When one of our clients in the weight-loss packaged goods category saw a sales decrease in spite of a growing consumer base, executives weren’t sure how best to combat the problem. At first, they had a hunch they needed to enhance their retention initiatives because they feared they were losing heavy buyers to competitors.
A standard “New, Lost, Retained,” year-over-year customer flow analysis did not give the company findings that were specific or insightful enough to guide the brand team to clear high-priority actions. However, a “Core Score” analysis uncovered where and how the brand had lost considerable momentum and that heavy buyer retention was not the root cause.
‘The company had lost significant momentum from the core of its franchise.’
The Core Score is the measuring and trending analysis of your customer composition; it flows into and out of your group of heaviest buyers—the minority of about 30 percent of your customers that is responsible for about 70 percent of sales. The people in your brand’s core are the ones who have bought in deeply to your brand’s proposition, not the temporary “brand visitors” that many promotional activities can generate.
The people in the brand’s core may come from several different prior buying groups or be new to the brand. The first element of the analysis, then, is to record the metrics of each of these subgroups. You need to perform the same kind of analysis for those leaving the heavy-buying group each year. The second element is the plotting of these subgroup inflows and outflows over multiple years to see the trends.
The beauty of the Core Score methodology is that the combination of the two elements invariably pinpoints the brand’s highest-priority opportunities and performance issues. Brands usually feel they would not have seen these issues in the same perspective any other way. Sometimes brands can even be experiencing sales or customer growth while at the same time experiencing a decline in the core, just as our weight-loss client was. This is rarely a good thing.
The Core Score analysis helped our client’s management focus on the appropriate branding direction to stem the core decline.
To perform a Core Score analysis, you should determine the units-per-year threshold that marks a customer as one of your heaviest buyers, using the most recent year’s available data. Pick the unit sales point separating the heaviest buyers constituting 70 percent of sales from the rest of your customers. Use this same unit sales threshold for each year of analysis to counter the effect of price changes. Doing this also helps you focus on usage patterns from a customer’s perspective. Going forward, the brand’s Core Score will primarily track absolute numbers of customers.
Now, create the analysis of where those heavy buyers came from in each of those years. For each year, record how many are new to the franchise; how many had previously been medium or light buyers; and those returning to the franchise after an absence of a year or more. Track also the number of buyers who were heavy the previous year but are not now heavy for the year being measured. Where did they go? Did they stay but buy less? Did they go partially or completely to the competition? Or did they leave the category altogether?
The second element consists of graphing these subgroup results over multiple years. To reveal current trends, it is good to start with the most recent three years if the data is available. This forms the basis on which to build each subsequent year’s tracking.
The brand now has a wonderful multi-dimensional picture of the movements in and between the subgroups that make up the core of the business—usually showing particular successes or regressions subgroup by subgroup. This is tremendously revealing in itself. Beyond that step, brands overlay their knowledge of marketplace forces and brand activities over the time periods being studied and correlate those with the changes and trends in the core and subgroups.
Our Core Score analysis gave our client’s management team clarifying and deeply focused insights about the brand’s issues.
There were three key findings:
- The company had lost significant momentum from the core of its franchise. The total number of heavy buyers had shrunk two years in a row, and the decline was accelerating, creating a hugely negative compounding effect on sales.
- The retention rates and share of requirements of the heavy buyers had actually improved. Therefore, retention of their best buyers was not the issue at all.
- The biggest problem was a dramatic decline in acquiring new heavy buyers. Over all, new additions to the franchise were outpacing those leaving, but the brand was not attracting people who would stick and buy above the heavy buyer threshold.
The key takeaway was that the company’s primary advertising was attracting many new light-buying “visitors,” but the brand was not connecting with, and adding, the heavy buyers that would grow the core. So although the consumer count was climbing, the core was declining. Moreover, “retaining” or “migrating” these newly-attracted light-buyer consumers who didn’t have a long-term heavy need for the product just wasn’t going to happen.
Using the insights from the Core Score analysis, the brand was well armed to reshape its advertising direction, product presentation and relationship offerings. The revamped focus was on the types of consumers who would join the core of the long-term heavy buyers. Happily, the growth of the core returned, and so did the health of the brand.
Every brand can gain from better study of the momentum and makeup of its core of heavy buyers. This is a terrific window into the brand’s health. Focus on building your brand’s base of heavy buyers, and if you’re like most of our clients, the rest of the brand will follow right along.