@Risk

Ask any brand manager or retailer, and they’ll tell you: churn is nothing new. Still, many in the consumer packaged goods sector were surprised –alarmed, even –last week when they found out just how prevalent brand defection is these days. As remarkable as it sounds, newly released research shows that one-third of the average CPG brand’s most loyal US consumers defected from the brand between 2007 and 2008.

The new data comes from a two-year analysis conducted by Catalina Marketing’s Pointer Media Network and the Chief Marketing Officer (CMO) Council. The study, titled “Losing Loyalty, The Consumer Defection Dilemma,” assessed 34 million US shoppers’ purchasing patterns for two-years across 685 leading CPG brands and 24,000 retail stores.

Here are a few of the key findings:

• As I mentioned, the study found that one-third of the average CPG brand’s most loyal US consumers defected from the brand between 2007 and 2008. Many more reduced share of category spend with the brand.

• For the average brand, only 48% of highly loyal consumers in 2007 remained highly loyal in 2008. (Highly loyal consumers were defined as shoppers who made 70% of their category purchases with a single brand during a 12-month period.)

• 33% of these highly loyal consumers completely stopped buying the brand even while they continued to make purchases in the same product category.

Interestingly, defection levels were high for most brands even in 2007, well before the economic downturn was officially declared a recession. Could that mean long-term customer loyalty is becoming an outdated concept? I suppose we’ll need more data to draw a more definitive conclusion. Certainly, thinner wallets are a factor in this study, as well, and the researchers are quick to point out that similar defections have occurred in past recessions. The problem for brand managers and retailers, however, is that once customers find cheaper products, it’s harder to motivate them to switch back.

“Building long-term customer loyalty is arguably the most pressing issue marketers are facing,” says 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 study and view a complete database of CPG brands analyzed at www.cmocouncil.org/resources/form_losing_loyalty.asp (registration required).