How does your company attract and retain customers?
For most consumer packaged goods (CPG) companies, having a brand that is top of mind for consumers has always been important. However, they hadn’t focused as much attention on consumer-centric business models until a global pandemic required — and rewarded — that shift.
Case in point: Online sales grew from 11% of total retail sales in 2019 to 16% in 2020 before leveling off at 14% in the spring of 2022, making direct-to-consumer (DTC) online channels much more desirable for CPG companies. This shift effectively jump-started previously nascent efforts at DTC growth strategies, which require a deeper understanding of what keeps consumers loyal.
Constantly bombarded with a wealth of choices — all competing for their limited time — consumers have little incentive to stay loyal to a brand. In fact, our recent PwC Customer Loyalty Survey found that almost 35% of CPG customers will walk away after a single bad experience.
As customer expectations surge and brand loyalty weakens, the answers to these questions become essential:
- How can CPG companies identify and retain their most valuable customers?
- How can they attract new customers?
- What drives customer attraction and how can companies increase it?
- While companies now have access to a wealth of consumer data, how do they focus on the right insights at the right time to drive valuable action?
- How do companies analyze the underlying forces that drive customers toward — or away — from them?
At PwC, we’ve created an equation that provides a structured way to think about customer attraction — the customer attraction score. We believe customer attraction consists of two components working in sync:
- Values attraction
- Capability attraction
Values attraction has been steadily growing in importance in recent years, with consumers increasingly caring about the values and actions of the companies they interact with. They want answers to these questions:
- What values does this brand or company embody?
- What benefit does the company provide society at large?
- Do those values and benefits align with mine?
With capabilities attraction, a more traditional concept, consumers want to know:
- Does this company offer what I need?
- Is it offered in the physical and/or digital channels I prefer?
- Does the company reliably deliver what I need at a price I find acceptable?
To attract customers and create sustainable growth, both sides of the equation require attention — as well as a more holistic approach to measurement.
Values attraction in action
In the context of CPG companies, values attraction refers to consumers’ quest for brands with which they feel a deep sense of kinship. They want a personal connection they can rally around to form communities with like-minded consumers.
Today’s consumers want to be recognized as individuals, not just as part of a larger demographic segment. Often, they gravitate to smaller, local, digital-native options, preferring the personalized experience those brands provide.
The wardrobe stylist company Stitch Fix, for example, uses an online game that provides wardrobe options customers can vote up or down based on their own preferences. More than 75% of the company’s 3 million active customers have played the game, generating more than a billion touch points for Stitch Fix.
Getting closer to customers
In response, legacy CPG companies are seeking new ways to get closer to consumers, often by way of acquisitions of more nimble counterparts. Some legacy brands, meanwhile, have implemented innovative organic approaches to the values side of the equation.
During the pandemic, the Coca-Cola Company recruited a group of customers who kept diaries noting when, why and what they ate and drank. This initiative shed light on consumers’ emotional moments, and the company plans to integrate these insights into its marketing campaigns to better connect with consumers.
In another example, Gatorade recruited student athletes from a variety of sports to create social content aimed at igniting interest among young consumers who could identify with them. Today, discovery commerce — how consumers discover brands, typically on social media — is gaining ground among young consumers on social platforms.
Capability attraction in action
As nimble upstarts continue to disrupt the old order, legacy CPG companies are seeking to build a rapid, agile capability to truly understand customer needs, especially for the customers a company considers most valuable.
To do so, they need to be purposeful about using data and insights to:
- Track each step of the customer journey, making an effort to understand and take action on what drives choice and experience
- Connect more strategically with customers in real time
- Anticipate customer needs and respond promptly and efficiently
When a personal care brand decided to create a DTC channel, PwC helped the company plan and launch it within 60 days. The DTC growth opportunity required consumer-centric, data-driven innovation, supported by embedding agile ways of working — all underpinned by a global marketing technology stack. The company has already more than doubled ROI improvement.
Devise a system of metrics
While no one-size-fits-all metric exists, CPG companies need to devise a system of metrics that combines customer experience data with operational data to better understand what drives the business, while clearly linking to outcomes. At PwC, we call this return on experience (ROX).
Customer experience metrics include customer satisfaction, brand engagement, trust and brand advocacy, while operational metrics encompass sales, loyalty, supply chain operations and human capital management.
Who oversees ROX? That depends on the company. At a leading CPG company, for example, the chief digital officer champions the ROX approach. While overseeing the company’s digital transformation, he focused on culture and employee experience as the means of enabling the transformation.
Surprise and delight with discovery commerce
Metrics are also critical when engaging in discovery commerce, which reverses the process of consumers finding products with one in which products find consumers. Start by using analytics to develop nuanced customer personas and understand which digital sites or apps they frequent. Then make sure your products are easily found in those places and use AI and other tools to fine-tune content to the tastes of various audiences. Finally, measure results.
TikTok users’ fondness for nostalgia led to the discovery of skincare brand Clinique’s Black Honey lipstick, a product originally introduced in 1970 that naturally adjusts pigment for individual skin tone. These new consumers — many of them younger than the brand’s typical customer — tried the product and made videos about it. Soon, it was sold out in stores, while demand continued apace. Ultimately, the phenomenon helped Clinique boost household penetration.
Translate meaningful insights into action
Build a process that drives meaningful insights into who is engaging with your brand and the occasions that cause them to engage — as well as who is leaving the category and why. Once that framework is in place, it’s time to translate it into action:
- Consider additional sources of data, both internal and external — beyond traditional loyalty programs — to avoid a siloed, fragmented view within the organization.
- Incorporate emerging techniques not ubiquitously used across the industry, such as social listening, natural language programming, text analytics, unstructured data and artificial intelligence to generate more real-time insights.
- Combine with operational data, such as web analytics, mobile app analytics, commerce analytics, loyalty analytics and other data from various internal systems.
- Iterate frequently and adjust accordingly to continually fine-tune results.
With more than 100 brands in its portfolio, Constellation Brands, a leading supplier of premium beer, wine and spirits, needed an ordering system to better address complex, high-volume orders. The intuitive new cloud-native ordering system the company implemented now saves distributors hours of ordering time while also providing valuable data and insights on customer preferences. During usability testing, customer satisfaction ratings typically hit 90% or higher.
Success requires both sides of the equation to work
To effectively manage customer attraction, CPG companies need to evaluate key metrics from both the values attraction and capability attraction sides of the equation in tandem, going well beyond historic metrics that were more narrowly — and internally — focused. Doing so requires cross-functional collaboration at every level.
The benefit is clear — each team, while meeting its own objectives, can see a larger, more holistic and enterprise-wide picture. Only then can the company drive the kind of vigorous, sustained customer growth required in an environment in which connecting with consumers is increasingly essential for CPG success.
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