From waking up to going to sleep, an average person uses more than a dozen of different consumer packaged goods (CPGs) and fast-moving consumer goods (FMCG) every day. Won’t you agree?
Starting from toothpaste and toiletries to packaged foods and beverages, the lifestyle that we enjoy today would not be possible without CPG and FMCG sector. Apart from being one of the most useful sectors, the CPG and FMCG industry is also one the fastest-growing in the world.
As per data released by Allied Market Research, the worldwide CPG and FMCG market size is estimated to grow at a compounded annual growth rate of 5.1% between 2021 and 2031, from USD 11,490.9 billion in 2021 to USD 18,939.4 billion by 2031.
But the sector also has its share of challenges. It’s a highly competitive space where big and small companies compete for customers’ attention and limited shelf space. The customer retention rate in the sector is just 60%, which is one of the lowest. This also results in rising customer acquisition costs and decreasing customer lifetime value.
As a manufacturer of consumer packaged goods (CPGs) or fast-moving consumer goods (FMCG), you must devise ways to enhance customer loyalty and increase their lifetime value. One of the most effective ways to do that is by leveraging CPG/FMCG loyalty programs.
What are CPG and FMCG Loyalty Programs?
CPG and FMCG loyalty programs are dedicated customer retention programs exclusively designed for CPG and FMCG brands such as packaged food and beverage brands, cosmetics brands, toiletries and household cleaning product makers, and more such products.
The main objective of a CPG and FMCG loyalty program is to make the transactions and interactions meaningful for customers. The rewards in these loyalty programs not only motivate and educate customers but can also be utilized to get new valuable referrals.
A unique attribute of CPG and FMCG loyalty programs is that they narrow the gaps between customers and brands. As CPG and FMCG products mostly sell through brick-and-mortar stores as well as e-commerce websites, they need some type of method to confirm purchases made by every loyalty program member.
Challenges Faced by CPG and FMCG Brands
When it comes to retaining customers, every sector faces some kind of challenges. The CPG and FMCG brands witness the following types of challenges:
1. Cutthroat competition
Even though the CPG sector is one of the fastest-growing sectors in the world, it’s one of the most competitive sectors. The competition for quantity and price is fierce. Many CPG brands face a wide range of similar competitors with almost similar products, quantity, price points, and efficacy. That makes it extremely differentiated between brands, which causes fleeting loyalty.
2. High churn rate
An article published by CustomerGauge found that the CPG industry has an average customer churn rate of 40%, which is the second-highest in eleven industries. Interestingly, the wholesale sector, which is closely related to the CPG sector, has the worst average churn rate of 56%!
3. Lack of first-party customer data
Let’s face it; CPG brands have limited access to first-party user data. As most of them sell either through brick-and-mortar stores or online marketplaces, they lack the means to collect and leverage customers’ data.
4. Lack of unified customer profile
It’s extremely difficult for CPG brands to have a unified customer profile because a majority of customers either buy from brick-and-mortar stores or third-party e-commerce websites. When most customers alternate between online and offline purchases, it becomes difficult for CPG brands to have a unified customer profile.
5. Limited opportunities to differentiate the customer experience
CPG brands have extremely limited opportunities to differentiate their customer experiences. This is extremely challenging in price-sensitive markets, where customers are extremely price-conscious, and products with the lowest price tags sell the highest.
6. Private labels
This is rampant in the CPG sector. Private labelling means a product, which a retailer sells under its brand name, is manufactured by another company. This puts immense pressure on new CPG brands as they find it difficult to compete with more established names in the sector.
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Loyalty Programs Features for CPG and FMCG Brands
The CPG and FMCG sector is unique in many ways. The brands play a volume game (they focus on selling more volumes to channel partners and retailers). They also aim to get repeat purchases from their end customers. To achieve their objectives, they can leverage many types of loyalty programs ranging from:
1. Coupon codes
CPG/FMCG brands can use coupon codes effectively within their loyalty programs to enhance customer engagement and drive sales. They can print a code on the packaging that customers need to submit to the website or app.
By doing so, they can provide members with unique coupon codes that offer exclusive benefits and offers for special occasions such as birthdays or joining anniversaries. This provides customers with a special feeling and a sense of exclusivity, which incentivizes them to take part in the loyalty program.
2. Gamified surveys
Loyalty programs can be instrumental when it comes to conducting incentivized and gamified surveys. Why is that? Well, let’s be honest, a majority of customers will not engage with surveys and quizzes without a reward. By conducting gamified surveys, you can collect zero- and first-party data as well as know your customers’ shopping habits, lifestyles, product preferences, etc.
3. Badges and challenges
Badges and challenges can be extremely useful for CPG brands to shape customer behaviour. In this type of loyalty program, members have to complete certain milestones to achieve badges and challenges. When the customers complete their desired challenges and achieve the corresponding badges, then they feel a sense of accomplishment. This encourages them to engage with loyalty programs more frequently.
4. Partner rewards
Partner rewards are among the best loyalty programs for the CPG/FMCG sectors. By using this reward strategy, CPG and FMCG brands not only can reward their channel partners but also join hands with other relevant brands and create cross-promotional campaigns. This can provide unique experiences to partners, influencers, and celebrities. It can also enable brands to enhance the appeal of their loyalty programs.
5. Tiered memberships
In this type of loyalty program, customers are grouped into different tiers or levels based on their buying frequency and spending capacity. The more they buy and the higher they spend, the greater are the ranks and tiers.
Higher tiers come with more lucrative benefits such as tailored offers, access to exclusive events, priority seating, and more. Customers who’ve reached higher tiers are more likely to stick with the CPG brands as switching to different brands would take away their hard-earned tiers and ranks.
6. Experiential rewards
Experiential rewards provide loyalty program members with unique and memorable experiences. Some highly unique experiential rewards are VIP events, behind-the-scene access, product testing, and culinary experiences, just to name a few. Experiential rewards work like magic for brands that aim to create lasting impressions in the minds of channel partners, influencers, and customers.
7. Tailored promotions and offers
Last but not least; many CPG and FMCG brands create customized and tailored promotions and offers to provide rewards as per the needs and preferences of their channel partners and customers. Tailored and customized promotions and offers are based on loyalty program members’ interests and preferences, past transactions, buying history, as well as special occasions.
Top 3 Examples of CPG and FMCG Loyalty Programs
Some of the top CPG and FMCG loyalty programs are:
1. Kellogg’s: Family Rewards
Michigan-based multinational packaged food manufacturing company Kellogg’s started its Family Rewards loyalty program in the U.S. in 2012 and revamped it ten years later, in 2022.
In the revamped loyalty program, customers can enter its digital download store and redeem points for the Family Rewards program. By renewing its rewards every month, the company entices its customers to return to its website to see what’s new.
The loyalty program is an excellent example of how CPG brands can retain customers even as they sell their products through retailers. The company’s partner rewards and tangible gifts are extremely potent.
The packaged food maker also gamifies its loyalty programs in the form of sweepstakes, which gives customers a chance to win big.
2. Yeo Valley’s Yeokens
Yeo Valley, one of the leading organic dairy brands in the U.K., launched its loyalty program Yeokens to build a close-knit community and provide an awesome reward experience.
The loyalty program has a token system, which customers can earn by entering special codes on products. Yeo Valley regularly hosts sweepstakes in which loyalty program members can participate by using their tokens.
Customers can spend the tokens on a wide range of benefits, starting from community events, and attractive discounts on products, to free yearly visits to Yeo Valley’s organic farms and gardens. Customers can also donate the tokens to various charities supported by the company.
3. P&G’s Good Everyday
Cincinnati-based multinational consumer goods corporation P&G (Procter & Gamble) launched its Good Everyday loyalty program in May 2020 with a special vision—to make the world a better place and to help customers make a positive impact.
The loyalty program is simple to participate in and free to sign up. By joining the loyalty program and engaging with the P&G website, customers can earn rewards and the company will donate the rewards to the charities selected by the customers.
The website also features stories about P&G’s partnerships and causes as well as various inspiring news articles. The company maintains a rotating list of charities, which ensures that its customers always find new causes to support.
In the CPG/FMCG sectors, a well-designed loyalty program can entice customers to try out the products on keep on buying from the brand. At LoyaltyXpert, we have the expertise and proficiency to create high-quality loyalty programs.