Jan 23 • 13M

Marketing BS Podcast: Have Electric Vehicles Changed the Rules of Loyalty?

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Two-part interviews with successful CMOs: Their careers and how they got to where they are, and a deep dive into marketing channels for a specific business. Companion to the Marketing BS Newsletter by Edward Nevraumont
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Edward: Peter, now that electric vehicles are around brand loyalty doesn't matter anymore. It's all the Wild West. That's what the Wall Street Journal is selling.

Peter: Oh man, I've heard this song before . It's the same old tuned men whether it was gonna be the internet, oh, that's gonna change everything. Or social media or covid. It's gonna totally upset the rules of loyalty. Yeah, those rules are pretty locked in and I'm willing to say same story here.

Edward: So what are those rules of loyalty? What are the rules that the Wall Street Journals claiming are garbage now? Or are they just missing the entire.

Peter: It all depends on how we define the rules. Where I'm coming from it coming forward it is from the top down. If we just look at actual behavior and just look at the choices that people make over time and how often they switch around and what they switch around from in two, there's some very regular patterns to that.

And we could talk about it, but all if you go a level deeper and say, what are they thinking? How are they making these decisions? Sure. Maybe the psychology's a little bit different, but from a business standpoint, that's all cheap talk. All we really care about is what are people doing?

And in that regard it's no different than people rolling a dye to say, which, which of these different items am we gonna buy?

Edward: What they're, so let me quote from the actual article. It says that basically in the past, whenever someone bought a Ford vehicle, 58% of the time it was a Ford vehicle. Now, when they're buying the Ford Electric vehicle, 66% of the time, it's not a Ford vehicle. So there's significantly more people switching to Ford to buy the electric vehicle than we're switching to Ford to buy the non Ford vehicle.

Peter: Yeah. First of all, we don't even know if it's significant or not, but second of all, it's cuz the set itself is changing. The number of electric vehicles out there is really different. It, no that's just nonsense. It's cherry picked, rubbish.

Yeah. The way it's interesting that we talk about cars cuz the people who first set out these rules that I'm referring to and I know you know it well. There was a guy in London called Andrew Berg and his heir Byron Sharp at the University of South Australia.

They basically say that it's you have your die. I have my die. And what drives our choices is, It's just as if random, and it's remarkable how well that story works. The do sleigh model as we call it. And there's no reason to believe it'll be any different here. Do you think So?

Edward: You say it's random, but that's not entirely true. It's weighted random, right? Because if I have, if I bought, if my last car was like a Subaru Forester I think when I go buy to buy my next car, I'm more likely to buy a Subaru Forester than amped. Whatever the average of all the other market shares are. I assume

Peter: you are so right about that.

It's, yeah. It's not that we're all rolling a six-sided equally way to die. In fact, it's not like we're all rolling the same dye that, that there's gonna be this distribution of dice and even that is gonna be well described by again, a. Jewish lay distribution. Look that word up. And yeah, you, but you have your die.

And the important point is that your die doesn't change very much over time. So whether it is covid or internet or EVs, you're rolling pretty much the same die. And there's just so much randomness around the choices that you make that it appears that there are some patterns, but there's really.

Much to it. The only thing that could be going on here is that we might sometimes. what these like guys like to call a structured submarket. So it could be that though that that just as gasoline split off into leaded and unleaded, then people would move into one corner of it. Maybe we'll see something like that.

But it's not some kind of fundamental change in the way that people make decisions.

Edward: So again, I go back to. We're talking about, there's no, like the brand loyalty is not a thing, but brand loyalty in that example is right. There's something to, even if it's not oh, I love my Subaru Forester.

It's the fact that. That I had a Subaru Forester before, I'm more comfortable. I'm the type of person who would buy a Subaru Forester the first time, which means I'm probably still the type of person who's gonna buy it a second time. Plus the fact that now that I'm used to using it, right? So I'm the, and I know it works and I know it.

Presumably it operated the way I wanted it to operate. And so when I go to buy my next car, my default choice is the same car I had before. Now it could change, but the default choice is there, and that's a form of brand loyalty.

Peter: But, so there, there's two pieces to brand loyalty and you described them really well.

One is just that you just have this natural propensity for whatever reason, to buy some things more than others. That part Absolutely. Positively. And that's why your die might be, a little bit weighted more towards the Subaru Forester. And mine might be weighed a little bit more towards, I don't know, a Tesla or something.

Edward: And is that the selection effect? The fact that I bought a Subaru Forester means that, I'm probably the type of person who buys Subaru forests.

Peter: Exactly. Yeah. Cuz then the second piece to it, which is the part I take issue with is this idea of lock in this idea that my propensities get shaped by my behavior over time.

There's not much evidence to that. Again, if you're a supervisor person Yeah. Then you're gonna lean towards it more than most people would. But your propensity to do it isn't gonna get higher over time. It's pretty. Maybe, but it's gonna pretty much stay at that same level no matter how many times you, you roll that die or buy a car, that's the big piece of it.

We don't see that kind of lock in. We don't see that kind of learning. We don't see all of that romantic stuff that we like to talk about where the customers learn to love us and we learn to serve them better. There's not much to that

Edward: really. But I feel like. Say I'm doing, let's switch to a new category.

Let's say I'm doing laundry. Let's say I moved to a new country, so now I have no brand loyalty at all. The first time I go in I, I look at the shelf and I pick one effectively at random, and I take that home and it works. I feel like the next time I go to the store to buy laundry, I'm gonna go and buy that same one.

Just cause I know No, it works. Rather than trying to gamble on something that I don't know that.

Peter: First of all, what you said effectively at random, there's gonna be a lot of influences on it. It could be the brand name. It could be where it's located on the shelf. It could be the colors, it could be stuff that you heard about, but you haven't even thought about, seeing ads for it on the subway or hearing people talk about it.

So there's a lot of influences there that. Things look random, but they're not. And those messages, one way or another got through to you. So it might be less about the actual experience you had with the product and more about the, some of that implicit prior exposure you had to it, that's gonna drive those choices that you make.

That's, that, that's the real important point.

Edward: Sure. And so I, so you say, Hey, the, whatever those influences were the first. They're gonna influence me the second time, but doesn't, the fact that I used it and it worked influenced me like I feel like it does. I feel like. Once I have a chocolate bar that I like, I'm more likely to buy that chocolate bar again.

Even if it was, let's say it was gifted to me. Let's say someone gave it to me rather than me choosing it. Once I have something that I know works, it feels like why wouldn't I stick with what works

Peter: well? Because of all, you might, you just might have a propensity to, to stay with that chocolate bar, but there's all kinds of reasons why it might be just variety seeking, that let's just try something different.

I like this thing, but, ,

Edward: that may, maybe that makes sense for chocolate bars, but I. For cleaning my clothes. You know what, let's just .

Peter: But, but it could be a situational thing that, oh, my mother-in-law is staying with us this week. And, and she only likes certain kinds of things.

And so there could be things that, that might be perfectly rational. Why you're switching around. But to, to me, as an outside observer, I'm just looking at that sequence of choices. And man, oh man, it looks an awful lot. , rolls of the dice. Now to be fair I mentioned all this work by Aaron Bergen Sharp, and they basically said, you have your dye, and it never changes.

Now, I myself have written a bunch of papers that show that, that model's a pretty good first pass. But every now and again, people. Do throw the old die away and do start with a new one. So I don't rule out the idea of changes, what we technically call non-stationary. But the times that you do that tend to be relatively infrequent and they tend to be dare I say, random.

It's not like necessary because of a pandemic or a or change in the macro economy. It's just, there's just something in your life that. Be related to anything anyone else is doing that just causes you to shift your preferences. And it doesn't happen that often.

Edward: What about sampling? So say I'm a I'm a loyal, I don't know, strawberry jam eater, and I'm doing it all the time. Not because I'm loyal, but because I have a propensity to eat Strawberry Jam. And then I go into the grocery store and they give me a sample of, I don't know, grape. , does that have no influence on the chance of me eating crypto jelly?

Peter: I did say that in, in fact, I'd say it's stuff like that. It's sampling, it's word of mouth. It's seeing a Super Bowl ad that sometimes we'll have people switch around a bit. It could be just a change in which things are on which shelf in this store. And and that's why to, again, to me as an outside observer, I see some switching around again there.

Perfectly good reason. It's cuz someone, forced that grape jelly on me. But it makes it seem like that you are rolling a die. And so yeah, a lot of these influences will will have some impact on it. But to the outside observers, it looks pretty random and it looks relatively steady over time.

Edward: But if, again, if I outside observer, if I'm the marketer who's running the sampling program, , I r I go and start sampling a bunch of these jams stuff. Can I expect that my jam sales are gonna increase and that the people who switch over to start buying that grape jelly are more likely to buy grape gel in the future? Like the impact is more than just the next purchase, but it might be like a series of purchases after that.

Peter: This starts where it gets really interesting. So again, a lot of this. Great. Work by Aaron Berg and Sharp. And Byron Sharp has this book that I'm sure some of your listeners would know called How Brands Grow. And they talk about a thing called Double Jeopardy, which again, I know you know Ed, which basically says if you can get more people to buy it, if you could increase the penetration, the footprint, just the overall number of people who tried The Thing at least once. That in and of itself is gonna be associated with higher degrees of loyalty. So yeah, your point is pretty good. You get more people to buy it, they're gonna tend to buy it more often. They're gonna appear to be slightly more locked in having a slightly higher propensity to buy it. It's really counterintuitive, this idea of. Double jeopardy. But it's really powerful. It's pretty much universal. And it's something you should expect to see instead of it being the exception.

Edward: Yeah. So then looping back to the wall Street Journal Electric car article sounds like they're doing the right thing by introducing the electric cars, they're getting people, so Ford introduces an electric car and it's getting people who didn't buy Ford before to be more likely to buy them now.

So it's a customer acquisition play it brings and it brings 'em into the Ford fold. And then once they're in there, Ford's market share increases because they now have more customers they acquired with a electric vehicle. And then once that happens, the double jeopardy kicks in and they should. Those people who have bought those four vehicles the first time, more likely to keep buying them in the future.

Peter: So you will see some of that. Absolutely. The big key is how to get that wonderful cycle going. And in other words, how do you do the acquisition? And again, going back to the great work of Aaron Bergen Sharp and others, you can't just lean on one attribute. You can't say, this is the coolest, newest electric vehicle. You gotta. Broadly appealing. You gotta really punch up a number of different attributes that, yeah, it's gonna save the environment. But you know what? It's all, it's also fun to drive and it's very safe and and your friends will like you better. So you don't lean too heavily. Don't nichey yourself.

You want to make yourself broadly appealing and that's gonna bring in more people and just, implicitly get them to do to. Or to roll your side of the die a little bit more often. It, it really is amazing how counterintuitive that he did. Double jeopardy is, but you just see it it's funny to see a lot of companies stumbling upon it as if it's something new and unexpected, it's been there all the time.

Edward: And what's neat about this is it does hint at that, the next paragraph in the article talks about how these people buying these $70,000 new electric vehicles it what says they're, I dunno if this is actually true, but this is what the journalist is saying. They're as likely to own a $30,000 Subaru Outback as they are to buy, as they are to have previously owned a $100,000 Porsche 9 1 1 sports car. And whether that's true or not, the idea that we should make these vehicles to appeal. Everyone rather than just some sub-segment. Sounds like a step in the right direction for the marketers anyway.

Peter: Yeah, it, and it goes against the grain of so much of what we've taught and learned in the marketing 1 0 1 s. We just figure out what your distinctive attribute is and hammer that and find people who care about that instead. We're trying to say, not so much be all things to all people, but a step more in that direction.

Edward: Great. Anything else to add, Peter?

Peter: We just want people to appreciate that this is the way the world works, whether it's electric vehicles, whether it's soup, whether it's hotels we expect to see these kinds of patterns.