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 economyCPG 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

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