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New study on German consumer behavior: Brand loyalty on the wane


Drastic changes are occurring in consumer behavior. Today's shoppers are extremely sensitive to price, while brand names are increasingly leaving them cold. Manufacturers of well-known brands risk losing growing swathes of customers unless they fast improve their brand marketing and price communication. These are the key findings of a recent study carried out by Roland Berger Strategy Consultants, based on the market research study "Typology of Desires", which investigates almost 10,000 people in Germany aged 14 and over.

"In just the last five years, the power of brands has shrunk dramatically in all sections of the market," says Ingmar Brunken, author of the study and Principal in the Marketing & Sales Competence Center at Roland Berger Strategy Consultants. The trend is clearest in the market for shoes (down 11.6%), wine (down 7.4%) and Germany's economic power base, the automotive industry (down 9.1%). "At the same time, consumers' price sensitivity has often risen dramatically," says Brunken. This is the case, for instance, in the market for computers (up 8.8%), soft drinks (up 7.6%) and, again, the automotive sector (up 9.0%).

"Surprisingly, shoppers are focusing more and more on price even when it comes to fashion items, where purchases are generally considered to be driven by emotions." Indeed, the fashion industry saw the sharpest increase in the share of price-driven consumers, up 13.1%. "This trend in highly competitive segments indicates what the future holds for other markets, too: for power, flights, coffee, banks and telecommunications, brand suppliers who fail to communicate prices effectively are rapidly losing ground on all sides."

Added pressure from inflation and shrinking sales

The high rate of inflation and consumer awareness of rising prices are exacerbating the trend. According to co-author and brand expert Rainer Balensiefer, the study's findings indicate a long-term shift in consumer behavior rather than a short-term trend. In some traditionally firmly brand-based sectors – women's cosmetics, automobiles or soft drinks, for example – consumer preferences show a complete turnabout. In the past, it was the brand that clinched the deal; nowadays, more often than not, it's price," says Balensiefer.

But that doesn't mean that brands have had their day and products will only be sold on the basis of price in future. A number of examples discussed in the study reveal that successful brand management is still possible, even in highly price-sensitive markets. T-Mobile recaptured market share, for instance. "Commerzbank also gained ground, despite the competition from on-line banks and reductions in account management fees," says Balensiefer. "And Lufthansa shows that success can be achieved even when competing with low-cost operators. Customers respond quickly to effective marketing and price offers aimed specifically at their target group."

Key to market success

The authors of the Roland Berger study identify three keys to ensuring future market success: "First of all, brand manufacturers must start grouping today's target consumers in terms of their attitudes, rather than demographic data such as age or income," says Brunken. "Second, pricing should no longer be based exclusively on previous market experience. Companies must learn to understand customers' price perceptions and how they differ between the new target groups. Third, companies need to use intelligent pricing models that take a differentiated approach to the new attitude-based target groups. 'One price for young and one for old' is no longer enough in today's market."

Accordingly, established providers of branded products and services must change their approach to brand management and pricing. Understanding brand positioning and price communication is critical, as brand manufacturers are increasingly caught in the conflict between high quality (accompanied by higher costs) and low, competitive prices. This development will give a further boost to private brands, which have long competed on price.

"All in all, this development represents a major challenge to the German economy," says Balensiefer. "German manufacturers mostly offer high-price brands. The battle for market share with manufacturers from the Far East, who traditionally take a low-price approach, is set to become even tougher."


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