While CPG firms have historically set the benchmark for other industries in understanding customer needs, delivering consumer benefits, and building powerful brands, they are not connecting at an emotional level nearly as well as they could. As a result, revenue and profit growth have become increasingly elusive.
Across a wide range of industries, customers whom we term Emotionally Connected generate anywhere from 30 to 100 percent greater annual value (and even higher lifetime value) than those customers who “merely” perceive functional benefits or high brand differentiation. After 10 years of work defining and measuring the effects of Emotional Connection, analyzing over one billion data points on more than 1.5 million consumers, we’ve discovered that Emotionally Connected customers consistently concentrate their purchases, pay higher prices, and stay loyal longer.
Most CPG companies are leaving money on the table by failing to maximize and monetize their Emotional Connection with consumers in a precise and predictable way. For example, while 66 percent of consumers of Coca-Cola rate it a “good brand” (8 or higher on a scale of 1-10), only 24 percent of Coke’s consumers are Emotionally Connected. This “Emotional Connection Score” is equally modest for other well-perceived brands such as Budweiser (27 percent) and Dove (29 percent). The same pattern is true with well-liked non-CPG brands: Nike’s Emotional Connection Score is 30 percent; Starbucks’ is 26 percent.
This isn’t surprising because Emotional Connection isn’t easy to achieve. Traditional approaches to consumer insight lack the ability to define precisely the emotions that truly matter, measure their impact on behavior, and predict their financial value. Organizations lack the predictive metrics necessary to focus customer-facing investments toward these key emotions. And digital competition and seas of customer data increase the challenge (as well as the opportunity) of reaching consumers with the right messages at the right time.
As a result, what we often see is a vicious circle. CPG companies attempt to differentiate their brands by concentrating on functional benefits and key claims such as “better taste,” “healthier options,” or “the cleanest clean.” While the products and messages they then introduce may have an emotional aura and generate a temporary bump in sales and price realization, that’s usually followed by competitive imitation and promotional pricing that return sales and profitability to the status quo (or worse).
Combining emotional and behavioral big data and predictive analytics, leading-edge CPG companies have developed Emotional Connection-based strategies to focus their brands on the underlying emotional needs, values, and motivations of the most profitable consumers in their categories. They understand that Emotional Connection is not about them; it’s about how they gratify what consumers are seeking in their own daily lives. These are often unspoken, deep-seated emotional motivators such as an individual’s desire to “stand out from the crowd,” “have confidence in the future,” “enjoy a sense of well-being,” or “enhance my social standing.”
Companies that increase Emotional Connection by even as little as three to five percentage points reap huge financial benefits because of the impact of Emotional Connection on customer value. For a leading household cleaner, for example, Emotionally Connected customers purchase nearly twice as much annually than customers who merely perceive functional and brand differentiation. For a major condiments brand, this ratio is 1.7:1. And for a venerable OTC pain medication, Emotionally Connected customers are almost twice as willing to pay a higher price.
CPG companies that gain advantage via Emotional Connection typically follow four key steps:
First, they quantify and model the value of building their brand’s Emotional Connection.
Second, they identify the precise emotions that drive the most profitable customer (and prospect) behaviors, developing an “Emotional Connection Lens” through which their brand investments can be focused directly on the critical emotional drivers of customer value (such as purchase, price realization, loyalty, or advocacy).
Third, they test and implement changes with the highest potential to impact Emotional Connection (from brand positioning, message design, and media selection to on-line targeting and interaction, product development, and channel strategies).
Fourth, they monitor Emotional Connection over time to ensure that all customer-facing functions are generating the highest returns from their investments.
These four steps replace the vicious circle of functional benefits and price promotion with a virtuous circle that builds continuous competitive advantage, driving higher Emotional Connection and financial results.
A frozen snacks brand whose sales and market share were in long-term decline had been relying on heavy couponing which was eroding profit margins. New product introductions weren’t making an impact. Big data-based analytics helped them discover the value of Emotionally Connected consumers versus those who were just “highly satisfied” with the product and perceived strong brand differentiation. Those Emotionally Connected consumers comprised 22 percent of their customer base, but purchased 2.4 times as much annually, spent 1.7 times as much every time they bought (due in part to higher price realizations), and were 6.4 times more likely to purchase the brand even if a competitor’s was on sale.
The brand team’s focus on the primary emotional benefit of “helping Moms keep their kids happy” drove consideration, which was already high for their and competitors’ brands. But after Emotional Connection analysis, the team found that what actually drove purchase frequency, loyalty, and price realization were surprising emotional factors such as “reward myself” and “perform at a higher level” that didn’t come through in conventional research. Those successful emotional factors were about the Moms, not the kids.
Based on these precise and actionable insights, the brand reconfigured its messaging, reduced promotional activity, and invested in the touch points that the analytics said would generate higher Emotional Connection, such as the mobile app and consumer-generated website content. As a result, across its entire customer base, their Emotional Connection Score rose to 29 percent, surpassing the leading competitor. Overall household penetration grew from 12 to 15 percent, the average price per purchase increased 39 percent, and the click-through rate more than doubled – all of which drove a 21 percent increase in sales.
This example illustrates the power of focusing big data and predictive analytics on the fundamental goal of all CPG companies: to generate an Emotional Connection with consumers. In an increasingly challenging and competitive marketplace, leading-edge CPG firms are leveraging Emotional Connection to revitalize lifetime customer value and organic revenue and profit growth.
Alan Zorfas is the Co-Founder and Chief Intelligence Officer of Motista, a predictive consumer intelligence firm. Daniel Leemon is a Senior Executive Advisor to Motista.