Froot Loops vs. Omaha Steaks: Brand, Loyalty, Age and the Inelasticity of Demand

While the Conference Board reported this week that its consumer index of sentiment has reached a three-year high (pointing to job gains and increased consumer spend), talks of pending inflation and rising gas prices may quickly reverse this positive trend.

In the upcoming 2011 Digital Marketer Report, set to release later this month, we’ll talk about brand loyalty and its importance to countering the hole that we’ve dug for ourselves in heavily discounting our products and services during this recession. You may recall from Econ 101, that one factor that can counter elasticity of demand (how demand for goods and services changes by price) is brand loyalty.

One of the surprising findings that we’ll discover in this year’s report is the relation of age to brand loyalty.

Based on our analysis of Experian Simmons consumer data, there is a strong positive correlation between our age and our loyalty to specific brands. The take-away for marketers – for those of us that have strong brands, especially those that have brands that appeal to older consumers, we may be able to back away from steep discounting and still maintain our customer base. Conversely, brands appealing to younger consumers should proceed with caution when attempting to raise prices.

How do we know our brand’s age attraction?  One potential tool is to look to Experian Hitwise and our ability to segment our sample of 10 million Internet users by age. In the table below we look specifically at Food & Beverage brands by isolating consumers over the age of 55 compared to those in the 18-24 year old age bin.

Applying the concepts of elasticity of demand, brand loyalty and age, we can predict that if I’m 55+ years of age and in the market for a box of NY strip steaks from Omaha Steaks, I’d be less concerned about cost than a college student would be regarding the cost of Froot Loops or pizza slices.

Want to learn more about digital marketing in 2011? Click here to request a copy of Experian Marketing Services highly-anticipated 2011 Digital Marketer Report, launching in late March. The report features an editorial by Bill Tancer as well as unreleased data spanning email, social, mobile, search and more.