What drives CPG brand loyalty erosion?
The total revenues of the Top 100 brands in the nationwide Catalina Network of grocery, drug and mass merchant stores grew by only 0.7% during the 12 month period ending in early July 2011, according to research conducted by Catalina.
The study also found that brand defections and reduced share among previously highly-loyal consumers represented a major obstacle to individual brand performance.
While the average brand in the company's Top 100 grew revenue by 2.2% during the year, the average brand also experienced a lost opportunity equal to 8.5% of revenue due to defections and reduced share among shoppers who had been highly loyal buyers one year earlier.
For the average brand, 46% of previously highly loyal consumers either completely left the brand (20%) or reduced their loyalty (26%).
"This mid-year performance review presents a strong argument for making loyalty a more significant part of brand strategy," said Todd Morris, executive vice president of brand development for Catalina. "Staying close and in touch with the changing needs and purchase behaviours of your brand's most valuable customers is the best way to retain loyal customers and grow revenue."
The study also found that the fastest-growing brands tended to hold onto more of their loyal consumers, while large revenue decliners tended to lose more loyal consumers. On average, the lost opportunity due to loyalty erosion stood at 11.1% of revenue for the five largest revenue decliners in the Top 100, compared with only 6% for the top gainers.
Finally, brand defection was found to have generally happened suddenly, with one in three shoppers who were 100% loyal to a brand in the first year of the study having completely abandoned that brand during the next year after only one competitive purchase. On average, 1 in 5 highly loyal consumers from the previous year's study had completely defected from brand during the study's 12 month period.
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