When my wife began clipping grocery coupons a couple of months ago, she learned something surprising. In her words, “I discovered that I had a loyalty to certain brands of coffee, laundry detergent, ice cream and quite a few other items. The strange thing is that these products were not necessarily better or cheaper than other brands; it is just that I got into the habit of buying them and had no good reason not to perpetuate that habit.” Fortunately, the couponing has forced her to look at each and every item with a fresh objectivity. While some of her long standing favorites have continued to find their way to her shopping cart, others stay on the shelf in lieu of better and/or less expensive ones.
Where else do we have brand loyalty?
The grocery store revelation caused me to wonder, “Where else can brand loyalty be costing us money?” My answer is in itself a revelation: almost everywhere. I will list only a few items in this post, but, hopefully, they will help you consider other product loyalties which could be costing you money.
Insurance
Most of us (myself included), can easily fall into the mode of simply paying those premiums without ever considering if we am getting the best combination of price and service. Three years ago, when I solicited home and auto quotes from several local agents, I discovered that we could save $1200 annually (yes, that is $100 a month) by switching companies. Memo to self: compare insurance rates again soon!
Bank
We have three home town banks in our city. I have banked at the same one for years because they gave me a better rate on my home mortgage, which, by the way, has been paid off for quite a few years. Why do I stay at this bank? Why don’t I shop for an online bank which could actually pay me something for my savings account? Well, I might be old fashioned, but I like banking face to face with real people. Besides, we don’t keep much money in our bank. Brand loyalty? Yes, if I learned that any interest earned elsewhere would be enough to cause me to change. Hmmm. Maybe I need to start comparing.
Cell phone provider
Because of the long term contracts we sign to get those discounted phone prices, many of us stick with the same company simply to avoid the hassle of switching. A second factor, for us, is that nearly all of our mobile to mobile minutes are “free” because our entire family uses Verizon. I don’t feel any warm fuzzies toward Verizon, but we continue to re-up. Brand loyalty? If I don’t check my options, I suppose so.
Satellite/cable TV provider
I have Direct TV and have had it for years. Is Dish Network better? Would cable TV save me money? I really don’t know, but I do know that switching would probably be a hassle. I don’t like hassles, so, although I feel no particular allegiance to Direct TV, I keep sending them my money. I think the hassle factor is a greater influence than brand loyalty, but, whatever you name it, it could well be costing me money.
Mechanic
Having a mechanic that you have confidence is a good reason to stick with him. I do. However, I have recently been taking some of my less technical work to a different mechanic who is giving me great service while saving me money. I am now questioning whether I have stayed with my old mechanic because of his quality of work or because of a form of brand loyalty. I know this: I enjoy working with more than one mechanic; it gives me a fresh perspective on both price and quality. It also prevents me from blindly giving all of my work to one shop just because I have always done it that way.
Automobiles
When I was a kid, it was always Chevy versus Ford. A “Chevy man” would never, ever buy a Ford, and vice versa. Today, with the myriad of vehicle choices, brand loyalty may be less common. But just yesterday, I heard a woman say that she will never buy anything other than Volvo. Brand loyalty? Sounds like it to me.
Restaurant
I have my favorite restaurant. I love the food, the atmosphere, the service and the price. Because our small town offers few eating out options, our default restaurant continues to be Cerro de la Silla. Is brand loyalty costing me money? Probably not. We simply don’t eat out all that often, and we never spend money we don’t have in our “eating out” envelope. Still, we would be wise to occasionally try elsewhere, just to make sure we are getting the best food and service for the best price.
Is brand loyalty costing you money? Maybe. I know (as I shared in this post) that it has cost me in the past and could well be continuing to cost me in some areas. The key, be it your investment broker or your favorite beverage, is to constantly monitor the value you receive for the dollar you spend. These things can change, and if you allow yourself to go to auto-pilot, your brand loyalty may be costing you money.
Readers: Is brand loyalty costing you money? How?
You’re right. Many of us do have brand loyalty. I don’t think that’s necessarily a bad thing though. Many times, we enjoy the quality of products and services from one particular company, and if they are a good company, their good business will be a cost savings on our time.
Agreed…IF one will take the effort to monitor the value received for the dollars spent. My problem is that I don’t do that often enough, and service or price can change without me realizing it. I guess I need to invent a new phrase: “blind brand loyalty”.
I totally agree. I’m a big fan of store brands – they are usually much cheaper, and sometimes taste/work much better than the national brand!
Brand loyalty does definitely come at a cost. There is an upside for investors, though, in being able to buy companies that attract a loyal bunch of customers. A great example is AAPL, which has brand loyalty that is unmatched by any electronic company.
JT…Great thought. I had not considered how brand loyalty can be advantageous to investors.
I’m very loyal to mechanics because I can’t trust someone I don’t know. I think that’s the ultimate brand loyalty!
Kevin — me too. As I mentioned in the post, I have recently been hiring a different mechanic to do less technical work for me. But I wouldn’t have tried him in the first place if he hadn’t been highly recommended by a good friend who owns a trucking company. Of course, I didn’t know the mechanic…at first…but he has earned my trust.
I switched banks to get a higher interest rate on my checking account. I hate my new bank though, and the minute they drop the high-interest checking, I’m transferring all my money back to my old bank. I never went to either bank in person, but my old bank you can call and a real person answers the phone. The new bank, I’ve never managed to call and speak to anyone, and they have ignored emails. It bothers me that if something goes wrong, I can’t just contact them to sort it out. For now, the interest rate is worth it, but if soemthing goes really wrong, maybe I will regret not sticking to the bank that I had more of an inclination to be “loyal” to.
I suppose the challenge is to know just how much higher interest rate it takes to offset poorer service. Unless I start keeping more money in the bank (or they really tick me off) I will probably stay with my current home town bank.
I guess it’s the same reason why we stay with our Hair Salon or Barber. What thoughts come to your mind when switching to a new barber? Mine happen to be: “What if he messes up my hair?” So I would tend to stick with a barber who has consistently delivered good results for me.
People feel much more comfortable with a brand that they know (and probably one that they’ve heard of on TV or online) compared to a relatively unknown, but cheaper alternative.
P2P — Switching barbers or cosmetologists would set off hyper anxiety in many of us. As you say, if he/she has delivered consistently good results, this is a good case for keeping that brand loyalty going.
Great post, Joe! I actually switched my car insurance after a few years of using Geico. I saved by switching FROM them.
Tim — I don’t know about you, but I was amazed just how much money I saved by switching insurance. One would think that the company who quotes the cheapest rate would continue to be the company with the cheapest rate. Not true! The company I switched FROM was at one time the cheapest.
I think brand loyalty at the local level is a great thing. People in our city love going to the local restaurants and loath chain restaurants. This is great because it foster local brand loyalty. As far as groceries and other generic products go, I don’t really care about brand unless I can tell the difference in quality.
retireby40 — The fun thing about this type of post is that it draws out so many perspectives. Although I hadn’t considered the brand loyalty at the local level factor, I should have. My small home town, in a quasi-tourist area, needs all the local loyalty it can get!
In some ways, my brand loyalty is a result of the time it takes to switch. Banks, for example, have tons of hidden fees and fine print. I know every fee associated with my bank; I’ve spent a few hours actually reading their customer disclosure materials. I don’t want to switch, for that reason: imagine the time it would take to learn another bank’s ins and outs.
Your example of banking reminds me of my satellite TV scenario. For me, the hassle factor trumps the effort it takes to switch. By the way…I am impressed that you actually read all of the banking fine print. Have you written a post on what hidden fees we might miss by NOT doing that reading?
I agree with RB40- brand loyalty at the local level is a good thing. Good for the local economy. I have brand loyalty with my cell phone even though I know that I could probably get a cheaper data plan with the new service providers that are coming out. I think it’s all about trust and comfort- we like what we know.
young and thrifty — Brand loyalty at the local level…I too agree with RB40. About your cell phone provider, I assume you must have a lot of trust and comfort with this provider (that is a good thing) if you aren’t willing to try another at a cheaper price.
Brand loyalty does have some pros as previous comments have pointed out; however, in addition to restaurants, anyone who is brand loyal to Starbucks on a daily basis must love drinking overpriced coffee. I can only imagine how much they spend on coffee per month :(
Yes, brand loyalty to Starbucks could indeed be pricey! The quality MIGHT be worth the expense to some (not for me), but it is nevertheless pricey.
Howdy Joe,
I have little brand loyalty, but a TON of loyalty towards a particular person. My auto mechanic of 10 years is one example, and a private banker is another.
I would have dropped my insurance company of 18 years if they didn’t rectify a scam they had going where they charged me 50% more b/c they said my house was 50% larger than realty. I had to fight, and won, and they gave me some credits and extra.
My loyalty is to people, not to brands.
Best, Sam
Sam — As usual, you have a knack for seeing what others miss: loyalty to people, not to brands. Agreed. However, I am confused by your loyalty to an insurance company (not a person) who tried to scam you and whom you had to fight with in order to get them to rectify their misdeeds. I assume you were working with a stellar agent who went to bat for you. Right?
I am typically a price shopper. I will routinely purchase the store brand or a different brand if it is on sale. However, you definitely have me pegged with the insurance and cell phone provider. Sometimes it’s just easier to keep what you have. Even though if everything Sprint is saying is true I should switch right now…
I have a friend who pays huge premiums to her insurance company. She will not consider comparing rates with other companies because she has been with this one so long. Personally, I don’t get it, but she would rather pay too much (even if she knew she could get better rates elsewhere) than switch. Obviously, this is not you. Right? :)
i like to think i am loyal, but i am not afraid of challenging existing relationships because stagnation and complacency sets in naturally over time, and relationships are often taken for granted, especially in large companies where philosophies, management and strategy/direction changes from time to time. while i have taken some relationships to market, i have kept others despite a slightly higher premium because there are other intangible factors that i value in those such as quality of service, etc.
Well said. The key is to not get too deeply entrenched in brand loyalty because when, as you say, “stagnation and complacency sets in naturally over time, and relationships are often taken for granted”, a sleepy consumer could miss those changes.
I’m kind of like Sam – not a lot of loyalty to particular brands or companies but people and good service providers earn a lot of loyalty from me. Sometimes I think it’s worth paying a little more for someone you trust but I am usually willing to try something different in an effort to save. If I don’t like it, I’ll go back to my preferred brand/service provider.
Great post Joe!
Matt — You remind me of my dealings with my mechanic. I still hold my “main guy” in high esteem, but I have been allowing another, highly recommended, mechanic do some of my less technical work (and saving money in the process). My new guy is working like crazy to earn my trust, and I appreciate it. But I still plan to use my original guy (and pay more) when I need his expertise.
Hello Joe!
Interesting list that I didn’t take into consideration (I usually only think of brand loyalty in terms of consumer products). I am definitely loyal to ING Direct and Verizon. Something about that bright orange ball just makes me happy, and I have been a verizon customer since I got my first cell phone when I was 17.
Amanda — You crack me up…that happy, bright orange ball keeps you loyal. Just curious: what, if anything, would cause you to switch from ING Direct or Verizon?
I love tide laundry detergent, it smells great. But sometimes I go with a cheaper alternative in spite of my preference for tide! My pocketbook sometimes prevails on that one. Joe, I like the article, reminded me that in some instances, trading is not worth the hassle.
Barb — Sometimes price will trump brand loyalty, and that is a good thing: it proves we aren’t on auto pilot. And yes, the hassle factor (for me at least) is a big one. I think that is why Satellite TV and cell phone providers make their plans so confusing.
I must admit I am doing pretty good for not caring about brand. I do however try to get high quality whenever possible. Thanks for a great reminder though. Many of us need this check up.
We will pay extra many times in many situations (from car tires to a great restaurant) for high quality. But not (if we can help it) for brand loyalty.
Brand loyalty?? Just buy the product you need assuming there are no brand labels…thats the easiest way to go trust me :)
Hmmm. I like your “easy” tip. Makes me wonder what we would be buying if we weren’t allowed to see the brand.
I have some brand loyalty to brands that have always done well for me in the past, but you are right, sometimes we just fall into habit and we really need to evaluate if we’re still getting the proper value for our dollar!
Nothing wrong with brand loyalty to those proven products. But because quality and prices tend to change, we need to stay on our toes.
I’ve used several banks to take advantage of fee free accounts, better rates, and reward programs. I tend to be most brand loyal to health products. Second would be phone/cable companies b/c it’s such a pain to switch.
I believe the phone/cable companies intentionally create the “hassle factor” so we will stick with them just to avoid the hassle of switching.
Apple is an excellent example for brand loyalty. Its baffles me to see people standing outside the Apple store 2-3 days before the release of a new iphone or ipad that they haven’t even seen before.
Good example! It’s hard to blame the fans who are willing to page huge premiums. The products just work so well and look so good.
Everything Finance — Apple is indeed an excellent example of brand loyalty. I started out with a PC years ago, have had very few problems, and, for my uses, have never seen the advantage of paying twice as much for an Apple. I know very few PC “died in the wool” loyalists, but the Apple users are often fanatically brand loyal. Even though I will probably stick with my PC, I applaud Apple for producing a product great enough to inspire such loyalty.
I don’t know if I am brand loyal. I usually shop everything periodically though. If I am not willing to switch, I will negotiate. I did that with the cable company and saved roughly 15% for TV and internet.
Krantcents — someone who shops everything periodically and looks for ways to negotiate will seldom be paying “the hidden costs of brand loyalty”.
Enjoyed the article Joe. Reminds me of the coupon clipping “hobby” a few of my in-laws are starting, where you buy what you need when you can get it cheap, regardless of the brand. I’m not personally a huge fan of coupons (I love saving money, but can be lazy at times when it comes to something I see as cumbersome, like coupon clipping), but it goes back to your point about brand loyalty. I think it’s easy for us to stick with the comfortable / usual / tried-and-true, but the big elephant in the room we ignore is motivation. Why do I keep spending $XXX with this cell phone provider, or this insurance company when I can get it cheaper? If we can answer that question, I think we can get a better handle on things. But then again, I think we all know how much fun it can be answering a question like “why?”. Cue the five-year-olds!
Matt — You got to the heart of this issue with this sentence, “the big elephant in the room we ignore is motivation”. I need to be asking myself those “why” questions. Thanks for the thoughtful comment!
Being Brand Loyal can cost you money in regards to grocery/drugstore shopping for certain. I have found that my willingness to get the best deal has not only helped me
to save money but allowed me to try out brands or products I wouldn’t have otherwise. http://www.manymoneysaversblog.com/2011/01/being-brand-loyal-can-cost-you-big.html
Amy — Well said. If we strive for the best price, then discover the quality isn’t what we expected, we have learned to go more for quality next time. However, if the quality is good, we have learned how to save money. Either way, we can avoid brand loyalty.
I don’t have any brand loyalty. I won’t necessarily buy whatever is cheapest but I’m looking for value for money.
Learning to avoid consumerism is a definitely solid step toward saving money! And as @Help Me To Save stated, making conscious choices – rather than buying the cheapest OR the high ticket brand-name is part of being a savvy shopper. Searching for value/quality is something many folks tend to forget in their quest for a frugal lifestyle.
Great article, definitely a lot of brand loyalty in everything we buy. Once you have brand loyalty, it takes a lot from a different brand to catch your attention. We have gotten used to Dunkin Donuts brand of coffee, to a point where we won’t try other brands even if they are on sale.