'Brand Blind' Consumers May Be on the Rise

July 9, 2013 — -- I took a seat at the diner where I regularly eat breakfast just in time to hear the woman sitting at the table across from me ask for a Diet Coke. The waiter nodded and left to fill her request. No problem, right? Except the restaurant doesn't serve Diet Coke…only Diet Pepsi.

To be fair, the waiter usually explains they don't serve Diet Coke and asks if Diet Pepsi will be okay. On this particular occasion however he didn't. He brought the Diet Pepsi to her table, fished out a straw and left with their orders. I watched as the woman sipped away either oblivious to the fact she was drinking Pepsi instead of Coke or didn't care. It was at that point that I began to wonder whether the number of people who don't actually care if they are drinking Dr. Pepper or Mr. Pibb, using Johnson's Baby Wash or CVS store brand, using Scotch brand tape or a generic version is growing.

It is well documented that a strong brand is valuable and helps its owner gain market share, communicate brand promises and charge a premium. There is a growing pool of evidence that suggests that the prolonged economic downturn, smarter, more connected consumers due to the rise of social media and changing demographics has increased the number of "brand blind" people.

As I began my research I found out right away that the great recession of 2007 followed by the global recession of 2010 has been particularly damaging to brands and has created a lot of people who now buy on price for purely economic reasons. A 2010 survey revealed that 93 percent of consumers had changed their grocery-shopping habits because of the economic downturn. Some of those shoppers after having tried store and generic brands became loyal –the idea that higher price means superior quality vanishing in a single bite or spray of the lower-cost competitor. In grocery stores this proves more damaging for brands because in most cases the margins are better on store and generic brands than name brands so the store makes more profit.

While frequently used household items seemed particularly susceptible to the shift from brand to generic, higher-ticket luxury brands have been able to better hold on to their customers. The most obvious reason is that for the most part the rich stayed rich during the recession. As the recession dragged on and the recovery has moved along slower than molasses, everyone, even the ultra-rich have put the brakes on spending. Top-tier luxury brands like Hermes, Cartier and Louis Vuitton have held their own while mid-luxury brands like Coach have suffered.

In the auto market, which is pretty much all about brand, brands are doing fine in the middle and on the low end, but high-end sales, that is cars that sell for over $75,000, are down. So while the Lexus 460, Audi 8A and the Mercedes E-Class sales are down, overall vehicle sales are fine. If this is true then it stands to reason that there is more comparison going on and people are willing to venture into the relatively unknown, say a Hyundai Genesis or Equus instead of a Mercedes or Audi. In fact, Hyundai is one of the most-shopped car brands in America.