Habit: the established brand’s undervalued advantage

 

Whether it is the result of preference, routine, or dependency, habit has a powerful influence on purchasing behavior, but one that I suspect many marketers undervalue.

In addition to more frequently purchased categories like packaged groceries and household cleaning products, habit plays an important role in choices related to travel, retail, fast food and casual dining, credit card usage. However, all too often it seems that companies ignore how their own actions can disrupt habitual purchasing behavior, losing them valuable customers.

Habitual purchasing has important benefits to a brand
Habit insulates a brand from competition because the buyer does not even consider their choice. Customer journey? There isn’t one. The guiding principle for the habitual purchaser is do what you did last time.

Why? Because the brand solved their need in a satisfactory manner. However, woe betide the brand that disrupts habitual purchasing behavior, because then the buyer will explore alternatives that they might never have considered otherwise. By contrast, fostering habitual repeat purchasing behavior can help improve retention, thereby strengthening the impact of acquisition on growth and boosting profits.

Habit tends to favor big, well-established brands
My exploration of the role and impact of habitual purchasing behavior was prompted by a discussion with J. Walker Smith. Walker recalled a brand that he worked on which had managed to produce a significant increase in market share by switching budget from broadcast advertising to instore activity designed to disrupt people’s habitual purchasing of a leading competitor.

Habitual behavior is largely instinctive, and little considered. It tends to favor big, well-known brands that have been in the market for a long time. So, if you market a big, well-established brand, then you need to nurture habitual choice, because the last thing you want is people actively considering whether your brand offers a real advantage over its competition. But, to the point made by Walker’s anecdote, marketers of smaller brands should focus on how best to disrupt that instinctive behavior.

Habitual purchasing does not imply strong attitudinal loyalty
Academics, marketing practitioners, and consumer insight professionals (who should know better), often vastly overstate the influence of attitudes on behavior. While exploring the topic, Oliver (1999, p. 34) offers this definition of consumer loyalty,

A “deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior.”

To my mind, this definition is extreme to say the least, and I suspect overly influenced by the examples of Harley Davidson, Winnebago, and Jeep cited in the article. These brands are niche exceptions, not the rule. To be fair, Oliver later raises the question of what portion of consumers in general are inherently loyal, disloyal, or ambivalent for further research, but still implies a degree of cognitive thought in ongoing decision making which I believe is often lacking when it comes to habitual purchases.

Preference, routine, or dependency?
Now, to be clear, I am not a subscriber to the attitudes always follow behavior camp. However, we cannot afford to assume that buyers have a clear, recognized preference for every brand they buy. They might or they might not. And it is perfectly possible for someone to buy one brand because they have an antipathy towards another, or to be forced to buy a brand simply because it is the only one readily available on a consistent basis.

For instance, in the days when I regularly traveled on business and I had an early morning flight from Heathrow Terminal 5, did I care that the hotel attached to the terminal was a Sofitel? No. Convenience was the primary motivation for choosing to stay there. If I fly JetBlue these days, do I care that the hotel at Terminal 2 is a Hilton Garden Inn rather than a Sofitel? No. Both brands offer a perfectly adequate experience, but as far as I am concerned, the brand is substitutable, the location is not. I am willing to pay a little more for a convenient location and am lucky enough to be able to indulge that preference. Bad experiences and extremes of pricing aside, I am likely to continue to choose the hotel location that fits with the terminal I am flying out from, which means my choice of airline determines which hotel brand I use.

Behavior alone does not tell you why people buy
Repeat purchasing on its own tells you little about why those individual buys, and no brand should take repeat purchasing for granted, so it is always worth checking whether those apparently loyal purchasers really do prefer your brand or whether something else is guiding their behavior. What proportion have a real attitudinal preference? How many are acting on autopilot with little cognitive or attitudinal basis? What proportion feel they have little real choice in the decision? And, if so, are they content with that choice or frustrated with their lack of options?

Habitual purchasing insulates a brand from competition
A recent academic study confirms that most consumer packaged goods are bought on autopilot. In a paper titled, “The habitual nature of food purchases at the supermarket: Implications for policy making”, published in 2020, Leandro Machín, María Rosa Curutchet, Vanessa Gugliucci, Agustina Vitola, Tobias Otterbring, Marcela de Alcantara, and Gastón Ares report findings from eye-tracking research conducted for grocery shopping in Uruguay. Across an extensive array of product categories, they found that for 67% of products chosen consumers made no comparison, they simply grabbed the product they wanted and put it in their shopping cart.

If they were anything like me, some of these people did not even remember the name of the brand they were buying, they simply remembered where to find it on the shelf. Either way, that instinctive behavior insulates the incumbent brand from switching because the competition never even gets looked at. The ramifications of automatic choices like these are huge: increased customer lifetime value, improved profitability, and a reduced need to invest in acquiring new customers. However, as we shall see, it is all too easy to disrupt that valuable behavior if the wrong actions are taken.

Changing brand cues too much can disrupt habitual behavior
While macro level events like store closings disrupt habitual purchasing, marketers must also be aware of the potential disruption that can be caused when consumers fail to recognize a brand they buy on a regular basis.

To pick up on the point that a big brand should not disrupt existing behavior, look no further than the famous Tropicana packing redesign in 2009 that resulted in a massive drop in sales. The real issue was not that the redesign was generic-looking, but that the change in design was so major that habitual buyers failed to recognize their own brand, leading them to consider and choose alternative options. In fact, this analysis of the impact of packaging changes in the US finds that while changes increase revenues on average, 38.5% of SKUs experienced revenue losses following repackaging. When it comes to visual packaging changes the authors conclude,

“Striking the right balance between novelty and familiarity is also key—moderate novelty consistently delivers the best results.”

Habitual purchasing depends on specific needs and context
Habit formation leads to a reduction in cognitive load, freeing up mental resources for the myriad other decisions that we need to make on a day-to-day basis. Habitual purchasing can also reduce the risk inherent in trying something new. In essence this is what makes brands so important in the first place. Given a specific need and context, brands offer a shortcut to a positive outcome, and when that outcome is proven positive enough times, habit takes over.

Habits can be broken by changing the context that triggers habitual behavior
Academic research has explored this aspect of habitual behavior in depth, particularly when it comes to the adoption of behavior more beneficial to the individual and society at large. Changing the context of a decision disrupts instinctual behavior and triggers consideration of alternatives. A paper by Amir Tohidi, Dean Eckles, and Ali Jadbabaie titled “Habits in consumer purchases: Evidence from store closures” finds that following a store closure, finds that on average households chose different brands from those they bought previously because they were exposed to new shopping contexts.

Habits form quickly for desired behaviors
Research suggests that habits can form quickly when it comes to desired behaviors and that habit strength increases steeply at first, and then levels off.

Early in the purchasing relationship, buyers are sensitized to the experience, implicitly and explicitly validating their choice against expectations. Finding a brand that delivers a good experience is going to lead to a desire to repeat that experience when the need next arises. If that expectation is proven valid the biggest barrier to habit formation has been overcome.

Frequency and consistency of experience help habit formation
Given that frequency and consistency are important to habit formation, we can expect habits to develop relatively quickly for brands like coffee, cereal, or soft drink brands. And the easier it is to take an action, the more likely it will lead to habitual behavior.

Importantly, however, the more intrinsically rewarding the outcome, the more likely habits are to develop. In my case, travel habits developed quickly once I discovered the most convenient and least tiring way to travel between the US and UK (in this case, the reward was a less shitty experience). However, habit plays a lesser role for product categories that are one-off purchases or where we might expect the options to have changed significantly over time, like EVs or laptops.

Habits are relatively immune to small changes in need, context or outcome
Now this is where it gets interesting. Academic research finds that once formed habits are relatively durable. Even when the buyer no longer finds the experience to be a good one, inertia and the risk attached to choosing an inferior alternative means that it is easier to stick with the good enough option rather than switch. (As Walker Smith and I agreed, most marketers totally underestimate the power of good enough.)

Observing my own behavior, my habitual choices often lasted long after they delivered a tangible benefit. Whether it is my choice of coffee, car rental, or airline brand, my behavior has often outlived obvious justification as advantages have eroded and outcomes proved less satisfactory over time. Eventually, however, the friction involved just becomes too great, and I reconsider my purchase decision.

Habits fail when they are no longer make life easy
For years when I traveled to the UK, I rented from Avis because flying with BA meant I arrived at Heathrow’s Terminal 5 and could pick up my car from the parking garage next to the terminal. Then Avis moved their pickup location offsite, removing its obvious advantage over other offsite brands. To the point about habits being durable, I continued to choose Avis, in part because I had the app on my phone. It made my choice easier.

However, habit and convenience only go so far. For years Avis had an old, expired Amex card of mine on record, and no one – not me, desk agents, nor customer support – could delete it from the Avis system. Not having a current card in the system stopped me from prepaying for a car at a lower rate or even changing the pickup location. I could add an additional new card, but the system would not accept my debit card (even though the Avis web site clearly states that international customers can use one). So now I need to get a credit card just to rent from Avis? Goodbye Avis, it is just too much of a hassle to do business with you. Hello Hertz.

Note, the pivotal experience was not simply the shift to an offsite location. That shift removed the obvious advantage of using Avis, after which irritation at being forced to pay more than I needed to eventually triggered the switch.

Pricing extremes can act like a change in context
A strong brand may be able to command a slightly higher price point than its direct competition, but when the price asked is out of line with what people expect, they will consider the alternatives.

I have flown BA from Boston to Heathrow and back for decades. The flight times are convenient, and my frequent flyer status used to be a bonus. BA was the easy choice. However, there is a limit to how well habits will insulate a brand from competition. When I attempted to book a return flight shortly after Thanksgiving last year and found that the return fare was four times that of the outward leg, I decided that convenience was a luxury I could no longer afford. This trigger event prompted me to check out alternatives. JetBlue offered a better deal and proved to be a pleasant enough flying experience. As a result, I have now flown to the UK with JetBlue a several more times, and even splurged on their Mint flatbed for an overnight trip. Sorry BA, your short-term financial gain led to a long-term loss of two or three flights each year.

Of course, not every purchase requires the same investment as a plane ticket, but even for regularly purchase consumer packaged goods higher prices than expected can prove a deal breaker. Over the last few years, a combination of higher house prices and rents, rising healthcare costs, and inflation has squeezed lower-income household budgets, but seemingly unaware of that fact, many companies have boosted profits by raising prices, only to find that many people decide their brands are unaffordable luxuries. Companies like Frito Lay, McDonald’s, Beyond Meat, Conagra, and Kimberly-Clark have all reported falling sales in the wake of price rises.

Brands must steer a fine line between evolution and disruption
One thing that I have observed over the years is that many brands make frequent changes to their offer to attract new users, but in the process, risk disrupting their existing customers’ habitual buying behavior.

• You liked that old recipe? Too bad, we changed it.
• You liked that style? Too bad, we changed it.
• You had just got used to that interface? Too bad, we changed it.

Each time a brand changes something which buyers find unnecessary or disconcerting it risks throwing those buyers out of their comfort zone and disrupting their habitual behavior. While it is very true that a brand must stay contemporary to thrive, there is a big difference between evolution and change for change’s sake. People have enough change to deal with in their lives without brand marketers adding to the chaos unnecessarily.

All too often, changes seem to be driven by corporate insecurity and a lack of consumer understanding rather than necessity. Changes should only be made when they improve the value of the brand experience to the people that matter, the brand’s customers. Unfortunately, in business, executives are often judged by the changes that they make, irrespective of whether those changes are necessary or not. So, when it comes to innovation, product development, or marketing choosing not to do something is a brave decision, and, as a result, rare.

Takeaways
Habitual purchasing from existing customers is valuable. It is commonly asserted that keeping an existing customer is more profitable than acquitting a new one, in addition, habitual purchasing is the foundation on which growth is built. However, my experience of working with many different brands in many different industries suggests that the habitual customer is rarely given the same attention as a new one. Running a CRM program is just the start, unless it is used effectively, because guess what? People will buy your brand when they have a need for it and only a minority of customers will ever look at your content. Far better to deliver a great experience that someone wants to repeat and not make any ill-considered moves that might undermine habitual behavior.

1. So, first off, do not take habitual purchasers for granted. They likely make up a substantial proportion of your ongoing revenue. Do you know what that proportion really is? How much profit do they account for?
2. Make sure you understand why people buy your brand. Do they really care about it or are they just on autopilot? Even if you cannot make people care about your brand, what can you do to ensure it is indispensable?
3. What context triggers that habitual purchasing behavior? Remember, brand choice may be dependent on something other than the brand itself, e.g., my hotel choice is often dictated by which airline I have chosen. Do you do understand the choice architecture involved? What might disrupt that architecture? If your brand is the incumbent, is there anything you can do to avoid that disruption? If your brand is the challenger, how might you change things up to your advantage?
4. What cues trigger habitual purchasing? How do people recognize your brand? Yes, distinctive assets are important, but what else can you do to make your brand the most obvious choice in a typical purchase situation? If you are marketing a consumer packaged good, do people actually know what your brand looks like beyond a store location and color scheme? If you are selling a brand online, what prompts someone to search for your brand by name rather than a generic search?
5. If yours is a product or service category where people might buy more or more frequently, think long and hard about how you might encourage habitual purchasing from first time buyers. I’ll return to this in another blog post, but it just amazes me that for all the talk of personalized marketing in our industry the majority of marketing I experience is one-size-fits-all activities that pay little attention to a customer’s specific needs.
6. When considering changes to your market mix, think very carefully about what the ramifications will be for your existing purchasers. Does the proposed change add value to their experience? Will it disrupt the way that they recognize, buy, or use your brand? If the change is necessary, what can you do to smooth that transition for your existing buyers?

In summary, habits are valuable to us as people because they make our lives easy. Habits are valuable to brands because they obviate the need for advertising and promotion beyond that necessary to facilitate the habitual behavior. However, all too often, the role of habit is undervalued because marketers take that behavior for granted and disrupt it inadvertently. It can be a costly mistake.