The importance of customer loyalty in the food industry

How important is it for Food and Beverage players to build customer loyalty? What are the best ways to do it? And why is the Employee Experience so important? In this post, we’ll answer this and more.

Try to envision the shelves of your local supermarket, in the pasta section alone. How many products and brands do you see? If you imagine just five or 10 years ago, the number of brands has multiplied. Even the packaging is more and more sophisticated and diversified. Today, in addition to big name brands, you’ll also find organic and specialty brands that perhaps did not exist 10 years ago. And then, consider all the different types of pasta—pasta made from whole wheat, corn, rice, buckwheat, or even quinoa. There are gluten-free pastas and even soy spaghetti, in packages that evoke China and the Far East.

It’s not just the pasta aisle. There have never been more choices than there are today. The Food and Beverage industry has never been so open or crowded with players; and the competition has never been so tough and complex. At the same time, business opportunities have multiplied; it’s a matter of learning how to seize them and make the most of them.

Where should we start, then? People. People are the most decisive factor. We’ll come back to people later in this post.

Let’s ask ourselves now, though: what is the ultimate goal? Again a simple, but decisive answer: loyalty. To win the trust of one’s customers, to transform them into “regular customers” and, even more so, into ambassadors, and therefore the most credible marketing agents. 

 

How important is customer loyalty in the food industry?

Loyalty is an important factor for all sectors, but it’s especially fundamental for the Food and Beverage sector. Let’s look at some data. 

The Net Promoter score (which you can read more about here), was created by  Frederick Reicheld from Bain & Company. In his research, Reicheld found that, depending on the type of industry, it costs 5 to 25 times more to win a new customer than to retain one. That’s right, up to 25 times! Moreover: increasing the loyalty rate (also called “Customer Retention”) by only 5% increases profits by 25% to 95%. (See the study data here). These numbers speak for themselves.

As we mentioned earlier, the food sector is hyper-competitive, and this impacts everything from distribution, to retail, to sales. It’s also a sector where all the players live (or die) on repeated purchases over time. And the profit margins on a single product are, generally speaking, not so large.

So, how do you generate revenue? In two ways: either by getting people to spend more on every single “visit” to the supermarket, small grocery store, fast-food restaurant, etc.; or by getting these same people to come back more often, and consistently.

In a word: to generate more sales and more revenue (but not only) the main path is loyalty. It’s all about personalization (and data).

Food is an “essential” type of purchase that concerns our habits, tastes, and preferences, but also the way we represent ourselves. Let’s think about the different values behind our choice of restaurant. Customers may value only restaurants that use local produce or “farm to table,” or one that only offers vegan dishes, or may only eat at restaurants that are Michelin-rated. Food, to put it briefly, is something very personal.

And, if you are the owner of a small restaurant, or the Chief Marketing Officer of a multinational brand, it’s important to win the trust of your customers and learn about their preferences to be able to reach him or her in the most personalized way possible. In this way, you can invite them to try new dishes based on what you know about what they already like. 

But is it possible to have a personalized approach when addressing an audience of hundreds, thousands or millions of people? The answer is yes. 

And it’s something that has been made possible by Digital Transformation. Mainly, it’s a matter of data.

To make it simple, think about your trusted baker or pastry shop. They know your face, your name, your habits, and your preferences; based on those, they can offer you very targeted suggestions for other baked goods that you might like.  

The same mechanism is at the basis of the analysis of Big Data. It’s about collecting the “traces” that people leave online—personal data, geographical data, data about behaviors, habits, preferences, mapping the so-called “customer journey” on social networks, on dedicated platforms and/or apps, from desktop and/or mobile. There is a potentially huge amount of information available.

Harvesting these digital traces and interpreting makes it possible for marketers to divide the actual and potential audience into smaller and smaller groups based on their characteristics; this is “segmentation.” At this point, targeted marketing and Customer Care operations can be put on track. 

This is the starting point for building customer loyalty. But you can go even further, and activate a dialog with individuals in a truly personalized way. This is the focus of companies like Doxee who specialize in helping companies create personalized, user-oriented services.