Can’t Beat Loyalty

An amazing transformation is occurring in the way that consumer brands are building direct and insightful bonds with consumers.

With new technologies and the Internet, coupled with the creativity of a new generation of marketers, a growing number of brands are investing in relationship marketing.

Coke’s My Coke Rewards is the epitome of such a program. Tens of millions of consumers have registered, providing insightful profiling data from sign-ups. Points earned can be exchanged for a wide array of merchandise.

Consumer packaged goods marketers realized that it was a huge competitive advantage to be able to communicate directly with and influence their most valuable customers, to be able to segment their customers and customize the nature of how they communicated, and to more strategically allocate how they spread around their promotional and incentive budgets.

Retailers, hotels and airlines had been doing this for years.

The best promotions take on a viral dynamic. Recipients share messages with friends, dramatically lowering a marketer’s average cost of acquisition.

CPG loyalty programs address a number of compelling issues. They are able to:

• Validate and extend their core consumer segmentation schemes based on a far wider sample size of participants (versus market research and panel data).

• Segment price-sensitive purchasers for couponing in order to a) reduce wallet splitting and b) keep discounting focused on a more narrow audience.

• More effectively introduce new products based on prior purchase behavior, limiting promotional spend to consumers who have not yet trialed.

• Strategically allocate reward expense based on channel profitability (e.g., limiting exposure to lower margin club sizes).

Examples of CPG loyalty programs include: Clorox’s Fresh Step “Paw Points,” which rewards cat owners for purchasing kitty litter; Disney’s Movie Rewards, which seamlessly integrates DVD purchases with attending theatrical releases; and Nature’s Bounty Healthy Rewards, which rewards members for purchasing vitamins and other health supplements. Each of these programs leverages registration and product purchase awards data to ultimately build a sustainable bond with their most valuable customers.

Building a strong and profitable CPG loyalty program should encompass the following best practices:

• Launch the program with a strong, creative and well publicized interactive promotion.

• Integrate the program promotion into all consumer touch points; packaging, P-O-P, Web, coupons, banners and TV.

• Enable a very simple and foolproof means of receiving credit for purchases. A unique code entered into a simple Web interface is preferred.

• Use the information collected to customize communications and offers. Let members know that you are listening.

• Extend the means of earning points well beyond purchases to drive deeper consumer engagement (e.g., photo uploads, testimonials, referrals and interactive games).

• Provide a relevant set of rewards that are attainable enough to engage moderate purchasers and compelling enough to excite even the most brand-loyal.

Expect to see more CPG marketers extend their reach to the end user as some of these early programs produce lessons and more best practices for others to follow. And as technology acceptance spreads and programs solidify, the path to the end user will be as well.

David Rosen is senior vice president of Loyalty Lab. He can be reached at [email protected].

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