The U.S. packaged goods industry grew up during the golden age of mass marketing, an age characterized by three television networks, less choice and far fewer competitors for consumer mindshare. Marketers could expend minimal effort to keep their customers loyal, gearing their marketing dollars toward customer acquisition at the expense of customer retention. The notion that brands could actually nurture long-term customer relationships had yet to capture marketers’ attention.
But that golden age is now a distant memory, gone with the days of “Mad Men.” Today, relentless economic pressure, media fragmentation, private labels, and the explosion of digital and mobile channels will continue to bedevil CPG manufacturers. That’s the bad news. The good news is, CPG marketers now have a road map to help them seize control of their own destiny by using data, recognition and rewards to build direct, real relationships with their best customers.
Today’s Marketing Reality
Here’s the reality of CPG marketing: Brands can no longer build strong, profitable relationships with their best customers by relying on advertising and promotions alone. Today’s savvy shoppers showroom in-store via their mobile devices, seek recommendations from friends on social media and check user reviews online. To connect these new forms of brand interactions back to core shopping behaviors, brand marketers are increasingly turning to the tools of loyalty marketing to create emotional bonds with customers and generate appreciable return on investment.
In implementing data-driven marketing efforts, CPGs have historically found themselves at the mercy of their retail partners. Thanks to the convergence of mobile marketing, social media and next-generation loyalty platforms, CPGs now find themselves on the cusp of a new golden age of loyalty — a future in which they can build their own loyalty initiatives, work more closely with their retail partners and engage directly with their best customers. Transformation at this scale is never easy. But the opportunity is more than worth the effort.
The Five Transformations
With decades of equity and millions of engaged customers, the most successful CPG brands can stand toe-to-toe with their retail partner brands. Just as customer-centric loyalty data has transformed today’s most successful retailers, so too can CPGs leverage loyalty marketing to transform brand equity into stronger relationships that deliver both incremental revenue and increased lifetime value. Here are five important ways loyalty marketing can transform CPG brands.
1. Transform your economics
In the low-margin, high-frequency world of retail sales, CPGs must manage brand economics down to the penny while searching for ways to compete beyond price. Core loyalty program models offer several opportunities to transform these economics: Partnership models offer customer rewards at below-market prices; coalitions built around brand families or demographic groups offer increased customer value at scale; and currency-based coalitions offer shared costs and robust data sets. Choose your model and watch the transformation begin.
2. Transform your results
Loyalty programs can help you hit the marketing trifecta: Increased revenue, lower costs and higher profits. Increased revenue comes from higher yield from best customers. Lower costs come from trading straight discounts for below-cost rewards with high perceived value. The Pampers® Rewards program, for example, offers rewards ranging from magazines to digital photo services to sought-after toys. Higher profits come by using shopper data to negotiate with retailers, optimizing campaign and media spend, and growing the program with minimal incremental costs. Starbucks®, for example, recently expanded its loyalty program to allow members to earn points in Starbucks stores, on Starbucks grocery products and at over 300 Teavana® retail stores nationwide.
3. Transform the purchase cycle
By connecting transactional loyalty data to data points throughout the purchase cycle — from awareness to product research and through to post-purchase activity — CPGs can now build relationships at every stage of the customer journey. Pampers Rewards, for example, has leveraged data analysis to identify key points along the motherhood journey to arm expectant and new mothers with information, education and offers that help them make the right decisions for their families.
4. Transform your retailer partnerships
CPGs serve two constituencies: consumers and retailers, each of which has different needs and expectations. CPG loyalty programs balance the requirements of both sides: the programs both deepen consumer relationships with recognition and reward and generate increased retail sales at no cost to retailers. In addition, these programs create opportunities for data sharing and joint promotions. My Coke Rewards™ enjoyed an industry first, for example, when it announced a partnership with Rutters Farm Stores, a 56-store convenience retail chain, to allow program members to redeem My Coke Rewards points for fuel discounts.
5. Transform your customer data set
CPGs have always faced considerable roadblocks in gaining access to robust consumer data sets. Loyalty programs remove these roadblocks by providing direct connections with customers to build permission-based segmentation and profiles based on purchase data. CPGs can then leverage customer insight to test and learn their way to marketing optimization. Kellogg’s®, for instance, now runs most national brand promotions through Kellogg’s Family Rewards®, creating greater marketing efficiency.
Transformation is never easy. CPG marketers are naturally inclined to focus their efforts on the tried and true. But the days of standing pat with the same old marketing tactics are over. CPG companies that leverage customer-centric data to provide unique combinations of recognition and reward for their best customers will win the battle for customer loyalty. Those marketers who embrace this transformation, rather than shy away from it, will be the brand leaders of tomorrow.