Effects of “Recession” On Brand Loyalty

While the Unites States has not officially declared a ”recession,” nearly seventy percent (68%) of consumers believe a recession has already arrived, according to a new survey conducted by
Brand Keys, Inc., the New York-based brand loyalty and emotional engagement research consultancy. The current survey examined loyalty levels in 39 B2C and B2B categories.

Perception Is Reality

“In this instance, perception is reality. There’s an enormous difference between ‘availability,’ ‘affordability,’ and ‘loyalty,’” noted Robert Passikoff, Brand Keys founder and president. “Supply chain disruptions, low inventories, and inflation all logically affect sales. Loyalty is a totally different paradigm and operates differently.”

Loyalty Is Never About Price

“Consumers can’t control the economy,” noted Passikoff, “But they do manage loyalty. Brand loyalty is never about price. It’s the emotional engagement that ensures future purchase. It’s the degree to which a brand meets expectations consumers hold for their Category Ideal.” It’s the unequivocal answer to the question, ‘How well does the brand deliver on what you really desire?’ In this instance, how brands are meeting their expectations in the context of a recession.”

“A recession – or consumers’ perceptions of a recession – became the perfect test market for brand loyalty,” said Passikoff. While a recession may force consumers to adjust their spending or even buy a substitute brand, it doesn’t affect their loyalty to a brand. Categories adapt to economic circumstances, with loyalty levels increasing or decreasing.

17 Categories With Increased Loyalty Levels

Among category-consumers who believe there is currently a recession, 44% of the categories saw increased loyalty levels including:

  • Apparel
  • Automotive
  • Beauty Care
  • Beverages (alcoholic)
  • Computers
  • Fast Food
  • Footwear
  • Healthcare
  • Household Cleaners
  • Luxury Goods
  • Paper Products
  • Personal Care
  • Pet Food
  • Snack Foods
  • Technology
  • Telcom
  • Video Games

15 Categories (37%) Saw Loyalty Levels Decline

  • Airlines
  • Appliances
  • Beverages (non-alcoholic)
  • Credit Cards
  • Electronics
  • Gasoline
  • Hotels
  • Insurance
  • Investments
  • Online
  • OTC Pharma
  • Casual Dining
  • Retail
  • Streaming
  • Video
  • Utilities

Loyalty Levels Remained Unchanged In 7 Categories

  • Banks
  • Furniture
  • Office Equipment
  • Shipping
  • Social Media
  • Sporting Goods
  • Toys

An Economic Acid Test For Loyalty

“The current economic environment – and consumers’ perceptions of it – provided the perfect ‘acid test’ of ‘The Loyalty Rule of Six (loyal consumers are six times more likely to give a brand the benefit of the doubt in uncertain circumstances). We usually see this on a brand-by-brand basis, where an individual brand runs into a problem or gets into trouble. But the current marketplace allowed us to examine loyalty expectation levels on a category-to-category basis. There’s not a lot more uncertain than an economic upheaval.”

In this recession-drilldown, respondents who participated rated the current economic environment as “recessionary,” Unlike economic-use models that rely on historical data and profitability conjecture, Brand Keys’ evaluations are 100% consumer-driven, measuring the emotional and rational aspects of each consumer’s decision process and current levels of customer expectation.

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