Wednesday, December 18, 2013

Loyalty Strategy Remains a Juggling Act for CPG: Study

Loyalty strategy is a juggling act for many consumer packaged goods (CPG) companies, says a new study by Partners in Loyalty Marketing (PILM) on behalf of the Shopper Technology Institute (STI).

“Loyalty programs can be executed successfully in a variety of ways with varying degrees of technology. My Coke Rewards, with its unique pin code under the cap, is often touted as best in class; smaller programs, such as a series of targeted coupons, work just as well,” commented Tanya Bhothinard, Senior Director with PILM, a Chicago-based consultancy.

Regardless of the program structure, the study found the top three reasons CPG companies engaged in loyalty were:
  • To retain existing customers
  • To encourage purchases
  • To up-sell or cross-sell other products.

This confirms what PILM has observed over the years; namely, interest in loyalty peaks during good economic times as well as during downturns. For some, building a loyalty strategy during the boom years provides an edge over their competition. For others, the Great Recession prompted a loyalty strategy to protect and maintain their share, said Bhothinard.



“In the past five years, we have seen the number of loyalty membership increase significantly. Technology and internet advances have been the key driver for this trend,” she said. 

In the online study conducted over the summer among 100 respondents, 53% of CPG manufacturers indicated that they currently have a loyalty strategy in place.  

Over 90% of survey respondents said they generated additional revenues through their loyalty programs. When asked about their investment, 71% of manufacturers reported that their investment in loyalty has increased over the past year. Even more -- 87% --  believe that investment will continue to grow over the next 3 years. 

From a manufacturer’s perspective, Bhothinard said, it is easier and more cost effective to build a program today than at any time in history. The average cost to launch a program can range from $1 – 125 per member. From a consumer perspective, membership is as easy as providing an email address.

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