How to Get U.S. Market-Ready Brand Keys' 2019 Customer Loyalty

FEBRUARY 1, 2019 | MODERN DISTILLERY AGE VOLUME 10 | NUMBER 4 Brand Keys’ 2019 Customer How to Get U.S. Market-Ready Steve Raye, an longtime drinks business consultant, has written Loyalty Engagement Index How to Get U.S. Market-Ready (Positive Press, 300 pages, e-book, $24.99). “Growing concerns regarding privacy and data security have reached a tipping point, driven by an astonishing increase in consumer expectations for trust and transparency in the brands they purchase,” according to Brand Keys’ 24th annual Customer Loyalty Engagement Index (CLEI), conducted by the New York-based brand engagement and customer loyalty research consultancy. Biggest Shift In Expectations For Trust . Ever! “Trust — an engagement factor in every product/ service category — has become the indispensable connective tissue between brands and customer loyalty,” said Robert Passikoff, President of Brand Keys. “Consumer expectations for that single value have increased across every category and brand we track, on average by 250+% since 2018. Consumer “I wrote it as a primer for everyone in the wine and spirits business, expectations increase each year — normally in the 2% domestic and imported, to make it easier to understand how to navigate the to 25% range. This is an unprecedented spike.” complexities of the Three-Tier System,” Raye said. “It’s particularly directed at Where “Trust” Matters Most In Alcoholic new-to-the-U.S. and new-to-the-world brands looking for creative, practical Beverage Category ways to penetrate and expand their business. Less lecture, more useful tools, Individual attributes, benefits and brand values strategies and case histories.” make specific contributions to consumer brand The book is available in the U.S. on Amazon.com in Tablet/Kindle for PC/ engagement and loyalty. In 2019, the alcoholic Kindle Fire formats. The print version will be available in the U.S. by mid- beverage sector showed the following increases in February. Both versions are available now in the E.U. via Amazon.it. consumers’ expectations for the value of “trust”: 1. Single Malts - 16% 2. Whiskey - 13% TTB Message to Industry & Others 3. Beer (regular) - 15% Affected by the Shutdown 4. Tequila - 12% We have received a number of questions regarding how we plan to address the 5. Vodka - 10% 6. Light Beer - 9% significant backlog of applications and other work items we now have following continued on page 2 the shutdown, including how long it will take us to resume normal operations. We recognize that TTB approvals are critical to your businesses, and that the partial government closure over the past five weeks may have adversely affected Texas House Legislation your operations. Would Repeal Antiquated The permit, formula and label submissions received during the funding lapse roughly doubled our existing backlog prior to the shutdown, at which time we “Blue Law’’ & Allow Package were on average achieving our service standards of 15 days for label and formula applications, and 75 days for permit applications. We are still assessing the overall Stores to Open on Sundays effect of the shutdown on our service levels going forward, and we are committed Texans would have the opportunity to purchase to working diligently to process these applications and restore normal operations as distilled spirits from package stores on Sundays under quickly as possible. We encourage you to monitor TTB.gov for the latest information new legislation introduced in the Texas Legislature. regarding our processing times. State Rep. Richard Peña Raymond, D-Laredo, What We’re Doing has introduced House Bill 1100, which would allow As part of our recovery efforts, we are: Texas package stores to open seven days a week. The th • actively developing strategies to further streamline processes legislation, if approved by the 86 Legislature, would • redeploying staff to critical areas repeal one of the remaining so-called “Blue Laws’’ in Texas. continued on page 2 continued on page 3 Consumers Still Shop, But They’re Customer Loyalty Engagement Index TTB Message to Not Stupid! findings, consumers’ behavioral maxim is “It isn’t just Facebook’s, Google’s, Twitter’s ‘verify first, then trust.’” Industry and Others and other social networks’ failures to address The result? Massive changes in what Affected by the privacy, security and transparency that are consumers want, and equally massive gaps responsible, although making significant between what they want and what brands Shutdown continued from page 1 contributions to the paradigm shift,” said are delivering. • authorizing the use of overtime Passikoff. “Charges of hacking — foreign “Real engagement metrics keep brands where appropriate and domestic — and misuse of data have on the path to profitability,” said Passikoff. • applying our risk-based enforcement raised consumers’ emotional hackles. Data “Building brand trust isn’t a matter of approach to address compliance breeches in the past year alone — along with technique or more social networking, but issues that may have occurred failure to disclose — by brands like Macy’s, the development of actual, believable brand during the shutdown Saks, Adidas, Panera, Delta, Under Armour character and values.” What You Can Do and Orbitz, have significantly increased the A complete list of the CLEI’s 90 categories You can help us recover from the gap between what consumers expect and is available here. shutdown by: what brands deliver. There’s a new brand Methodology • Withdrawing any applications that you ‘yardstick’ for every category. Consumers For the 2019 CLEI survey, 51,673 may have submitted but no longer may still shop, but they’re increasingly wary.” consumers, 16 to 65 years of age from the need, reducing the size of the Categories That Dodged “Trust” nine U.S. census regions, self-selected the overall backlog Expectations Bullets categories in which they are consumers and • Waiting to submit an application until you “A few categories managed to dodge the the brands for which they are customers. have decided on a final formulation ‘trust-bullet’ this year,” noted Passikoff. “Trust Forty-five (45%) percent were interviewed or label, because multiple hasn’t disappeared from the engagement by phone, 45% percent via face-to-face submissions for the same product and path-to-purchase process, and interviews (cell phone-only households), further increases the backlog expectations always increase Y-O-Y, they just and 10% were interviewed online. • Ensuring that any applications that haven’t escalated in their contribution to Brand Keys uses an independently- you submit are complete and loyalty the way it has in other categories.” The validated research methodology that fuses correct, speeding our review and five categories with the lowest increases in emotional and rational aspects of the approval process consumer expectations for “trust” included: categories, identifies four path-to-purchase • Checking TTB.gov for any needed 1. Printers (2%) behavioral drivers for the category-specific guidance or assistance prior to 2. Parcel Delivery (2%) Ideal and identifies the values (including reaching out to us by phone or email, 3. Lip Balm (2%) “trust” as it is characterized in a particular minimizing the overall volume of 4. Economy Hotels (3%) category) that form the components of each inquiries requiring a response 5. Gasoline (3%) driver, along with their percent-contribution We will provide an update on our efforts to “Trust” = Engagement = Loyalty = to engagement, loyalty and profitability. restore normal operations and service levels Brand Profitability These assessments are leading-indicators when additional information is available, “Brand engagement” is best defined of consumer behavior, identifying such and we thank you for your understanding as by how well a brand meets consumers’ activities 12 to 18 months before they we work to address these challenges. expectations for values that drive purchase appear in traditional brand tracking or return to page 1 behavior,” added Passikoff. “Consumers have in focus groups. Brand Keys’ research an ideal image for every product and service; technique, a combination of psychological it’s how they measure brands. In recent inquiry and statistical analyses, has a test/re- Brand Keys continued from page 1 years, a more emotionally-based process has test reliability of 0.93, and it produces results “The beer category is feeling the pinch,” created a more value-infused, complicated generalizable at the 95% confidence level. It noted Passikoff. “Some of their lower volume path-to-purchase as it regards ‘trust.’ If has been successfully used in B2B and B2C is due to a more limited pool of younger marketers think they know consumers’ categories in 35 countries.- drinkers. Millennials are shifting from return to page 1 trust levels for their brands, this year they beer to wine and spirits. The proportion of need to take another look, preferably using beer’s core drinking group — young white methods more precise than traditional males — is dropping precipitously, and it’s brand tracking.” showing up in Share-of-Market metrics.” Consumers Verify First, Then Trust This year, the Brand Keys CLEI examined Decision-making has become more 90 categories and 822 individual brands. emotionally-driven over the past decade,” Virtually all showed significant increases said Passikoff. “But the addition of increased in consumer expectations for the value desire for trust and transparency have of “trust,” some brands significantly more changed category landscapes. ‘Business than others: “Although alcoholic beverages as usual,’ ‘research as usual,’ won’t cut it in were more in line with what we’d normally today’s brandscape. Based on the 2019 expect,” added Passikoff. 2 FEBRUARY 1, 2019 | MODERN DISTILLERY AGE Texas “Blue Laws” continued from page 1 “Allowing Sunday sales in Texas is long overdue. I’ve heard from many constituents — including small business owners — who WELL, TASTING EXTRAORDINARY GIN IS PART OF IT. have asked me to file this bill to let the free market be free,’’ Raymond said.

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