'Give them a rich experience': The importance of retaining customer loyalty
With consumers segmented by an abundance of choices, food and beverage manufacturers are searching for new ways attract new customers and boost customer loyalty among the customers they already have.
"It’s well understood, well analyzed, and there’s lots of books, research, and entire industries created around the idea that customer retention is something that creates more value than going out and constantly acquiring customers," said Naomi Kasolowsky, head of loyalty at dunnhumby. "We talk about how 20 customers need to be acquired to replace the value of one loyal customer over time."
Driving customer loyalty is especially important as the millennial generation becomes a larger target for brands. Research has shown that millennials aren’t as brand loyal as other generations and are also more likely to distrust major food companies.
How brands drive customer loyalty
Brands aim to retain their loyal customers in different ways as they try to appeal to various consumer demographics, such as through packaging and branding.
"Smarter packages that provide better safety, wellness, convenience, value and gratification will increase brand loyalty because these factors drive most purchasing decisions and behavior," Packaging Digest reported.
This could include using innovative packaging materials that improve sustainability, customer interfaces, or shelf life. It can also mean a QR code on a product’s packaging to provide consumers with more information, such as the Grocery Manufacturers Association's SmartLabel, which recently debuted on Hershey’s Kisses and milk chocolate.
Branding is another key way for brands to drive customer loyalty. A 2014 report found that cereal companies use mascots, particularly those making eye contact with either adult consumers or their kids, to increase brand loyalty among their target audiences.
"Findings show that brand trust was 16% higher and the feeling of connection to the brand was 28% higher when the rabbit made eye contact. Furthermore, participants indicated liking Trix better, compared to another cereal, when the rabbit made eye contact. This finding shows that cereal box spokes-characters that make eye contact may increase positive feelings towards the product and encourage consumers to buy it," according to Cornell researchers.
It’s all about the experience, not price
One of the most common ways brands aim to beat their competition and maintain customer loyalty is through pricing, but Kasolowsky says it’s a mistake to focus solely on price.
"Where a lot of us get confused is really this overreliance on best price all the time and being heavily promotional," said Kasolowsky. "You’ll find a new conversation happening among customers. Price has to be right, value proposition needs to be solid, but customers are looking for something a little bit more exciting and interesting to get their attention."
More than price, packaging, or branding alone, Kasolowsky says more than 50% of loyalty can be explained by brands delivering experiences that are of real value to customers.
Companies are embracing technology as a way to provide consumers with more engaging brand experiences, including mobile apps, which are proving to be helpful for more than just grocery retailers. Enjoy Life Foods recently expanded its integration with various apps to help raise awareness of the free-from foods category, particularly among millennials. These include Ibotta, a loyalty-based app for local rebates, and Ingredient 1, an app that offers consumers more information about ingredients, allergens, nutrition, taste profiles, and other info for natural and specialty products.
"You really have to choose key pain points or risks [consumers] feel they might have and just focus on those things, do them really well, and give them a rich experience," said Kasolowsky. "Mobile technologies are starting to provide customers with value in that way."
Campbell recently partnered with Amazon’s Echo voice-controlled technology to bring food-related content directly into consumers’ homes, including recipes that feature Campbell’s products, according to Adweek. The partnership is one element of the larger Campbell’s Kitchen initiative, an expanding resource Campbell has created to engage home cooks and foster brand loyalty.
Where do food and beverage brands stand?
Though more brands are exploring innovative customer loyalty strategies, on a wider scale, consumers don’t appear to be nearly as loyal to food brands as they are to brands in other categories, particularly technology.
On Brand Keys’ 2015 Loyalty Leaders Top 100 List, which surveyed 753 brands in 68 categories, Grey Goose was the only food or beverage manufacturer to appear in the Top 20 after jumping 11 spots from the previous year. Four other vodka brands also made the list, though this notably highlights the lack of whiskey brands in the Top 100, even though whiskey is currently the reigning spirits category in the U.S. Only one beer brand, Sam Adams, made the list. Overall, alcoholic beverage brands have decreased 40% since the 2010 list.
Beyond alcoholic brands, no dedicated food or beverage manufacturers made the list, including breakfast cereal brands, which had appeared on past lists and comprised 8% of the Top 100 brands in 2010. One notable appearance was Dunkin' Donuts, which, while mainly foodservice, also produces its own coffee, including single-serve K-Cup pods introduced earlier this year. Consumers were, however, loyal to a number of food retailers, including Whole Foods, Trader Joe’s, and Costco, and restaurant chains.
"It is a mistake to think that you can continue filling the top of the funnel with lots and lots of new customers when really you can have more relevant, meaningful discussions with customers you know better than those you don’t know at all," said Kasolowsky.