When Brand Loyalty Breaks Bad

Merchants are obsessed with building brand loyalty and have spent much of the last half decade investing millions (or, more likely, billions) chasing after it by creating loyalty and rewards platforms, designing subscription services and “Disneyfying” their physical locations into positive experience hubs for their customers.

And this is not a case of misplaced enthusiasm. One of the main questions for those looking to reinvent retail is how to create and maintain brand loyalty in a digital environment rife with the types of distractions that keep consumers constantly on the move. And the dividends for getting it right are quite great.

Apple is the biggest company in the world, and it was carried there on the shoulders of an international legion of fanboys and girls who believe that its products are the first, last and best word in high-tech and high-design. The visual of otherwise intelligent people sleeping on the sidewalk outside an Apple store waiting to buy the latest iPhone is a powerful piece of free advertising.

And while there are many other examples of the magic of the brand loyal customer, the concept speaks for itself. Retailers want to sell goods, and having customers who buy goods often — and who derive a positive feeling about themselves from buying specific goods (or from specific retailers) — seems like a no downside proposition.

Except when it is.

This is an experience Whole Foods is becoming intimately familiar with as it is trying to launch its secondary brand — 365 by Whole Foods Market. As it turns out, the company’s new neighbors in a Silver Lake, California neighborhood — where the first 365 will be opening its doors next year — aren’t all that happy to see the store take up camp in their hood.

It’s not that they don’t like Whole Foods.

In fact, it’s the opposite problem: These people love Whole Foods. They tell stories of how they once dreamed of the day their suburban alcove would have its own Whole Foods. But they like old school Whole Foods and are feeling just a bit cheated to be getting the scaled down, lower cost model.

How cheated?

They’ve taken to calling it “Half Foods” and have even circulated an online petition begging for reconsideration and the establishment of a full Whole Foods. And they attracted a lot of press coverage from all over the nation. Business Insider, the LA Times, Slate and Motley Fool are just a short list of sources for the several hundred articles written about Whole Foods 365’s frosty reception at its first location.

So, how did a group of extreme Whole Foods fans turn into such a problem for Whole Foods?

Well…

Frustrated Expectations Among The Loyal

Silver Lake is an up-and-coming Los Angeles neighborhood that is often compared to Williamsburg, Brooklyn, as its West Coast doppelganger.

Williamsburg is getting its own Whole Foods in 2016 incidentally.

Silver Lake, on the other hand and on the other side of the country, has been waiting for a Whole Foods to call its own since at least 2011. That was the year a local jokester posted a fake sign on the chain link fence around a closed Circuit City announcing “Future Site of Whole Foods” that briefly caused community-wide cheering — until they realized it was a joke.

But in 2013, as a 5,000-square-foot Ralph’s Supermarket closed down, the coming soon announcement was for real. Local real estate announcements started touting “located near the upcoming Whole Foods” in million-dollar listings; think pieces started appearing about whether or not the area could handle the traffic influx.

In short, these people were ready for Whole Foods.

But a Whole Foods 365? Well, not so much — a situation exacerbated by the fact that its parent company has been pretty tight-lipped about what exactly a less expensive version of Whole Foods will actually look like.

“We aren’t ready to share specific details about department offerings just yet,” Marci Frumkin, an executive marketing coordinator for the store, told a Slate reporter in an email.

The people were not pleased and were pretty sure they weren’t getting what they wanted.

“People in this neighborhood are desperate for a local high-end market with the best quality foods, which are often not the 365 brand,” resident, music executive and online petition poster Dawn White posted with the “Whole Foods! We want the REAL thing” petition.

“The neighborhood is actually comprised almost exclusively of financially secure people in their mid-30s and above and many accomplished professionals with young families. The average property tax and median rent will prove this point … the residents of this neighborhood can afford this.”

A Complicated Picture

Whole Foods’ problems in Silver Lake are something of a microcosm of the challenges it faces as it attempts to grow its brand out, particularly among its target market: millennials.

According to research by the Boston Consulting Group, millennials as a group are twice as likely to have a strong preference for organic food than any other age demographic. That is good news for an organic merchant like Whole Foods but also challenging news. Because those organic-loving millennials (with a healthy share of well-capitalized and health-conscious baby boomers) are a larger and more transitional group than most statistical data gives them credit for being.

The oldest members of the generation — born in the early 1980s — are in their mid-30s and are often the young professional family people that Dawn White described. They are buying those million-dollar listings, and it is going to take more than some organic kale to bust their whole paycheck.

But the tail end of the generation is still in college — the younger members are just a few years out — and statistically speaking they are more likely to value a bargain than an organic product.

This is especially true when measuring their day-in, day-out spending. Plus, “organic” and “bargain” are becoming increasingly non-exclusive terms, as Walmart and Costco have both found ways to bring down their costs by the power of massive scale.

It also bears remembering that Whole Foods 365 itself is a response to a frequent PR problem for the upscale grocery brand: that however high its quality, it is essentially unaffordable. Those accusations got somewhat more pointed over the summer, particularly with the awfully suspicious $6 asparagus water.

365 is an attempt to cast a wider net and lure back some of those younger millennials with a better price, presumably tied to a more Whole Foods-like experience.

So, What’s A Retailer To Do With Those Super-Fan Customers?

Ultimately, despite the hundreds of stories and tens of thousands of clicks expended on one neighborhood’s attempt to block a downscale Whole Foods from coming to its area, the petition didn’t really receive all that much support. Only a little over 200 people signed — 2 percent of its initial 10K goal.

So, it seems that while some Silver Lake residents demand to pay full price, others are more content to wait and see what 365 looks like.

However the situation turns out though, it points to an interesting problem with developing customer loyalty so fanatical that a brand can’t deviate or innovate without enraging purists. Brands must grow, and successful ones that are as often imitated as Whole Foods have to grow and change faster to stay ahead of their own success.

But they have to do that carefully, because even when relatively few in number, true brand loyalists excel at using the Internet as a megaphone, and it’s rough when they use it to trumpet your failings, as opposed to touting your virtues.