Catalina: Major Packaged-Goods Brands Lost 46% of Loyalists

Firm Finds Companies Can Maximize Revenue Growth by Maintaining Brand Faithful

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The top 100 packaged-goods brands saw reduced loyalty from 46% of their loyal consumers in the past year, exacting a steep toll on sales, according to a study by Catalina Marketing based on shopper loyalty-card data.

The big brands fared better than the 52% rate of lost loyalists shown in a Catalina study two years ago that looked at a broader group of 685 brands. So bigger brands commanded more loyalty -- just not a whole lot more.

On average, the 100 brands in the study grew sales 2.2% during a 52-week period ended early July, according to Catalina. But had the brands held onto their loyalists, they would have grown an average of 8.5% more.

Of course, that assumes a brand holds onto its own loyalists while also snaring defectors from others. But it also shows the potential power of maintaining loyalty, according to Todd Morris, exec VP-brand development at Catalina.

The top five revenue-gainers in the study on average retained more than 70% of loyalists, and the top gainer (a frozen waffle brand) lost only 22 % of its loyalists while posting a 35% sales gain. Unlike two years ago, Catalina isn't calling out winners and losers by name but is mentioning their categories. The biggest loser, by the way, was an ice-cream brand that lost more than 70% of its loyalists.

Catalina anonymously analyzed individual frequent-shopper accounts to conduct the study. It defined as loyalists consumers whose frequent-shopper data from one year ago showed 70% or more of their category purchases going toward a single brand. Reduced loyalty was defined as cases in which people who qualified as brand loyalists a year earlier reduced their share of brand purchases in the same category to under 70% during the most-recent year.

People who stopped buying in the category entirely weren't counted. That way, Catalina could exclude shoppers who may have appeared to stop buying a brand or a category because their consumption shifted to a different store or a store it doesn't track. Overall, Catalina covered more than 80% of U.S. households in the study.

Catalina runs loyalty programs for retailers and the Checkout Coupon system -- both of which can be used by marketers to help target loyalists and prevent defection with special offers. But its programs can also be used by rival brands to try to pick off loyalists from competing brands, so it's not necessarily wedded to loyalty over new consumer acquisition as a strategy -- just to being able to target based on purchase behavior.

"The biggest, best-performing brands do a better job with loyalty," Mr. Morris said. But the numbers overall suggest loyalty is a fleeting thing generally in packaged goods.

The frozen waffle brand that topped the loyalty chart counts 6.4 million people as its loyalists, less than 2% of the U.S. population. Even it could have added another 3.9% in sales for the most recent year by holding onto all of its loyalists, according to Catalina.

"This is a call for brands to continue to move to a consumer-centric marketing model and away from mass-marketing thinking," Mr. Morris said. "Most of CPG and [over-the-counter] marketing is built around measures of efficiency. This data would indicate we would be better suited to move toward looking at customer lifetime value and that real revenue growth could be found in small groups of consumers who offer infinitely higher revenue potential."

That doesn't necessarily mean using Catalina products, he said. Other alternatives for targeting loyalists, such as Facebook fan bases, can work -- though he said there's no easy way of knowing how much a Facebook fan actually buys a brand, as opposed to someone in a shopper database.

Mass media such as TV might also be a targeting vehicle for brand loyalists, assuming they can be found lurking in disproportionate clumps within various programming options -- something Nielsen Catalina Solutions, a joint venture with research firm Nielsen Co., is set up to help find.

Regardless, some categories are just more prone to fickleness than others. Three candy brands on average lost or saw reduced loyalty from 79% of their loyalists year over year. The defection rate for 14 beverage brands was less than half that -- only 37%.

Category Number of Brands Average Sales Change % of loyal consumers lost
Beverage 14 6% 37%
Shelf-stable meals 11 5% 43%
Produce 2 5% 30%
Dairy 7 5% 43%
Candy 3 4% 79%
Refrigerated foods 10 2% 49%
Snacks 9 2% 53%
Alcohol 4 0% 50%
Frozen Food 8 -1% 46%
Bakery 5 -3% 57%

Source: Catalina Marketing

Loss of loyal consumers defined as shoppers who bought 70% of category purchases from brand prior year, then reduced to buying less than 70%.

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