CPG Loyalty Programs – Comprehensive Guide (Part II)

Posted on September 23, 2021 by Keerthana Tiwari

In the first part of this two-part blog series, we touched upon why CPG loyalty is important and what are the latest trends to keep in mind for CMOs while executing brand marketing strategy. In this part, we take a deeper look at the challenges that marketers must address while building a loyalty program.

Imagine a customer walking into a grocery store. Their eye catches colorful packaging embossed with not just brand names but offers and prizes.… In this intense battleground, how is your brand going to stand out in the aisle?

CPG loyalty programs: Challenges faced by marketers

One thing that stands out as the biggest hurdle when implementing loyalty programs for CPG brands is that brands in this sector often lack direct relationship with customers. They are mostly reliant on retail stores for inputs. This dependency leads to several challenges. Some of them are stated as below:

Limited Customer Database: CPG manufacturers have no physical avenue to capture customer information (transaction data) since it is heavily reliant on the Point of Sales (POS) integration. This creates a vacuum between the brand and the customers and limits customer acquisitions and data capture. Capturing data will go a long way for companies to stay consistently relevant to consumers.
High Marketing Cost: Consumers are regularly bombarded with ads and billboards on a daily basis. While it’s no cakewalk to come up with catchy content, the engagement through these mass campaigns and advertisements is limited, with no personalization. Generic promotions and offers may not be relevant to every customer, leading to low engagement and redemption.
Quickly evolving customer preferences: Customer preferences change more rapidly in the CPG space than any other industry. Take the apparel industry, for example – fashion trends change quite frequently in a span of just few months. CPGs are typically low cost items with various competition products available in markets. This contributes to low customer retention with the brand, as customers are inclined to make compromises in their purchases if the preferred products are not available.
Heavy reliance on retailers: Over the decades, there has been massive seismic shifts in the CPG landscape, in terms of advertising and promotion. While manufacturers wielded this power in the 1980s, the power shifted to the retailers in the 1990s, as they had full access to the POS and scan data. In the current scenario, the power lies in the hands of the customers. The consumers’ choices are heavily driven by social media and information. Therefore, it is important for companies the embrace these shifts and let it drive retail strategies.
Difficulty in predicting profit: Due to the lack of direct communication between brands and customers, it becomes extremely difficult to measure cumulative customer value over time, to increase the customer loyalty necessary to maximize the Customer Lifetime Value.
The inevitable competition: While competition exists in all sectors, but it is far more intense when compared with other industries, given that CPGs are fast moving products with the risk of customers switching brands at any moment. It’s challenging for companies to break away from this clutter with brands offering same products and prizes.

CPG loyalty program: How to design an effective CPG loyalty program

Data is the key ingredient: To stand out in the grocery store and build brand loyalty, data becomes the key pillar for engagement strategies. Today’s consumer is constantly researching, shopping, and engaging with brands online, producing new data sets every minute. CPG brands can collect this data, unify data silos across all such touchpoints using platforms and solutions. The unified data should contain omnichannel consumer interaction, data from supply chain, marketing, and secondary research data, resulting in an all-encompassing view of the touchpoints. This holistic customer data management strategy is a prerequisite to build a valuable loyalty program that maintains dialogue between brand and customers, leveraging customer feedback on products and offering discounts to tailor better engagements. This also sets a platform to share information on product benefits and new product launches, apart from hyper-personalizing messages. Brands can also incentivize customers who share personal information in exchange of rewards and an overall transparency from the company, given that consumers have become increasing intentional about the data they share.
Digital strategy brings customers closer to brands: CPG brands are now looking to stay relevant with the digital transformation, investing in direct-to-consumer models. Brands must then focus on leveraging digital channels for an optimum loyalty program, and cultivate the desirable behavior of purchasing online. Mobile applications and Microsites serve as the primary interface of interaction between brand and customers, thereby reducing reliance on retailers and trade partners. This creates a win-win situation for both consumers and brands – while consumers experience ease-of-use through digital channels, customer acquisition, data and reward redemption can be easily facilitated for brands.
Several large CPG brands have taken their first steps in this digitized journey. For example, Colgate dove in to a digital-first marketing campaign for their new electric brush that is targeting millennial users. Paired with innovative messaging, this push for ecommerce sales has given the company an edge over competitors, and hopes to deepen its bond with consumers.
Focusing on brand values and ethics: After several months of intense research, Nestle recently launched the vegan KitKat. The company came up with the 100% plant-based alternative to the popular chocolate bar after huge consumer demand. Veganism is just one of the recent trends in the consumer landscape that CPG brands must incorporate in their brands. As we have already seen that 40% of the global consumers are Gen Z, and it has become an important marketing strategy to align products based on their needs. As the newer variants of products get launched, it is paramount to use loyalty programs to boost sales. Consumers can be incentivized to use these new products. Brands can also introduce personalized offers for consumers based on previous purchases and preferences.

Capillary’s pioneer in CPG sales, Kunwar Keshav emphasizes on observing the new generation’s needs, saying: “The era of conscious consumption is here, and the newer generations are watching brands more closely for sustainable packaging and marketing. While these new-age concerns need to translate into the present production strategies, brands can use loyalty programs as a medium to transparently communicate about such process changes and messaging.”

Incorporate Gamification elements– Gamification is especially useful in increasing customer engagement for CPG brands. Brands can apply games like spin the wheel as a way of unlocking rewards, providing incentives to customers to stick to your brand via awarding of badges and stickers. Gamification can boost non-transactional interactions and drive short-term behavior change like product awareness and trials. When Kellogg’s launched Krave, they hoped to direct the marketing at younger consumers. So, the breakfast cereal company made it a point to launch the product in social media channels for the first time. The brand launched a Facebook treasure hunt game that offered daily prizes and giveaways.

Let’s future-proof your brand with agility…

In a recent Harvard Business Review article, Janet Balis (Partner at EY Consulting) writes 10 sharp marketing truths that emerged after the pandemic. While many of them reiterates the importance of customer-centricity, one of the pointers discusses about how agility has become a marketing approach rather than a technology process. In terms of building CPG loyalty, this requirement to implement agile marketing strategies is an advantage.

CPG Loyalty Programs- A Comprehensive Guide (Part I)

Posted on September 20, 2021 by Keerthana Tiwari

The Consumer Packaged Goods (CPG) sector growth soared by almost 5 times in 2020!

However, forecasts also suggest that this growth may slow down, owing to small business competitors. Is a comprehensive loyalty program, an answer to the shifting consumer preferences?

Enter CPG loyalty. A clear path for CPG manufacturers to improve repeat sales and build a strong relation with distributing retailers and customers. This is a two-part blog series where we will unveil the length and breadth of CPG loyalty where we uncover some CPG customer loyalty strategies and look at some best practices for CPG loyalty programs. Let’s dive into how loyalty programs have in the past and will transform the CPG sector revenue game.

CPG loyalty programs: In retrospect

Little did we know that CPG loyalty programs evolved since 18^th century from the simple act of American retailers distributing special copper tokens to regular customers! Let’s take a look at the timeline from the past where retailers promoted repeat sales:

While these loyalty programs hooked customers, CPG brands had no structure behind crafting these programs. CPG marketers then did not have enough customer data to make strategic decisions based on customer preferences. They did not even have access to the point of sale at retail stores. While getting third-party data was an alien term, it did not allow them to build a deeper connection with consumers. But now in today’s digital age, e-commerce, and loyalty programs give CPG brands the opportunity to create this direct connection.

The sudden shift of CPG brands towards loyalty programs explained

Post Covid and global economic slowdown, the first instinctive reaction of consumers was to stock groceries and other essential products. Owing to the huge demand, the average basket size went up but many consumer goods brands went off the shelf quickly. During this time, consumers stepped aside and opted for (a) alternatives to try other new brands or (b) purchase economical substitutes due to the reduction in household income caused by the pandemic. This posed a huge opportunity in incentivizing buyers not to shift their loyalty towards a specific brand through offers, discounts and other freebies.

The global CPG consumer profile report suggests that more than 40% of the consumers are from Gen Z, who chose products based on their personal values and interests. While in 2010, the common trend was to save money and opt for cheaper labels, principled values and views are a priority for consumers today. Therefore, CPG brands need to brace themselves to encounter such radical changes in customer behavior, attitude and engagement through loyalty programs.

CPG loyalty programs: How it benefits brands

When customers enroll into a loyalty program, they also provide credible data on their buying preferences, giving brands an opportunity to understand them better.
Companies can nudge customers to provide feedback, leading to improvised and relevant products.
By introducing engaging aspects like gamification plugin in loyalty programs, engagement level with the brand goes up.

CPG loyalty programs: How Capillary benefits CPG brands with loyalty programs

CPG loyalty unfolds into two broader categories – While a business-to-business (B2B) loyalty program strengthens the connect with the retailers, a Direct-to-consumer (D2C) loyalty program would give brands an opportunity to directly reward consumer. At Capillary, loyalty experts ensures a brand’s core objective is considered before designing a CPG loyalty program. Let’s take a look at the two brands that leverage CPG loyalty programs using

Loyalty+.

D2C loyalty Programs
A multinational personal care products manufacturer uses Capillary’s lifecycle marketer, which is an omnichannel campaign manager to capture customer database via multiple channels like the offline stores, ecommerce platform, Facebook etc. and run targeted promotions. The brand now has better visibility, seamless customer journeys and is able to reward them at various touch points in the journey, thereby increasing repeat sales.
B2B loyalty programs
One of the most-loved app-based loyalty program set up by Jotun in the Middle East does it really right. The multinational chemicals company wanted to enhance their relationship with painters across Middle East, persuading them through rewards to promote Jotun paints. Their loyalty program had achieved almost 50,000 registrations in 2 years, resulting in a conversion of 45% of repeat shoppers thereby building a brand advocacy as well.

CPG loyalty programs: Features

Gateway to a more data-driven marketing: While CPG manufacturers and retailers have never really collaborated for customer data, challenges posed by Covid had pushed them to mutually exchange data. Even in the absence of the pandemic situation, experts suggest that the manufacturer-retailer collaboration is critical for both day-to-day business and long-term values. A Mckinsey survey, shows that winning CPG companies use databases shared by retailers to analyze the shoppers’ baskets and demographics, leading to focused marketing and rewarding programs. Clearly, big data is enabling CPGs to be more accurate than before, through syncing social and transactional data.
Connected packaging: Packaging is the one of best ways for CPG brands to reach directly to consumers. Also known as connected packaging, it allows shoppers to point their smartphone at a QR code printed on a package, which acts as an access portal to product information, incentives, and other ways for them to communicate with the brand. With this solution, CPG brands have been seeing higher interactions with customers in categories that are typically considered low-engagement, such as cleaning and laundry products.
Authenticity over trendiness: Freedom to express, straightforwardness, openness to diversity – these are some words that we can use to describe Generation Z. Their ‘search for truth’ behavior also translates to what they look for in stores. Therefore, Gen Z want all the information they can get about a brand and its image — from product to packaging and marketing. Staying true to the brand’s promises is crucial for marketing campaigns. It could be your brand following sustainable practices or providing health benefits it claims to give. These are the kind of moral values and promises that consumers of today are looking for.
Social media marketing strategies directed towards Gen Z: Generation Z was also the first one to be born after internet was commercialized, therefore digital experiences are a non-comprisable part of their lives. While social network usage patterns may vary across the world, it is obvious that most consumers are on social media, and frequently use it to find or post reviews about products. Incidentally, CPG products and social media have one thing in common – they are used every day. So it naturally makes sense for brands to promote their marketing campaigns on this medium. Marketing in social media also opens the doors to influencer marketing, another catchy trend among brands. This is a phenomenon where online influencers promote or review products in favor of a brand. In a survey by Influencer Marketing Hub, 90% of the consumers felt that influencer marketing was effective. The industry is expected to grow to up to $13.8 billion in 2021.

CPG loyalty programs: The evolution

The pandemic has stunned the world economies, changing customer behavior and undermining traditional CPG marketing strategies. To push past this struggle to revival and win the competition for customer trust, pivoting to a marketing strategy with a robust loyalty program is the best way forward. In the next part of this blog series, we discuss the different challenges in implementing CPG loyalty and how brands can design their rewards programs agilely, paving the way to tackle any major crisis and achieve long-term success.

The Evolving Indian Fashion Retail Landscape Post COVID-19

Posted on September 16, 2021 by Keerthana Tiwari

While the pandemic has overstayed its welcome by now, the evolving consumer behaviour is here to stay. Breaking free from the work-from-home during the week and compensating for the lost time in shopping malls through revenge shopping, the dynamics is definitely shaking up the sleepy retail markets.

Clearly, the pandemic accelerated the online shopping trend. In India, it is forecasted that the ecommerce market will grow up to 25-30% annually in 5 years to reach up to $140 billion by FY26. In the same report by Bain & Company Inc., it is mentioned that this growth would be especially evident in Tier-2 Indian cities, accounting for four of every five consumers.

Early this year, when Aneesh Reddy (Co-Founder & CEO) conversed with Ashish Dikshit (MD, Aditya Birla Fashion and Retail) of the year 2021; these post-COVID trends were confirmed. Acknowledging that 2020 is a Black Swan event that brands did not financially or strategically plan for, Mr. Dikshit also shared several tips that would help Indian fashion retailers gear up for what lies ahead. Here are the top 5 picks from their conversation:

1.See ecommerce as an opportunity

Will ecommerce eat up offline retail? Ashish says this is an unavoidable question of the year for all the brands. While the downfall of brick and mortar is pretty steep, there has been a democratic and universal shift to ecommerce. Ecommerce is fundamentally creating a new channel, and instead of seeing the medium as a threat, companies should see it as a way to expand their distribution like they have never done before.

2. Don’t miss the big fat Indian weddings!

Ashish was quite optimistic that the big fat Indian wedding would be back to its glory soon. Weddings are exuberant occasions that play a big role in the Indian fashion retail. With further economic growth in the country, the financial migration of lower income to middle income is coming soon in the next decade. These consumers will move from basic essentials to products and service of expression, marking an exciting time for the retail industry.

3. Watch out for casualization and premiumization in Indian consumer’s wardrobe

Typically, brands start out by producing something that they excel at, and hence customers see the value of the product. But over a period of time, brands have understood that the focus needs to shift from the product to the consumer’s occasions, consumption patterns and habits. Therefore, a whole spectrum of clothing arises – from strict formal, to smart formal. This will move to relaxed formals and to smart casuals, and so on. Brands need to watch out for these changes in how people want to dress. Ashish elaborates this as he says, “In my time, we could go to an evening get-together and an office in the same clothes. This started to change. What you wore to a club, what you wore for lunch on a Sunday, what you wore during an important meeting and what you wore on a regular working day, are all different. As the stratification of occasions and wardrobe started to happen, we also continued to evolve the brand.”

4. Let your innovation run wild while starting up

Start-ups are always known to bring their unique ability to bring technology to the table. Among the various ways that data can be used, start-ups can address the tediously long lead time in the fashion industry while creating new outfits. Ashish echoed this thought, “It takes us 9 months to put out a product that goes through designers, supply chain, sourcing, manufacturing and distribution. And then it takes less than 30 seconds for a person to walk in and say ‘No, I don’t like this collection.” Consumer behaviour definitely rules the market.

5.Hold on to your franchise

Ashish further adds that no businesses can survive, if franchises are not successful. Offline stores are now being used to drive fulfillment and are converted into a place of deeper engagement. For example, stores are connecting with customers on video calls to help them shop remotely. In this new default, we will be seeing a lot of change in engagement metrics, where stores and franchises are trying to differentiate and make a mark in their location. Ashish advises retailers not to let go of franchises as their relationship will help grow the business and open more stores.

The fireside chat has even more insights on how your fashion brand can get retail ready in this changing world, tune in to the full webinar here.