The Importance of Consumer Engagement in FMCG

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Research shows the relationship between consumer engagement and value to the brand is fundamental to understanding brand health. It shows that for almost all brands, leadership is achieved by winning emotional commitment (adorers) from a small % of the brand community, the high value consumers (HVCs). Small changes in the way these HVCs are managed can have major impact on sales, margin and market share. Or put another way, HVC strategies can have a major impact on revenue protection, revenue growth, revenue development and cost of sales.

A convergence of two forces ((1) new, lower cost technologies and (2) consumer behaviours) has resulted in exciting new opportunities for brands to develop engagement with their brand community.

However, CPGs have had poor experiences of direct and interactive communications, and are not yet set up to take advantage of the opportunity, relying on traditional methods of brand development which sidelines, for instance, digital and relationship management techniques. We argue that the focus of brand managers needs to change to a stewardship role of consumer engagement and value, bringing in media and discipline experts when necessary.

Some brands and markets will benefit more than others. It is likely that regulated, mature markets will see quicker benefits especially with brands that have a high HVC concentration, an ‘information requirement’ and have a community that encourages the spread of viral messages. This extract of the full article examines the importance of consumer engagement. The pictures and graphics cannot be published in this blog – please leave your email id and we’ll send you the full article including graphics.

Aims of Brand management

Brand management aims to build in consumers’ minds a set of perceptions and attitudes relating to a product or service, leading to positive buying behaviour. Traditionally, the methods that brand managers use to find out who their consumers are and what and how much they buy are market research and retail audits. They influence consumer behaviour through powerful communication methods, such as advertising, sales promotion, packaging, display and the like. If there are any differences between consumers, none of these methods can be customised to deal with individual consumers.

Some consumers are more equal than others

Research has always shown brand managers that consumers are not a homogeneous set; they have differing value to the brand (the pereto (80/20) rule exists in some shape or form with almost all brands) and there are different levels of engagement with the brand. Importantly, multiple bodies of research have shown relationships between ‘engagement’ and value. The chart shows an adapted version of WPP’s (Milward Brown and Ogilvy) view of this.

The over-riding truth from engagement and value research is: Few consumers make or break a brand

Consider these 8 key points, which have been distilled from various research in this area.

Firstly, it is clear that the greater the consumer engagement, or ’emotional loyalty’, the greater the financial value of the consumer. On average, consumers will spend more with you as their engagement increases.

Secondly, deeply engaged, or committed, consumers (adorers) drive brand performance. Indeed, Ogilvy BrandZ Loyalty Index can produce this type of profile (illustrated in the chart below for two different organisations in the same sector) for many consumer brands in many countries around the world. If you can move consumers from mildly engaged to committed, their value leaps dramatically. A committed consumer has 5-8x the value of an average consumer.

Thirdly, not all committed consumers are of equal value. A consumer can be very engaged with your brand, and buy your brand every time they spend money on that category – but they may not spend much in that category! For committed consumers, if you were to split the group into HIGH, MED and LOW category spenders, the HIGH spenders may spend around 5x as much as LOW spenders

Fourthly, commitment is extremely difficult to achieve. Consumers are frugal with their ‘loyalty’. Only a small % of the brand community will be committed to any brand in the category. This loyalty has to be earned, and rarely is it earned through price or sales promotion. Commitment is driven from a combination of RELEVANCE (you can’t be committed if the category is not relevant to you), INTEREST (you can’t be committed if you are not interested in the category) and UNIQUENESS (you can’t be committed if you think several providers have the same proposition each category). It is more difficult to develop committed consumers in some categories than it is in others.

The fifth point is that commitment is a key driver of brand leadership. The brand that has the highest % of committed consumers is almost always the leading brand. The worldwide BrandZ study shows this very clearly. The number 1 and 2 brands in any category have a higher % of committed consumers. In Insurance for instance (high relevance, low interest), only 2% of UK consumers are committed to a particular insurance company (across the sector). However, even with this sector, the brand leader has 3x the number of committed consumers as the follower brand. That is why they are the leading brand.Next, ‘satisfaction’ with the brand is not enough and does not imply re-purchase – it is simply a hygiene factor for being in the category. Commitment keeps buyers loyal. They are more likely to resist competitive promotions, search out your brand if they cannot immediately find it; pay more for it; be more forgiving of service issues. Put another way, research shows that ‘commitment’ is the only stage of engagement where re-purchase of your brand is virtually guaranteed.

The seventh point is that although emotional commitment by itself correlates strongly with brand performance, there can be barriers to purchase. Even with highly engaged consumers (but less so with them) practical factors impact on sales because full commitment is a combination of emotional (engagement) and functional (e.g. price, availability, promotion) factors. If the price is perceived as too high; if the consumer cannot find your product on the shelf or on the web; if the packaging size is wrong, or if promotions aren’t attractive, then consumers may switch to a competitor brand – at least for that purchase. Correlation analysis shows a very close relationship if brand performance is compared to both engagement and functional factors. The correlation chart shown is from Synovate.

Finally, you can identify not just the degree of engagement with your brand, but the degree of engagement with competitive brands (see bar chart from TNS). This will help you identify both brand equity and potential.

In summary, a small % of your consumer base (perhaps 5-20%) will drive the profitability of your brand. If you can increasingly engage consumers to become committed to your brand and if you have more committed consumers than your competitors, you are very likely to be the brand leader.

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