The Importance of CPG Loyalty Marketing in a Recession
Author: Katya Lopez-Nichols
Smart companies have realized that customer loyalty is the most powerful sales and marketing tool that they have. – Bill Price
We all understand the concept of customer loyalty because we are all customers ourselves. Loyalty is built with brands that not only deliver good products, but share our values and earn our trust. So as a marketer, how do you earn trust so that even during uncertain times, customers come back to your brand over and over again?
The answer is two-fold: 1) know your customers and their preferences, and 2) deliver personalized experiences to them. We’ll look at what some of the biggest food and beverage leaders are doing and what their strategies can teach other CPG companies.
In the CPG world, it’s low cost to consumers to switch brands. It’s, therefore, no surprise that the market for CPGs is highly competitive (Coke vs Pepsi, anyone?). Consumers switch from one CPG brand to another based on price, availability, brand and many other factors. So in other words, loyalty is fleeting.
So how does your brand win in this chaotic popularity contest? Our advice is that marketers need to stop focusing on loyalty and start thinking about relevance.
This is where CPG marketing comes into play, and more specifically, loyalty programs.
During a recession, although customers are holding on to their wallets tighter, their expectations are the same. They want personalized service and they want to be rewarded for their loyalty to your brand. According to a Twilio report, 60% of consumers report that they will become repeat buyers after a personalized purchasing experience.
For this reason, loyalty programs have become the main vehicle for driving personalized experiences and incentivizing customers to engage. This, in turn, provides your marketing team with insights on your consumers. So how does this change during a market downturn?
While traditionally you would segment your customers by demographics and lifestyle, these become less relevant during a recession. Instead, looking at psychological segmentation that takes into consideration consumers’ emotional reactions to the economic environment is more applicable.
As highlighted by Harvard Business Review, think of your customers as falling into four groups:
Slam-on-the-brakes consumers feel most vulnerable and hardest hit financially. This group reduces all types of spending by eliminating, postponing, decreasing, or substituting purchases.
Pained-but-patient consumers tend to be resilient and optimistic about the long term but less confident about the prospects for recovery in the near term or their ability to maintain their standard of living. Like slam-on-the-brakes consumers, they economize in all areas, though less aggressively.
Comfortably well-off consumers feel secure about their ability to ride out current and future bumps in the economy. They consume at near pre-recession levels, though now they tend to be a little more selective (and less conspicuous) about their purchases.
Live-for-today consumers carry on as usual and for the most part remain unconcerned about savings. The consumers in this group respond to the recession mainly by extending their timetables for making major purchases. Typically urban and younger, they are more likely to rent than to own, and they spend on experiences rather than stuff (with the exception of consumer electronics). They’re unlikely to change their consumption behavior unless they become unemployed.
Regardless of which group consumers belong to, they prioritize consumption by sorting products and services into four categories:
Even during a recession, people still need to purchase food and beverages so how do CPG brands compete for wallet share? It’s clear – know your customers’ preferences and harness that insight to create personalized campaigns.
54% of customers will stop shopping with a brand if it doesn’t provide engaging content or relevant coupons. (Fundera)
As mentioned earlier, point-of-sale data is your key to success. As discussed in our CPG Receipt and FMCG Receipt Data Extraction article, CPG receipts and FMCG receipts can be used to create a picture of a customer’s buying habits, brand preferences and other key information. A product company or an agency supporting them can use these details to customize promotions to engage the customer in further purchases.
All this data must be gathered and compiled in a precise and timely way to be useful. Speed and accuracy are key. For example, with speed and accuracy, a coupon or personalized promotion can be sent to a mobile device or printed on a receipt at the pump in time to impact purchase behavior.
A recession requires a renewed commitment to the company’s brand and product lines. Let’s take a look at a notable example of a successful CPG marketing strategy that took place during the 2008-2010 recession. Beech-Nut was a major competitor to Nestlé’s Gerber. Rather than price discounting or increasing ad spend, Beech-Nut partnered with Disney and launched a new range of innovative Toddler products that featured Winnie the Pooh characters.
The licensed Disney characters featured on Beech-Nut’s packaging provided a huge shelf impact without heavy advertising investments. This drove the brand to a strong No. 2 position in the category. For Disney, the Beech-Nut partnership was ultimately a great win.
In conjunction with this new toddler food line, Walmart created a new Infant Care area in its stores. In addition to apparel and other Disney-branded infant care products in the new space, the Disney/Beech-Nut Toddler range helped increase the traffic into this section. This helped grow Disney’s infant category sales across all product segments.
It was a win for Disney, a win for Walmart and a win for Beech-Nut.
We’ve gone through some basic strategies CPG brands use and how they can be applied during a recession to still drive repeat customers, and brand loyalty.
Here’s a recap:
Work smarter not harder – use technology and data to make your resources more efficient and your marketing programs more effective. The area most crucial to successful CPG loyalty programs is the receipt and cross-basket sku-level data. Without it, you’re running programs much like shooting arrows in the dark. You’re hoping for a bullseye but you’re just wasting darts without knowing if you’re getting closer to your target.
If you want to get receipt data in real-time, check out Veryfi’s CPG solutions for brand marketing. If you want to see how our technology works, you can learn more about our real-time data extraction from receipts here. Ready to see how Veryfi can help grow your CPG loyalty program? Schedule a complimentary demo with someone from our Veryfi team.