Study: CPG Brands Mi$$ Loyalty Opportunities

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Consumer product companies are losing far more than they think to brand defectors, according to a new study, with lapsing loyalties reducing sales by an average of 8.5%.  

"We know retaining customers is important, but what surprised us in this research is that the top 100 CPG brands could have grown four times faster if they had just hung on to the customers who were inclined to be loyal," Todd Morris, EVP/ brand development for Catalina, which conducted the research, tells Marketing Daily. "These brands grew under 1%, and brand defections are a major drag on growth."

Interestingly, price is not the primary issue, "and we found people defecting from value brands just as often as premium ones," he says. "Consumer choices are expanding, which makes loyalty harder. But often, they say, 'I kind of forgot why I was buying the brand in the first place.' They don't feel as committed, so they move on," he says. "That's why CPG companies have to be more consumer-centric and connect with customers better. It is a little like personal relationships, and the person you are closer with is the person you hear from most often."

The St. Petersburg, Fla.-based shopper data company found that in the 12-month period ending in July, total revenues for the top 100 brands sold in grocery, drug and mass merchant stores grew by just 0.7%. The average brand in the Top 100 grew revenues 2.2%, "but the average brand also experienced a lost opportunity equal to 8.5% of revenues due to defections and reduced share among shoppers who had been highly loyal buyers a year earlier," he explains. "That means that on average, 46% of people who had been highly loyal, which we defined as people who make 70% of all category purchases with a single brand in a 12-mionth period, either completely left the brand (20%) or reduced their loyalty (26%).

The study also finds that brand defections are often sudden. One out of three shoppers who were 100% loyal to a brand in the first year of the study completely abandoned the brand after just one competitive purchase.

The research is based on sales and individual consumer purchasing behavior observed across a sample of 21,000 U.S. grocery, drug and mass merchant stores, and "translates into large amounts of lost dollars, regardless of categories."

In frozen foods, for example, eight major brands experienced a total loss of 1% in sales, with 46% of customers demonstrating reduced loyalty. "That translates into $29.4 million in lost opportunity costs," he says. "It amounts to about $20 to $21 dollars per year for everyone that defected, so marketers need to work harder to understand why they left and talk to those consumers in a new way."

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