the consumer defection dilemma

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© Pointer Media Network. 2009. All Rights Reserved.

Losing Loyalty: The Consumer Defection Dilemma Measuring the Impact of Defection on CPG Brands

© Pointer Media Network. 2009. All Rights Reserved. 2

Market Forces and Factors

CPG earnings under pressure in difficult economy CPG earnings under pressure in difficult economy

Private label and lower priced brands winning favor among consumersPrivate label and lower priced brands winning favor among consumers

Loyalty and customer retention top of mind with brand managersLoyalty and customer retention top of mind with brand managers

New technologies and solutions provide unprecedented opportunities to engage with a brand’s most valuable consumers

New technologies and solutions provide unprecedented opportunities to engage with a brand’s most valuable consumers

“To weather the storm it will be necessary to identify who the profitable customers are.”

– McKinsey, The Downturn’s New Rules for Marketers


Study Purpose

• In-depth look at an industry-wide issue -- not a repudiation of individual brands or marketing tactics

• Designed to evaluate and challenge old assumptions about loyalty

• Give CPG and retail industry new insight into prevalence and cost of brand defection among today’s consumers

• Demonstrate how consumer brands can do more to identify at-risk customers, engage them on a personalized level, and build greater loyalty and retention


Losing Loyalty:The Consumer Defection Dilemma

• About the Research• Collaboration with CMO Council• Broad and Deep

– 685 leading brands, 32 million shoppers– Two year study, 2007 and 2008

• Key Findings:

1. Loyalty erosion and consumer defection pervasive and costly

2. On average, 52% of highly loyal consumers reduced loyalty or defected the following year

3. For the average brand, a full 1/3 of its high loyals defected to another category brand

4. The downturn is accelerating the loss of high loyal consumers for the brands studied.

5. Precision marketing strategies can engage and improve loyalty and retention.


How Loyal Are a Brand’s Most Loyal Consumers?

52% of high loyal consumers in 2007 had either reduced their

loyalty or completely defected from the brand in 2008.

High loyal consumers are defined as shoppers who made 70% of their category purchases with a single brand during a 12-month period.


How High Are Churn Rates Among America’s Top Brands?

Loyalty varies by category and brand, but switching and defection is a consistent issue, even for major brands.


Has the Downturn Driven Defection?


What Does Loyalty Churn Cost Leading Brands?


Are All Loyals Created Equal?

Not all high loyals are high volume buyers, but many are.

Pivotal Point consumers are those high volume aggregate account for 80% of brand sales. 2-5% of all shoppers account fro 80% of volume for average brand


Pressing Questions for Brand Executives

Do you have a clear understanding of who is defecting and why?

Is it better to retain or regain your loyal consumers?

How do you get closer to at-risk consumers to improve retention?

How can you win the war for value?

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How Pointer Media Network Targets Loyalty

Helps major brands get a deeper understanding of what’s driving consumer switching and defection.

Helps major brands get a deeper understanding of what’s driving consumer switching and defection.

Uses predictive modeling to retain at-risk consumers via targeted advertising, incentives and promotions.

• Our research shows it is far more cost effective to retain at-risk consumers than to win them back after they leave.

Uses predictive modeling to retain at-risk consumers via targeted advertising, incentives and promotions.

• Our research shows it is far more cost effective to retain at-risk consumers than to win them back after they leave.

Builds greater consumption and wins new customers through precision campaigns that leverage household-level shopping behavior data.

Builds greater consumption and wins new customers through precision campaigns that leverage household-level shopping behavior data.


Tell-Tale Signs of Defection

Pointer Media Network and Catalina Marketing are working with major CPG companies to analyze consumer behavior across 200,000 individual brands to identify at-risk consumers and take positive action to retain their loyalty.

• Purchase of alternative brands in your category

• Increased use of coupons in other categories

• Value-based defections in other categories

• Ingredient or claim-based defections in other categories


• Tracked 32 million “consistent shoppers” making observable purchases at least twice every eight weeks during two-year study period

• Behavior analyzed across 685 leading brands and more than 23,000 stores

• Defined “high loyal consumers” as shoppers making at least 70 percent of category purchases with a single brand

• Defection defined as a high loyal consumer in year one who stopped buying the brand, but continued to purchase in the category in 2008

Methodology


Conclusion

• Churn and defection are consistent problems for CPG brands

– Even more so in the current downturn

• For the average brand in this study, only 48% of highly loyal consumers stayed loyal the following year

– About 7 in 10 of these consumers stopped buying the brand completely

• Brand managers must take positive action:– Identify and engage with at-risk and high value brand

buyers

– Keep winning the war for value

– Reach out to new customers who are most likely to be drawn to your brand

the consumer defection dilemma

Self Improvement