Insights to Action Series [Part 5 – Loyalty]

Insights to Action Series
[Part 5 – Loyalty]

By Liz Emery, Senior Director, Product Marketing

Insights to Action Series [Part 5 – Loyalty]

Welcome back to Affinity’s “Insights to Action” blog series, exploring how to use Consumer Purchase Insights to solve complex business problems. Consumer Purchase Insights provides a complete, granular view of customer and prospect purchase behaviors, across and between brands and categories, to inform a wide array of growth strategies based on deeper audience understanding. This is part 5 of an 8-part series where we dive into different examples of how to gain insights into – who your consumers are, how they spend, and where they buy – to inspire meaningful action. Please check out our previous blogs in this series about market share, cross shop, new to brand and churn below.

Part 5: Loyalty

Brand loyalty is the level of preference a consumer has to a specific brand and is a key metric for companies across all verticals. Understanding brand loyalty is vital for the success of a business and yet many brands only focus on their known buyers. This is a miss for any business. Moving beyond just known buyers, loyalty analysis can answer helping questions like…

Where does my brand sit in the category?
How should I market to heavy category shoppers that are light shoppers of my brand?
How do I keep brand loyalists happy?
How am I doing with Loyalists, Switchers vs Light Brand Shoppers?
What retailers are my light buyers shopping at for competitive conquesting?

The answers to these questions matter because losing customers means losing revenue. Churn analysis is vital to revenue growth and protection. Without it, it can be difficult to identify key insights like what customers like or dislike about your goods/services, what is causing customers to leave and/or stay and what you can do to increase retention when they decide to part ways with the brand. Marketers need a way to track the consumer churn rate across their brand and competitive brands in a timely and accurate way to ensure actionable plans can be created quickly.

The Problem

Without repeat buyers/product users, it’s impossible to succeed. Not to mention, it’s more expensive to continually acquire new customers than it is to keep the ones you have happy. Loyalty is one of those words that everyone talks about – from Marketing to Product – but how do you truly measure it?

Using Insights to Create an Action Plan

Affinity has a framework that helps brands understand where they “sit” in the category – sizing the opportunity to help brands understand headroom in the category. This analysis allows for strong audience activation strategies to gain and/or protect category ranking, leading to more revenue and increased retention.

Consider you’re a large US-focused brand in the QSR Category (Quick Service Restaurants). Looking at the matrix above, the rows are all QSR Category level transactions (not specific to your brand) during the past 12 months split into three cohorts: heavy QSR buyers, average QSR buyers, and light QSR buyers. The columns are all YOUR Brand transactions split into the same three cohorts. An individual who eats out every day at a QSR would be considered Heavy in the QSR category (not specific to your brand). If that same individual went to your restaurant every day, they would be considered Heavy in your brand. The overlap of a “Heavy Category Buyers” who is also a “Heavy Brand Buyers” are an enviable cohort for any brand. The more dominant a brand is in the category, the larger the brand buyer number will be and the more repeat revenue the brand makes. Newer, less dominant brands will have larger numbers on the right side of this matrix.

Note the non-brand and non-category, those cohorts add up to 45% (14.9%+30.1% respectively) and chasing them will be a tough pursuit.

Based on these insights, what should this brand’s actionable strategy be? The first cohort that jumps out is those “Heavy QSR Category Buyers “who are also “Light Buyers of Your Brand.” These are consumers who have a love for QSR, but not your brand. The brand is going to have to work hard to move them from the right to left side of this matrix, but the size of that pie is considerable here (6.3%). Another, easier nudge, might be to target those “Heavy QSR Category Buyers” who are also “Average Buyers of your Brand” to inspire increased purchases of brand items vs other QSRs. Think of Heavy Brand Buyers as loyalists, Average Brand Buyers as potential switchers, and Light Brand Buyers as non-loyalists. While many marketers will invest in conquesting strategies (i.e., Heavy in the Category, Light in the Brand), if high ROAS is your goal, loyalists will always offer you a stronger return.

While the size of the pie is important, it’s also important to consider how responsive each of these cohorts have been to your offers in the past when deciding on investments. Brand loyalists (and switchers) are going to be more responsive to brand messaging.  These segments will receive specific messaging, encouraging another visit.

With non-loyalists, the brand is going to have to allocate budgets, knowing their response rate will be lower, and they will yield a lower ROAS. Using loyalty insights to understand competitive advantages for where non-loyalists eat, the brand can craft the right narrative/messaging to make conquesting dollars work harder.

One more nuance worth calling out when looking into loyalty and headroom is re-defining your category. Every brand has primary, secondary and tertiary competitors. Change the definition of the brands in the category and watch how the numbers (and your strategies) will shift.

The matrix is a framework that you can use to understand loyalty and headroom in the category to make the right business decisions. Creating this for a brand is the best baseline that can be refreshed periodically over time to see how campaigns are impacting their share in the category (How is headroom trending over time? Which cohorts are responding to your different campaigns and tactics? Etc.) This framework drives strategies and it should have a seat at a brand’s planning table.

By using loyalty insights, you can understand what impact retaining customers overtime has on business health and where your brand sits in the category to influence strategy. To learn more about Consumer Purchase Insights loyalty reach out to Sales@affinitysolutions.com.

That wraps up Insights to Action [Part 5 – Loyalty]! Stay tuned for Insights to Action [Part 6 – Recency, Frequency and Monetary Value (RFM)] where we dive into customer segmentation and the value of identifying and isolating groups of shoppers for differentiated marketing treatments.