Losing Loyalty: The Consumer Defection Dilemma

To read the full report, click on the attachment at right."Losing Loyalty: The Consumer Defection Dilemma" isthe second in a series of milestone studies on U.S. shopperpurchasing dynamics conducted by Catalina Marketing'sPointer Media Network in conjunction with the CMOCouncil. Our studies are designed to test the assumptionsof CPG brand marketers and retailers and assist in thedevelopment of new strategies and approaches forgrowing brand equity, volume and value based on therealities of today's consumer.This new study, through analysis of household-levelconsumer shopping behavior, exposes the high levelof loyalty churn that is impacting today's leading CPGbrands. The truth about brand loyalty, and its frequentlytransient nature, may surprise many seasoned brandmarketers and retailers.This study is unique in the breadth and depth of consumerdata used in developing insights. The findings are basedon an analysis of the individual buying patterns of morethan 32 million consumers in 2007 and 2008 across 685leading CPG brands. All consumers tracked in the studywere consistent shoppers, meaning that they shopped atleast two times in every eight-week interval during thetwo-year study period within the retail chains where theirpurchases were observed.For the purposes of our study, loyalty was measuredas a percentage of category sales using standard CPGcategories defined by Information Resources Incorporated(IRI). High-loyal consumers were defined as thoseconsumers who made 70% or more of their categorypurchases with a single brand during a 12-month period.Switchers were defined as formerly high-loyal shopperswho continued purchasing the brand, but reduced thosepurchases below 70% of all category buying. Defectorsare those formerly high-loyal shoppers who have stoppedbuying the brand altogether, but are still purchasing inthe category.The findings demonstrate that there is an unexpectedlyhigh level of churn across most brands. In fact, for theaverage CPG brand in this study, only 48% of highloyal consumers in 2007 remained highly loyal in 2008.Approximately one-third of all high loyals completelydefected from the average brand in 2008.The research was conducted using Catalina Marketing'svast database of household-level purchase data. Throughpartnerships with more than 200 major retail grocery,mass merchant and pharmacy chains across the UnitedStates, Pointer Media Network and Catalina Marketingcontinuously track the purchases of more than 150million individual shopper IDs, with a multi-year history ofpurchasing for an estimated 76% of American households.Study Highlights:Loyalty erosion and consumer defection are pervasiveand costly problems for CPG brands, and their impactis increasing dramatically in the current economy. For the average brand in this study, 52% of highlyloyal consumers in 2007 either reduced loyalty orcompletely defected from the brand in 2008.Only four out of ten brands retained 50% or more oftheir highly loyal consumers from year to year.For the average brand, approximately one-third of allhighly loyal consumers in 2007 completely defected toanother brand in the same category in 2008.The current economic downturn is having a significantimpact on brand loyalty. Many leading brands experienced a drop in the total number of highly loyalconsumers between 2007 and 2008.Loyalty and consumer churn have a huge impact onbrand revenue and value. Some major brands couldhave increased overall revenues by more than 20%in 2008 if they had eliminated churn among highloyal consumers.Precision marketing strategies for engaging loyal andhigh volume brand buyers are now playing a majorrole in improving consumer loyalty and value.Pointer Media Network and Catalina Marketingare working with CPG manufacturers and retailers tobuild programs that significantly improve customerloyalty, purchasing and brand performance.There is an unexpectedly high level of churnacross most brands. In fact, for the averageCPG brand in this study, only 48% of "highloyal"consumers in 2007 remained highlyloyal in 2008.

Losing Loyalty: The Consumer Defection Dilemma

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