Loyal CPG Buyers Defecting at Unexpectedly High Rates: Report

A new version of a study tracking brand loyalty among consumer packaged goods (CPG) finds that the average brand lost one third of its most loyal U.S. consumers between 2007 and 2008.

The study, “Losing Loyalty: The Consumer Defection Dilemma,” was produced by the CMO Council and the Pointer Media Network (owned by Catalina Marketing) and tracked the shopping patterns of 34 million U.S. shoppers across 685 CPG brands and 24,000 retail stores during 2007 and 2008.

The report found that for the average brand, 33% of its “high loyal” customers—defined as those who made 70% or more of their category purchases with a single brand during a year—actually defected completely from those brands between 2007 and 2008, while still continuing to buy within the category.

Another 15% reduced their loyalty in 2008, occasionally buying a rival CPG brand in the category. All told, the average CPG brand in the study saw 52% of its highly loyal customers in 2007 taper off or disappear completely in 2008.

The loyalty results differed widely by product category, but even those with the most persistent loyalty rates showed a high degree of churn from 2007 to 2008, according to the study. For example, the cola soft-drink category retained 75.3% of its highly loyal customers, but 16.6% reduced their loyalty from 2007 to 2008, while 8.1% of once highly loyal shoppers stopped buying the brand.

On the other hand, CPGs in the c4ereal category retained only 34.6% of their high-loyal consumers from one year to the next, with 37.21% of shoppers reducing their loyalty and 28.2% defecting between 2007 and 2008. In the pain reliever category, only 34.9% of high loyals in 2007 stayed that way in 2008, while 20.65 reported reduced loyalty and 44.6% defecting altogether from the brand they once championed.

According to the report, the total number of highly loyal consumers declined for many major brands in 2008 not just because of churn or defection but because those brands had greater difficulty converting new buyers to replace the lapsed loyalists who left or cut back on the brand.

The financial impact to brands of losing these loyal customers was considerable, the report concludes. Financial analysis of selected leading brands—all blinded in the report—determined that they could have seen annual revenue increases of between 4% and 25% in 2008 if they had prevented their highly loyal customers from reducing or abandoning their buying.

“Building long-term customer loyalty is arguably the most pressing issue marketers are facing,” CMO Council executive vice president Dave Murray said in a release. “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.”