscape got a view to what's happening in their category landscape. It's critical. Having said that, this full report and the highlights of it are available on BrandKey's website. It's brandkeyscom. You can find it there. Thanks again to Robert Pasikoff, who was founder and CEO of BrandKey's, for bringing the wisdom today and I look forward to doing this again. Thank you, sir.

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