Introduction
In the rapidly evolving Consumer Packaged Goods (CPG) market, brands are wrestling with how to keep their consumers loyal as economic conditions change -- and consumer tastes shift. Data from Nielsen IQ reveals that 64% of global consumers are uncomfortable with the swift changes in their lives, significantly impacting their shopping habits. For CPG brands, earning consumer loyalty has become a must-have, not just a nice-to-have. The competition is intense: the focus is not only on monetary price, but also on what value means for each consumer.
THE CPG LANDSCAPE: US and Europe
US: Inflation Concerns Tempering Consumer Confidence.
Concerns about inflation, coupled with the growth of private labels, are prompting established CPG brands to focus on differentiation and innovative promotions.
Europe: Adopting Money-Saving Strategies
The economic instability in Europe is driving consumers towards cost efficiency, a trend clearly reflected in the growing popularity of private labels.
KEY TRENDS SHAPING THE CPG INDUSTRY
Brand Loyalty Gets Personal
Brand loyalty is no longer just about product quality and brand recognition; it's also about experience and personalized engagement. This shift is particularly noticeable among high-income earners and millennials, who often display strong loyalty to certain retail and grocery brands. A Symphony AI survey found that while a mere18% of US and European shoppers are brand loyal, they generate a hefty 41% of sales across various CPG categories. They also tend to stick to their favorite brands across different product categories, making it vital to court their allegiance. But the loyalty landscape is complex and evolving – nearly half of US grocery and retail shoppers are open to switching to cheaper alternatives. This figure increases to almost 60% among middle-income retail shoppers.
Omnichannel Gets Intelligent
The modern consumer's journey weaves through an interconnected mix of digital and physical touchpoints. Failing to engage across all channels can lead to missed sales opportunities, especially since US and European omnichannel shoppers yield 15-18% more sales and have a 9% larger basket size compared to those who shop in-store only. Brands that offer omnichannel avenues not only gain more sales, they also gain deeper insights into consumer experiences and preferences. According to Forrester, CPG companies implementing omnichannel solutions report more consistent consumer experiences, improved long-term, data-driven strategies, and enhanced consumer loyalty.
Consumer Values Shift Priorities
Increasingly, consumer choices are being shaped by sustainability, affordability, and ethical considerations. A survey by Bain & Co found that over half of global consumers consider a brand's purpose and ESG factors when buying – this shows a trend towards purchases that reflect personal values. In the US, though, there has been a slight dip in the importance of ESG factors, from 57% to 45%. Still, many consumers, especially among younger and higher-income demographics, continue to value ESG elements such as fair trade and recyclability. CPG brands are working to balance these preferences with affordability, a challenge exacerbated by current inflation. American consumers also see a significant price difference in sustainable products, with 28% thinking companies overcharge and another 28% doubting the authenticity of large corporations' sustainability efforts – a trust issue that brands need to address by showing more transparency (no greenwashing!)
DTC and Loyalty Programs Get Competitive
Direct-to-consumer (DTC) models, including subscription-based loyalty programs, are reshaping how CPG brands interact with consumers. DTC channels are not just major growth drivers, accounting for over 10% of revenue for the companies using them, but they also provide critical consumer data that CPG companies traditionally lack. Many European CPG firms are ramping up their DTC strategies, targeting more than half of their sales through these channels. For CPG companies without DTC plans, the focus is on loyalty programs to enhance consumer relationships. The rising popularity of private labels adds to the competition, prompting both private labels and traditional brands to increasingly concentrate on loyalty programs.
A CPG LOYALTY MARKETING FRAMEWORK
In the crowded CPG sector, where 30,000 new products launch annually, gaining consumer attention is more challenging than ever. Digital advertising costs are soaring, consumer attention is waning, and a sizeable majority of consumers are willing to switch brands for better deals. So, how do CPG marketers foster loyalty? The answer: deep consumer understanding and personalized experiences. CPG marketing needs to harness diverse data sources such as point-of-sale, e-commerce, social media, loyalty programs, and third-party insights in order to understand and adapt to changing consumer behaviors and preferences. Emphasizing consumer-centricity, as suggested by Gartner, they should adopt a Total Experience (TX) strategy. This approach focuses on exceeding consumer expectations through a personalized and consistent brand experience across all touchpoints – key for enhancing loyalty and engagement in the CPG sector. An overall framework to achieve this will include the following elements:
Collect First-party Data Through Contests and Promotions:
Instant win games, gifts with purchase, sweepstakes, and similar tactics effectively generate buzz and engage consumers—and when using receipt scan for participation, capture valuable first-party data. Such tactics prove especially useful in a saturated market by helping to disrupt habitual buying patterns.
Liquid Death partnered with Live Nation on a gift-with-purchase promotion to raise awareness of its canned drinking water range. Consumers were invited to submit theair receipts on any qualifying purchase to receive a Snipp-processed coupon for concert tickets.
Nescafé combined instant win and sweepstakes to enhance engagement with its 'Get Rich Quick' promotion. Consumers could submit a photo of their receipt from any qualifying purchase of Nescafé Rich products to win instant prizes and enter a $50,000 sweepstakes grand prize draw, managed by Snipp’s platform.
Use Consumer Receipt Scans for Cross-Basket Shopper Analytics:
Receipt scans provide deep insights into shopper behavior. By utilizing loyalty programs, contests, and promotions as incentives to encourage receipt sharing, CPG brands can analyze a consumer's entire purchase history across different categories for a more nuanced understanding of their needs. This data can result in a personalized coupon or promotion sent to a mobile device in time to impact purchase behavior.
Through its loyalty program Good Rewards, General Mills partnered with the Fetch app to reward members for their purchases. The program collects data from receipts, providing insights into consumers' overall buying habits and enabling personalized discounts. Within 3 months of launch, it gained over a million members, who bought 1.5 times more General Mills brands than average Fetch shoppers.
Seamless Digital-Physical Integration:
By offering digital tools as part of a physical shopping experience, brands can create a unique, personalized shopping journey—and collect data across touchpoints too.
L'Oreal’s Connected Lipstick Device - YSL Rouge Sur Mesure - transforms cosmetics shopping by blending digital and physical elements. Using augmented reality (AR), consumers can design their own lipstick shades, which are then printed by the device--enabling them to carry 1,000 shades of lipstick in their purse! By combining online engagement with tangible product interaction, L’Oréal not only gathers valuable consumer data at every touchpoint but also offers high levels of customization and interaction.
Augmented Reality and Virtual Interactions:
By incorporating metaverse environments and tools like AR and VR, brands can create innovative ways to engage consumers. Even the humble QR code is getting a makeover, as brands are increasingly integrating them across many consumer touchpoints along the path to purchase.
UK brand Charlotte Tilbury’s s ‘Shop with Friends’ is a virtual shopping platform that emulates an in-store experience online, complete with a virtual guide named “Magic Charlotte.” It allows consumers to explore products and access makeup and skincare tutorials from home. Consumers can even invite friends and family to the virtual store, creating a multiplayer experience where they can together navigate the environment.
Known for its immersive labels, 19 Crimes uses AR to provide interactive storytelling experiences that extend beyond traditional product usage. Its recent launch of limited-edition Halloween wines featured Dracula and Frankenstein on glow-in-the-dark labels, leading to a spooky AR experience!
The cat food brand Smalls, known for its human-grade products, cleverly integrated QR codes into their New York City outdoor ads in subway stations, making it easier for commuters to access its website directly. By transforming a traditional static ad into an interactive experience, the brand effectively fostered two-way engagement between itself and its consumers.
Collaborations with Delivery Platforms:
Delivery platforms offer unique insights into consumer buying patterns, allowing CPG brands to develop more targeted and effective marketing strategies. These platforms are becoming valuable avenues for brands looking to connect with home shoppers.
Instacart is set to provide brands with category-specific buying data, helping them to build larger audiences in its marketplace.
Similarly, DoorDash launched an advertising solutions suite in 2022 to help brands reach their 20 million monthly consumers.
Retail Media Network (RMN) Partnerships:
Retail media delivers a powerful opportunity for CPG brands to gain first-party data on shoppers' changing habits, helping refine and optimize their targeted marketing. More than half of CPG companies increased their investment in retail media networks last year, and RMNs are now forecast to overtake linear and streaming TV revenues by 2028.
Clorox uses Sam's Club's Member Access Platform (MAP) to gain deeper consumer behavior insights, including itemized sales, new buyer patterns, and in-club search attribution. This partnership gives Clorox access to new data dimensions, such as household reach and purchase channels, significantly improving its campaign targeting capabilities.
Card Linked Programs:
These programs are becoming increasingly vital for CPG loyalty marketing. By seamlessly integrating with consumers' existing bank cards, they offer a convenient, off-platform way to earn rewards on everyday purchases and open new avenues for brands to access large audiences, engage with and understand their consumers.
Snipp Interactive and Bank of America Partnership: Snipp's Payments Media Network and Bank of America alliance delivers brand-funded rewards on everyday items in categories like food, pet, and health & beauty products. CPG brands can reach millions of shoppers with targeted, SKU level offers redeemable online and in-store via their bank’s mobile app or website. Brands also gain quicker insights into campaign performance and ROI.
Experiential and Gamified Loyalty Programs:
Now that traditional points-based loyalty programs are ubiquitous, gamification tactics such as multi-step challenges and mini-games can help a brand improve engagement in a fun way and stand out among the competition.
Sephora Beauty Insider Program: With over 34 million members, Sephora’s Beauty Insider is generally regarded as one of the best loyalty programs in the US. To keep consumers coming back, Sephora balances gamification with classic value-based rewards. This encourages more brand interaction and helps Sephora create personalized experiences, such as birthday treats.
Rewards and Coalition Loyalty Platforms:
CPG brands are increasingly turning to platform partnerships in order to reach wider audiences and be able to offer more compelling rewards and incentives. These platforms leverage technology to offer convenient, value-added experiences to consumers -- while providing brands with enhanced consumer insights and engagement opportunities.
A cash-back rewards app that provides rebates on in-store and online purchases at various retailers. Users earn by submitting shopping receipts or via the app and browser extension, redeeming cash back to a bank, PayPal, or as gift cards.
A coalition loyalty platform, Brand Wallet integrates multiple brand loyalty programs into one app. Consumers earn rewards by scanning QR codes on products, enhancing data sharing and consumer insights for partnered brands.
Sustainable Packaging:
All of the largest CPG brands have developed sustainability commitments, most of which include some form of packaging goals. According to recent Gartner research, 20% are focusing on reducing their packaging’s carbon footprint over the next three years.
Nissin Foods plans to introduce a new paper design for its Cup Noodles in early 2024, replacing the polystyrene cup used since the product launched in 1973. The new packaging will be made of recycled fiber and paper, with no plastic wrap or polystyrene, aligning with its broader mission to reach carbon neutrality by 2050.
Charitable Initiatives and Contributions:Transparency and Traceability:
Loyalty rewards focusing on community and social good are gaining popularity as they resonate with purpose-conscious consumers.
Procter & Gamble launched its loyalty program, Good Everyday, with a dual mission in mind: to build loyalty and make the world a better place. Purpose-led partners are a core component of the experience, with members earning points that can be donated as charitable contributions.
Marks & Spencer donates to purpose-led organizations such as Cool Earth, The Marine Protection Society, and others every time a consumer purchases from the brand. By doing this, the brand demonstrates its dedication to social causes while incentivizing its consumers to make more conscious shopping decisions.
The IAMS Checkup Challenge loyalty program offered pet parents who spent $40 or more on IAMS products a significant discount on their annual vet visit. Validated by Snipp’s platform, this program allowed IAMS to demonstrate fellowship to its community and provide financial support during tough times.
Transparency and Traceability:
Consumers expect the brands they buy from to provide transparent information on their sustainability claims and, more importantly, be able to prove them. Investing in better sustainability data and supply chain transparency pays off, from sales growth to consumer loyalty.
Kahlúa’s Coffee for Good project in Veracruz, Mexico, focuses on supply chain traceability and sustainability. Kahlúa supports and empowers local coffee-growing communities with advanced farming techniques to boost yields and combat climate change, and provides training in diversified crop cultivation -- ensuring that all coffee used in their products is sustainably sourced.
Innovative Marketing Campaigns and Partnerships:
Leveraging social media through fun and creative campaigns can significantly enhance brand visibility and help create loyal consumers. Brands that entertain their audiences, especially on TikTok, grow 34% faster than those that deploy a more traditional marketing mix.
Unilever's #CleanTok Partnership with TikTok: Unilever's #CleanTok campaign has been a resounding success, racking up an incredible 98.5 billion views. The campaign featured animated cleaning products in a series called "Dirty Deeds: A Kitchen Crime," driving a 30% surge in traffic to Unilever's Cleanipedia portal. The campaign effectively appealed to new audiences, particularly Gen Z, influencing a 38% increase in young adults buying its Cif Cream Cleaner in the UK.
Interactive Consumer Engagement Strategies:
Fostering user involvement in a brand’s social media marketing can lead to much higher engagement and enhanced brand growth.
Three Olives' AI-Powered Party Builder: Three Olives, a vodka brand, has introduced "The Generager," an AI-powered tool that allows consumers to design and share personalized party themes on social media. This interactive marketing approach offers consumers a unique experience with the brand and the chance to win real-life parties and additional prizes.
Stryx's Engagement Through Comments: Stryx, a men's beauty brand, effectively utilizes TikTok to redefine beauty standards and normalize makeup for men. By creating videos based on user comments, Stryx drives community engagement and provides direct consumer interaction. This strategy has been instrumental in starting conversations around men's beauty and addressing societal stigmas.
Agile Response to Trends:
By quickly creating and adapting products based on current trends or viral moments, brands can effectively align themselves with consumers' evolving interests and needs.
Heinz's ‘Swift’ Response to Pop Culture Trends: Heinz demonstrated impressive agility by promptly creating a new condiment, 'Seemingly Ranch,' inspired by a viral Taylor Swift moment. Executed in under 24 hours, this move allowed Heinz to tap into a cultural phenomenon and leverage Taylor Swift’s popularity -- enhancing brand relevance and consumer engagement.
Consumer-Centric Product Evolution:
This involves putting the consumer at the heart of every decision, from product development to marketing.
Aura Bora's Dynamic Flavor Strategy for Consumer Engagement: Aura Bora, a sparkling water startup, maintains a dynamic and engaging brand by introducing new, limited-time flavors every two months. With unique flavor combinations, Aura Bora has significantly expanded its presence in over 2,000 retail locations, including Whole Foods and Walmart. Regularly introducing limited-edition drops not only generates excitement but also drives repeat purchases, contributing to its growth and market penetration.
L’Oréal’s Consumer-Driven Innovation: L’Oréal utilizes its 3 global innovation hubs and 20 local research centers to detect shifting consumer trends and transform them into globally relevant products. This approach allows L’Oréal to continually update its product portfolio, ensuring it aligns with areas of high consumer demand.
Conclusion
The CPG loyalty landscape is far from static, and staying ahead of the curve is essential for brands to succeed in 2023 and beyond. Success hinges on a deep understanding of target audiences, recognizing them as individuals with unique needs, and engaging them at just the right moments. Fortunately, advancements in technology now equip marketers with the tools needed to forge stronger consumer relationships. These tools scale up the ability to personalize communications, products, and promotions. One thing is clear: the future will favor companies adept at understanding, predicting, and even influencing the decisions and behaviors of modern consumers.
To boost your CPG marketing strategy and engage your consumers with an effective CPG loyalty program, contact us to speak with one of our loyalty experts!
