CPG Loyalty Programs- A Comprehensive Guide (Part I)

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.

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Keerthana is a business journalist and is adept at catching market and retail trends. She enjoys analyzing facts and figures and often shares those insights through her writing. Before becoming a writer, Keerthana also had a stint in Biotechnology research.