Inflation Kills Brand Loyalty (2022 Jul)

by Barry A. Liebling

Like most people I am in the habit of purchasing products and services from the same vendors time-after-time. If I buy groceries, go to a restaurant, obtain electronic equipment, shop for clothing, rent a car, get insurance – my default action is to do whatever I did last time. An observer would say that I am demonstrating brand loyalty.

It is not that I am ecstatically happy with my spending. Instead, I am not generally disturbed, bothered, or frustrated when I deal with my vendors. I usually adhere to the old bromide “if it ain’t broken, don’t fix it.”

But in the last two years there has been a dramatic increase in inflation. I am aware that inflation is caused by government mischief – increasing the supply of money and spending. Now lots of things are broken and need to be fixed. Where previously prices were relatively steady, in the current environment I can expect an increase in my bill every time I shop. And each increase is a signal to look around, investigate alternatives, and switch if there is a better deal that is available.

Of course, my tendency to quit a vendor that raises prices is not new and is not necessarily caused by inflation. For the last three decades cable television providers and cell phone services have ballooned their rates every year, and I have switched from one company to another on multiple occasions. I always want to act economically.

What is new now? With inflation many goods and services – if not most – are getting more expensive on a monthly and even a weekly basis. I view every increased price as bad news. My mood is spoiled when I see my dollars losing value. I am concerned that eventually my funds may not be sufficient to meet my needs. Looking for bargains has become a defensive unpleasant necessity.

Rising prices in an inflationary period destroys brand loyalty. If the store I go to this week becomes more expensive, I will search for another store. If I do not find a better vendor I might stay with the store that disappointed me, but I will be on the lookout for a replacement. Even though I understand that the genesis of inflation is government behavior, my affection and comfort level for my trading partners has been diminished.

I realize that lots of people are not price sensitive. They purchase goods and services, pay their bills, and do not dwell on the effects of inflation. But a huge contingent of people – perhaps most – are irritated when they see their cost of living going up with no end in sight. Bothered citizens – like me – are shopping around and seeking bargains more than they did before inflation became a problem.

Consider what this means for ongoing businesses. Firms thrive on brand loyalty. Acquiring a customer can be difficult, but keeping the customer – encouraging brand loyalty is relatively simple. Continue delivering value, maintain a smooth relationship, and refrain from giving the customer a reason to leave. Note that increasing prices is one of the two main factors that chase customers away (the other is decreasing product quality).

In the ongoing inflationary environment it might not be possible for businesses to maintain their prices. The cost of providing goods and services is going up and firms have to take that into account in formulating policies. So a lot of enterprises are caught in a trap. If you raise prices some regular customers will leave you. If you refrain from raising prices you may not be profitable.

My advice to businesses is to keep your prices steady as long as you can. A larger bill (even if the increase is small) sends a message to consider other vendors. Note well that even if competitive businesses are not less expensive, annoyed customers will experiment and try other suppliers. Do not intentionally frustrate your patrons.

My advice to alert citizens is to think about what is causing inflation – the malady that kills brand loyalty and promotes general misery. When government creates money excessively and spends extravagantly the consequences are horrible. You have to elect politicians who respect liberty, understand basic economics, and work to end ruinous government abuse.

*** See other entries at in “Monthly Columns.” ***

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