Consumer loyalty and defection has always occurred; however, the historic unknown has been the degree of occurrence. In response to requests to understand this dynamic across hundreds of brands, Catalina Marketing’s Pointer Media Network and the Chief Marketing Officer (CMO) Council studied 34 million US shoppers’ purchasing patterns for two-years across 685 leading CPG brands and 24,000 retail stores. The milestone study released today, entitled Losing Loyalty, The Consumer Defection Dilemma, was designed to evaluate the global dynamic of consumer behavior on a granular level never before accessed.
Key findings demonstrate an industry-wide challenge- not a scoreboard on loyalty. An astounding one-third of the average CPG brand’s most loyal US consumers defected from the brand between 2007 and 2008, and many more reduced share of category spend with the brand. For the average brand, only 48 percent of highly loyal* consumers in 2007 remained highly loyal in 2008, and 33 percent of these highly loyal consumers completely stopped buying the brand even while they continued to make purchases in the same product category.
“CPG manufacturers are facing a formidable challenge to brand loyalty further inflamed by the economic downturn,” said Todd Morris, senior vice president of Catalina Marketing, the parent company of Pointer Media Network. “However, these findings also demonstrate that consumer defection and churn are persistent problems for brands, even during good economic times.”
Defection levels were high for most brands even in 2007—before the start of the current recession. A financial analysis of select leading brands demonstrated revenues could have increased between four and 25 percent had highly loyal consumers in 2007 not reduced loyalty or defected from the brand. The study also showed that the total number of highly loyal consumers declined for many major brands in 2008, not just because of churn and defection, but because brands were having greater difficulty winning new loyal brand buyers. This phenomenon has increased the impact of defection for the packaged goods industry.
“Building long-term customer loyalty is arguably the most pressing issue marketers are facing,” said Dave Murray, executive vice president with the CMO Council. “A lack of insight has previously challenged CPG companies’ ability to precisely connect with customers. However, as this study demonstrates, granular-level, predictive modeling advancements offer new opportunities for relevant and personalized consumer interactions. CPG brand managers must take action to address the financial impact of loyalty erosion by identifying and engaging with today’s at-risk loyal consumers.”
For more information, download a copy of the milestone study and view a complete database of CPG brands analyzed at www.cmocouncil.org/resources/form_losing_loyalty.asp.
* Highly loyal consumers were defined as shoppers who made 70 percent of their category purchases with a single brand during a 12-month period.
For more information at http://www.cmocouncil.org>