CPG loyalty programs are tackling unique challenges head-on

CPG loyalty programs are tackling unique challenges head-on
Aug 22, 2019

Launching and sustaining a differentiated, effective loyalty experience can be particularly challenging for Consumer Packaged Goods (CPG) brands. Luckily, recent technology and industry developments are putting these goals within reach.

To realize any 1:1 marketing program’s promises of consumer engagement and loyalty, marketers must address several tactical challenges:

  • Capturing and storing consumer purchase data
  • Designing an attractive value proposition for members
  • Cost-effectively maintaining a dialogue with customers

Companies in every vertical face these or similar challenges, but CPG brands feel the impact of these challenges more acutely. But, recent trends are making it easier to succeed at 1:1 marketing.

Challenge: Capturing and storing consumer purchase data

CPG brands typically leverage retail partners for distribution, with only a small portion selling their products directly to consumers. As a result, these brands can’t rely on a point of sale (POS) system, credit card, or e-commerce site for customer data. At the same time, the retailers and card issuing banks control this information, and they are typically not inclined to hand it over to their manufacturer partners as part of a loyalty or rewards program. If they are, the arrangement is often complicated and costly.

Some CPG brands rely on hidden, unique codes on their packaging to collect transaction information. These codes can be alphanumeric, QR codes, Microsoft Tags or other information carriers that can be iterated hundreds of millions of times. Consumers enter or scan these codes, and their transactions are recorded. But producing and attaching these codes to packaging is expensive and requires strong coordination between loyalty and CRM program technology and the manufacturing production process.

While there are other ways that brands have moved beyond direct POS integration and unique codes, they sometimes lead to fraud among consumers. With that in mind, we recommend these brands diligently track account activity, implement multiple security features, and of course, immediately communicate with customers when something seems off.

Technology and industry mindset offer solutions.

Retailers view change from ‘best alone’ to ‘better together’

Mass merchandise retailers are realizing that brands have more to offer than just a pile of merchandising dollars. The more sophisticated brands can also offer consumer insights and targeting tools that can dramatically improve the retailers’ own marketing efforts. Through collaboration with brand marketers, retailers are seeing that by carrying specific brands, they are able to better target consumers and drive more traffic into their stores. The result is that more and more retailers are willing to expose individual consumer transaction information to CPG brands.

Consumers are now wearing detection devices

The emergence and popularity of wearables offers intriguing possibilities for brands outside of the POS loop. Wearables like Fitbit and Apple Watch have already integrated with other entities and programs, so it is easy to see the possibility of further expansion. For example, Fitbit currently allows consumers to link their Weight Watchers app. Members’ activity levels are automatically tracked through their Fitbit devices and the Weight Watchers app then calculates the WW Points that members have available to spend each day. Enrollment and participation in this program is just as easy as syncing a device with an existing WW membership. Imagine the possibilities for transaction tracking when packaging or retailers can complement these devices with detection elements associated with brands.

Challenge: Designing an attractive value proposition for members

While most travel, retail and restaurant loyalty and CRM programs can easily afford to present members with compelling rewards (a free airline ticket, $20 off in store or online, a free entrée, etc.) most CPG programs struggle to do so, especially when the program supports just one brand or line of brands. The math is simple. Imagine you are a fabric softener brand and the average consumer purchases your product four times each year for a total annual spend of $35. How much could you afford to offer your program members in rewards? Three dollars? Five dollars? Would a program member participate in your program for a whole year just to get that value in rewards? Probably not.

Emerging approaches to loyalty program structure provide more value.

Programs offer “both and” in membership profiles

There once was a time when loyalty programs only offered consumers the opportunity to merge their accounts into a “household” or remain as unique individuals. “Householding” allowed members to earn rewards faster than they could have on their own as individuals, but they also lost their unique identities and were treated as one being. Today, programs are able to discern the degree to which purchases are decided by a group or an individual. As a result, some programs are able to offer members both the opportunity to pool their earning potential and be treated as individuals.

Partnerships are becoming a key differentiator in programs

For years, many 1:1 program sponsors presented their consumers with only one reward—more of their own products and services. While the cost advantage of that strategy is somewhat obvious, it is a strategy that limits companies’ abilities to create immersive engagement experiences for their consumers. More and more, companies are finding that a well-selected partner can bring a sense of recognition or experience that is far richer than their products and services can bring on their own.

Challenge: Maintaining a dialogue with customers

Many loyalty programs fail when members begin to feel that they are neither appreciated nor heard. Irrelevant messages, meaningless offers and unanswered posts are the biggest reasons why members quit programs. Creating personalized, customized, timely exchanges with millions of members requires robust personnel and technology resources to get things right. Unless the company has bought in to 1:1 marketing, securing funds to support those resources can be a problem.

New channels present opportunities for engagement

Plastic, paper and computers are replaced by the mobile phone

Marketers are increasingly able to avoid the need to produce cards, key fobs, stickers and other manners of member ID carriers. Instead, they can rely on the consumers’ smartphones to do the trick through messages, rewards, games, apps, and social networks. Finally, the mobile phone acts as a main form of payment for some high-frequency purchases.

Popularity and share of voice are understood as things that deserve recognition within loyalty programs

Now that social networks are a standard part of every consumer’s life, we can capture and measure the value of posts, shares, tweets, and more using consumer data and analytics. We are gradually beginning to understand the impact these interactions have on consumer purchase behaviors and can reward them appropriately. Not only that, these platforms afford marketers a broader opportunity to engage consumers in a dialogue.

These trends and more are benefitting marketers in many ways. Some allow marketers to drive down the costs of their programs because they no longer have to produce costly cards, transaction verification processes and direct mail pieces. Some afford marketers the chance to forge more authentic and stronger relationships with their consumers because they can broaden the dialogue beyond just price. Others allow marketers to deepen consumer participation rates because they present more opportunities for consumers to find benefits that are meaningful to them.

Engendering consumer loyalty is tough for any brand in any vertical but today for CPG brands, the possibility of doing so with the help of a well-designed loyalty program is closer than ever.

ICF’s global marketing services agency focuses on helping your organization find opportunity in disruption.
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