- Circana
- 2 hours ago
- 4 min read
Table of Contents:
As consumers embrace a growing number of options, they are moving targets for brands and retailers trying to reach people at the point of decision. To better engage audiences amid all of this movement, marketers need to determine underlying causes behind shopper shifts and where to zero in on opportunities.
Identifying underlying causes requires more than transaction data. Brands and retailers need to leverage additional sources of insights and modeling tools to pinpoint and address retail leakage and customer churn.
What Causes Customer Churn and Leakage?
Buyer churn is unavoidable in retail, of course. Consumers naturally enter and exit categories based on need states. For example, if someone purchases an air fryer this year, they are unlikely to buy another one next year. This natural exit from the market looks like churn, but it is merely a reflection of the product lifecycle.
That said, while brands or retailers can’t entirely prevent churn and leakage, they can control how they assess and respond to those behaviors. In evaluating customer churn, it’s helpful to view business through the lens of the buyer. Shoppers, after all, do not belong exclusively to one retailer or brand and buy across a variety of channels and competitors, especially in the current marketplace. Consequently, relying solely on retention strategies ignores the broader reality of consumer fluidity.
Successful brands accept this dynamic and focus on managing leakage by regularly filling the top of the funnel with new households while maximizing the value of current customers. The goal is to balance the equation: as buyers naturally leave, you must acquire new ones to replace them.
How to Analyze Buyer Churn and Retail Leakage
To accurately observe trends and identify churn and leakage, a brand must have the right data foundation. Relying on isolated datasets often leads to misinterpreted signals.
Manufacturers and retailers have valuable first-party data that helps them understand how buyers engage specifically with their brand or store. However, first-party data lacks context. It cannot tell you what that consumer does when they leave that ecosystem.
Third-party panel data captures the breadth of total market spending and helps businesses understand their consumers. For example, data might reveal that a brand's most valuable buyer is actually a heavy buyer of the category in general. That buyer spends a lot with that brand but also spends significantly with competitors. If the brand can’t discern between a loyalist or heavy spender, incorrect strategic decisions may ensue.
To analyze leakage effectively, you need a view of consumer behavior across the entire marketplace. Not all panel data is created equal, however. To ensure accuracy, panel data should be anchored in Point-of-Sale (POS) truth. Combining panel and POS data, ensures that insights tell a consistent story across all sources, providing the confidence needed to make high-stakes decisions.
Moreover, utilizing advanced AI tools allows for the precise identification of items on receipts for an “apples’ to apples” comparison of the share of wallet. Sophisticated platforms facilitate this by integrating disparate data sources into a single, coherent narrative.
How Do You Turn Your Consumer Purchase Data into Business Drivers?
Once a brand or retailer has identified retail leakage and customer churn and put that into some context, the next step is to determine where the dollars are going and deploy specific solutions to recapture them.
The proverbial lowest-hanging fruit in churn analysis is identifying where consumers spend money when they are not shopping with you. If a buyer leaves your store to purchase a competitor's product, you can begin to deconstruct the drivers of that decision. Are they switching due to pricing, or are they simply purchasing less frequently? If pricing is an issue, then solutions can focus on that driver.
In the current macroeconomic climate, it is also critical to analyze discretionary versus non-discretionary spend. You may find that consumers are cutting back on dining out, but not necessarily transferring that volume to grocery. Understanding these overarching circumstances allows you to adjust your strategy to capture displacement spend.
On-shelf availability can result in retail leakage, too. Supply chain data can determine gaps stemming from out-of-stocks that cause shoppers to switch to a competitor or a different retailer. By correlating churn data with inventory levels, you can pinpoint specific retail locations where availability issues might be driving customers to others, and then take steps to avoid availability problems.
In addition to quantifying data that reveals problems and gaps, retailers and brands can address leakage by uncovering the sentiment behind the behavior. Survey solutions allow you to query the same panel of consumers whose purchase behavior you are tracking. You can ask specifically why they chose a different brand or why they switched retailers. This longitudinal view of attitudes and usage ensures you are not guessing at the motivations behind the metrics.
Once a brand or retailer understands consumer motivations and identifies key gaps, it’s time for activation. This involves using innovation tools to test concepts, forecast demand based on consumer intent, and deploy media budgets more effectively.
How Do You Measure Changes in Buyer Churn After Making Adjustments?
After implementing strategies that address drivers behind churn and leakage, brands must measure the efficacy of their efforts. Continuous measurement is essential because consumer behavior shifts so often and a strategy that works today may lose effectiveness as new competitive pressures arise.
For example, tools that offer syndicated solutions allow you to track how buyer churn evolves over time. You can measure whether adjustments in pricing, assortment, or marketing have successfully stemmed the tide of retail leakage or improved loyalty.
By integrating consumer insights with media planning, such as marketing mix modeling, you can ensure that you are targeting meaningful buyer segments. This creates a feedback loop where you measure performance, gain insights, and optimize future campaigns to drive growth.
Identify Opportunities Based on Your Consumers’ Purchase Data with Circana
Retail leakage and customer churn are complex challenges, but these issues present opportunities for businesses that are willing to dig into the data. By combining first-party data with Circana’s robust third-party panel insights, including verified purchase data, brands and retailers can see the full picture of consumer behavior and take steps to accelerate demand. Consumers will evolve, and the brands that thrive are the ones evolving right alongside them.
