Unique Challenges Faced by CPG Loyalty Programs

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

Every 1:1 marketing program needs to address a few key tactical challenges before the promise of consumer engagement and loyalty can be realized. These challenges are capturing and storing consumer purchase data, designing a value proposition that is attractive to members and sustains their interest, and cost-effectively maintaining a dialogue with members (not just talking at members but having a dialogue with them). Companies in every vertical face these or similar challenges, however the nature of the CPG distribution and retail environments causes the impact of these challenges is felt more acutely. Let’s take a look at each area of challenge from the perspective of a CPG company:

Data Collection

  • Except for a few rare brands that sell a small portion of their products to consumers directly, CPG brands leverage retail partners for distribution. As a result, relying on a POS system, or credit card or ecommerce site data to identify and collect SKU level detail for each consumer is not an option. The retailers and card issuing banks control this information and they are typically not inclined to hand it over to their manufacturer partners. 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 applying these codes to packaging is expensive and requires strong coordination between the loyalty / CRM program technology and the manufacturing production process.
  • Moving beyond direct POS integration and unique codes can sometimes mean that brands are exposing themselves to fraud within programs. Unless there is a way to ensure that consumers cannot reuse or duplicate codes, or take credit for a single transaction multiple times, brands run the risk of having their rewards budgets go out of control.

Value Proposition

  • 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, especialy when the program supports just one brand or line of brands. The math is simple. Imagine you are a brand of fabric softener 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.

Happily for CPG brands, recent trends are making it easier for them to succeed at 1:1 marketing. Here are a few of the top trends that Olson 1to1 has been both seeing and a part of:

  • Retailer views 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 brands can help them 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 brands.
  • Plastic, paper and computers are replaced by the mobile phone — With the broad acceptance of smartphones among consumers and the devices’ functional flexibility, 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. What’s more is the phone is becoming the main highway between the consumer and the company, acting as the conduit of messages, rewards, games and social interactions. Finally, the mobile phone is beginning to act 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. 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.
  • Programs are able to 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 as a household, individuals 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 of people or are very individual in nature. As a result, some programs are able to offer members both the opportunity to pool their earning potential and be treated as the unique individuals that they are.
  • 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 (or group of partners) can bring a sense of recognition or experience that is far richer than their products and services can on their own.
  • 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 you to link with your 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 your device with your existing WW membership. Imagine the possibilities for transaction tracking when packaging or retailers can complement these devices with detection elements associated with brands.

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.

About The Author

Suzy Cox, SVP-Client Services, has over 20 years of loyalty and promotion marketing experience. Suzy’s main areas of expertise are strategy and innovation development, as well as business development. She has published a number of white papers that discuss loyalty as a marketing discipline and CPG loyalty best practices. Suzy is also a frequent speaker at industryand client vertical conferences, and is a recognized leader in creating successful, sustainable retail and CPG loyalty solutions. She played a key role in designing the first-ever debit card loyalty program for Visa USA; was instrumental in creating the success of Procter & Gamble’s Pampers Gifts to Grow program; and, more recently, oversaw the design of Lancôme’s Elite Rewards program. Her recent work experience also includes CRM for Luxottica’s retail brands, including LensCrafters, Sunglass Hut and Target Optical, and loyalty for Chico’s Soma Intimates brand. Suzy holds a bachelor’s degree in Journalism and French from the University of Wisconsin, Madison.