A generation ago ‘brand loyalty’ was a simple concept based on satisfaction with specific tools, reports JOHN POWER. But in today’s rapidly changing cordless tool market, brand loyalty has a very different meaning…
Tool manufacturers and hardware store retailers are interested in one thing: sales. So it is vitally important to understand what trade customers are thinking when they make purchases. One of the trickiest subjects relating to tool purchases is ‘brand loyalty’, which inevitably influences product selection, store or outlet selection, as well as price thresholds. In this article, we will address some of the complexities and volatilities of brand loyalty in the modern cordless market, with an ultimate warning that brand loyalty is NOT the same thing as ‘retailer loyalty’.
Technology and brand loyalty
If we consider the power tool market, how strong is brand loyalty among trade customers? According to Dominic Menei, director of United Tools Bayswater in Melbourne, up to 80 per cent of trade customers have a fixed idea of what brand of tool they want before they enter a hardware store – a statistic that seems to apply to most stores nationally. On the face of it, this figure may not be surprising: professional users have always displayed preferences for certain makes and models, doubtlessly based on careful comparisons with a broad range of equipment, as well as recommendations from colleagues and resellers. But the nature of brand loyalty is changing quickly.
“In the old days a trade customer might have chosen a Makita circular saw, a Hitachi grinder, and a DeWalt drill,” Dominic says.
Today, however, that kind of multi-brand favouristism has all but died out. Why?
“Because now practically all tools are battery-driven,” he explains, “which means users have to run all their tools off the same battery platform – they don’t mix and match different brands of tools anymore,” he said.
This observation has startling consequences: trade users now face an ‘all or nothing’ decision whenever they wish to change brands, because a switch inevitably involves the purchase of a full suite of new tools using the same new battery platform. This new ‘platform’ era presents both opportunities and dangers for resellers and manufacturers.
On the one hand, sales of full arrays of products might be seen as a positive thing, involving higher average sales, seemingly guaranteed add-on sales of new-release products of the same brand, as well as ongoing maintenance and servicing work. Even better, the introduction of just one outstanding innovative tool or battery system might inspire fans to adopt a complete new set of tools of the same brand, potentially stimulating more frequent turnover or drawing fresh high-value customers to a retailer’s business.
On the other hand, however, users might abandon loyalty to an entire suite of products because of perceived problems with a single tool in the range. This could leave retailers unexpectedly holding large volumes of stock that suddenly become difficult to sell – potentially because of one toxic feature of one tool. Moreover, a customer might switch to a brand that a retailer does not stock.
In other words, brand loyalty is fickle and only effective if the products are good, and the existence of platform-based ranges does NOT, in itself, guarantee lifelong support from the customer or perennial strong sales for the retailer. Even long-term loyal users of a brand will happily cast off a tired range (often to apprentices), particularly if the warranty period has lapsed, in order to experiment with a differently branded set of equipment that appears to have an edge over the opposition.
Pricing and buying habits
What are some other consequences of platform-based brand loyalty? Extrapolating from the above points, we might deduce that full ranges of equipment will be subject to tighter pricing and haggling pressures than single tools. Indeed, even single-item purchases these days are not immune from instantaneous price comparisons online via smartphones, leading to a clear distinction between brand loyalty and retailer loyalty – many customers make purchasing decisions according to price comparisons between different outlets, instead of objective assessments of an item’s value or an appreciation of the quality of service provided by a particular outlet.
The dilemma for retailers is that even the most loyal advocate of a specific brand of product will often shop around (even internationally) to save a few dollars, so the perception that a customer is ‘locked in’ to a specific platform-based brand, and will therefore be a more reliable spender at the same outlet, is false.
The corollary of this ‘shopping around’ mentality is that traditional retailers tend to be extremely cautious when dealing with trade customers’ ‘big ticket’ preferences, particularly if there is even a remote chance that a customer’s decision to switch brands might mean a shift to another retail outlet.
The best-performing brands are those that attract long-term loyal customers with routine buying habits, i.e. tradespeople who refresh their ranges organically as individual units wear out, or who like to try out new-generation products of their preferred brand.
These well-performing brands also inspire loyalty from retailers through good margins and a culture of consistent pricing policies across all retail channels. Consistent pricing does not conflict with free market economics; companies like Dyson and Miele in the home appliances market have discouraged discounting wars between retail partners, thereby safeguarding brand image as well as reputation, and the same policy is serving certain power tool manufacturers equally well in Australia. It is interesting to acknowledge that consistent pricing does not seem to have a negative impact on brand loyalty as far as customers are concerned; as stated above, pricing is only problematic if there are wide fluctuations between different retailers. Some of the most prosperous and fast-growing power tool brands in Australia are the most expensive, and yet they remain good value for consumers and great performers for retailers of all sizes.
Unsurprisingly, retailers who prosper from selling popular products inevitably demonstrate their own kind of brand loyalty to manufacturers by offering greater shelf space to their fast-selling products, which in turn leads to better product exposure in-store and exponentially better sales of that particular brand. Savvy manufacturers, it is clear, know that brand loyalty applies to both retailers and end customers.
Sensitive and fickle
The advent of platform-based brand loyalty has helped many retailers to build solid businesses, thanks in large part to a small number of key brands catering to the needs of Australia’s trade customers. But brand loyalty is sensitive to a range of fickle events, such as several tools randomly wearing out at the same time, or the launch of a disappointing or unreliable tool.
Effective retailers know that a customer’s brand loyalty can be tested at any time, and the secret to success is to make sure that the store is well placed to accommodate changing customer preferences as they occur. This means having large numbers of brands represented in-store to cater to shifting tastes, along with sizeable inventories of product ready for immediate sale. Naturally, this high level of service is costly and requires immense dedication, but retailers have always known that service excellence, great products and deep stock levels are necessary features of any good business.