Cpg Loyalty Final

8/8/2019 Cpg Loyalty Final

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taBLe o coNteNts

Introduction ...................................................................................................................... 1

The Current State: Marketer Stability And Frustration ............................................................ 3

The New Approach ............................................................................................................. 5

Loyaltys New Value Proposition .......................................................................................... 8

Back Through The Chain .................................................................................................. 10

About Carlson Marketing .................................................................................................. 11


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1 Carlson Marketing 2010

INtroductIoN

As any competent consumer packaged goods (CPG) marketer would do, lets start with some

numbers. PriceWaterhouseCoopers reports that the consumer packaged goods industry took

in $2.2 trillion in 2009, a 10 percent increase over the

previous year. P&G alone generated sales o more than

$77 billion in 2009 and in February 2010 announced our

new major product line upgrades. It is admittedly hard to

say that CPG sales are broken. And its also tough to say,

thereore, that CPG marketing is broken.

However, look to some outside sources and it becomes

evident that some pressure points are squeezing the

packed goods industry. Several analysts have noted that

consumers are starting to spend again but are attracted to

heavy price discounts.

In act a recent Morningstar analyst report predicts some

acquisitions in the CPG space because o price pressure.

We view this as a sign that consumer products companies

expect growth to be muted over the near term and so are

taking advantage o potentially depressed prices to bulk up

on brands, the Morningstar report states.

Other analysts have predicted a need or change as well.

A Nielsen report encouraged CPG companies to innovate

rom the supply chain right through consumer marketing,

saying that 2009s increase in coupon activity needs

to be ollowed by changes that will hold margins. CPG

manuacturers will look or more efcient and eective

ways to reach consumers vs. traditional trade spending,Nielsen says. Time will tell i new product innovation will

be enough to drive shoppers back to traditional brands.

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The mid-term and long-term growth prospects are not the lock they once were or CPGcompanies. Change is needed to keep marketing costs down as well as to deal with other

challenges that this white paper will outline. Those challenges are customer-centricity, private

label competition, price erosion, and lack o media efciency.

Current marketing approaches lead to grinding out those ew percentage points o growth each

quarter. They deliver predictable results, but those results will become more expensive to

achieve. As the retail, fnancial services, pharmaceuticals, and technology sectors have ound

new ways to present products and drive eective customer strategies, CPG as a category has

relied on traditional marketing strategies or a short-term win, thus overlooking the customer

experience in avor o product tweaks. It avors message over dialogue. It leaves the customers

attachment to the brand at a slim margin when loyalty is threatened by private label brands,struggling retailers, and desperate competitors.

A brighter uture is attainable or CPG brands and or CPG brand managers. That uture can be

ound in a strategy that many CPG companies have tried and discarded because o improper

execution. That strategy is customer loyalty. Using direct-to-consumer transaction tracking

techniques, new approaches to analyzing customer data, and the latest digital marketing

strategies have taken loyalty programs and relationship marketing to a new level. This new

technology and customer relationship ocus have given loyalty marketing a bright new uture and

can give tired marketingand weary marketersnew juice or their brands and customers.


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the curreNt state: marketer staBILIty aNd

rustratIoN

Beore laying out loyaltys new approach and promise, lets detail the problem that complacency

will incite. In February 2010, the CMO Council reported that most marketers (61 percent)

believe that loyalty program participants are the best and most proftable customers. So it is

not surprising that an almost equal number o respondents (65 percent) view customer loyalty

program investments as an essential and valuable part o the marketing mix. Unortunately, only

13 percent o respondents believe they have been highly eective in leveraging loyalty andbrand preerence among club members, and nearly 20 percent dont even have a strategy

or this. Another 25 percent admit they have not mobilized brand loyalists to become active

advocacy agents either.

There are two key problems hindering CPG marketing today. The frst problem is CPGs reliance

on advertising and promotions. Although it makes a brand managers job easy, its long-term

sustainability is questionable. It is much easier to buy another print or TV ad than it is to truly

connect with customers and generate customer value. Almost all major brands advertise online,

and experiment with social and mobile media. In act, Coke and Pepsi, to their credit, opted

or community-building social media programs around the 2010 Super Bowl instead o their

traditional $20 million or $30 million game expenditure.

However, even these innovative programs are not aimed at customer loyalty. They will

indeed build engagement, attract customer data, and generate some dialogue (which are all

improvements over the traditional stale approach), but they are not automated or sustainable.

They are event driven. They speak more to the shiny object syndrome being attracted to the

latest marketing ad. The key to converting marketing activity into sustainable customer loyalty

is to view the campaign as a long term strategic initiative.

The second problem is in the reward/reciprocity, or lack o it. Customer loyalty is currently

disappearing aster than the polar ice caps. Carlson Marketing research shows that 52 percent

o highly loyal customers in 2007 either reduced their loyalty or completely deected rom their

CPG brand in 2008, and predictions or 2010 suggest a continued slide in brand loyalty.

Expect no mercy rom retail partners. CPG companies have made a predictable science out o

trade promotion spending, advertising support packages, and in-store slotting ees. At the same

time, retailers such as Kroger, Saeway, and Wal-Mart are aggressively expanding their own

private labels while removing or constricting the presence o national brands on their shelves.


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The list oten changes by the month, but brands such as Glad, Hety, and even some Coca Colaproducts, have had trouble keeping their shel space at Wal-Mart. CPG companies are in a stable

position or the short term but should be wary about the long term. Mass media continue to raise

their rates without guaranteeing competitive rates or perormance. Categories such as health and

beauty, beverages, and household cleaning continue to rely on these media as the oundation o

marketing eorts when the customer wants a stronger value-oriented relationship.

Much o this mass market spending is done in the spirit and with the intent o supporting retail

channels that are ready to launch private label competitors while demanding more merchandising

dollars or the products they currently stock. Those merchandising dollars are tough to track. CPG

brands have continued to design sweepstakes and coupons to generate customer and sales data,

but access to that data or the brand is ar rom guaranteed. By working through channels, CPGbrands have no ability to connect to their most loyal and proftable customers. The bottom line

is that retailers currently need CPG brands much less than CPG brands need retailers.


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The New ApproAch

A new approach to CPG marketing is clearly needed. We are not suggesting that loyalty programs

become a substitute or eective retail promotions. We are not saying the loyalty program should

replace eective advertising, including the mass media awareness building that is still essential

or CPG brands. We are saying that it is vital to level the playing feld in channel relationships by

giving the CPG brand, its retailer, and most importantly its customers, the touchpoints needed

to build meaningul relationships. Our research oten shows a 20 percent or more share increase

among consumers participating in sustainable CPG loyalty programs, with volume increases o up

to 12 percent year-over-year. Add to that the cost osets in the millions o dollars rom strategic

partnerships, and brand managers can rediscover the value in this new breed o loyalty programs.

CPG loyalty programs can and should be accessible, automated, efcient, and powerul

strategies.

Like any business strategy, customer loyalty marketing has key elements or success, including a

sound fnancial plan, the ability to capture and track consumer transactions, a communications

plan, and data analysis to understand customer needs and provide customer intelligence built rom

individual shopping behavior. Understanding that behavior and turning that insight into concrete

actions will help CPG marketers win in their markets. But it cannot be a set and orget plan.

Points and redemptions, or example, are not right or all CPG brands the economics on both

sides o the equation must work. Targeted, timely, and relevant communications to loyalty program

members are sometimes enough to drive retention, cross sell, and organic growth but they must

be inormed by customer purchase data. Individual customer needs and drivers help inorm the

rewards/oer mix and stretch dollars to their ullest potential. Some brands in a companys portolio

have higher emotional connections and attract higher customer value than others. Considering

these actors, it is evident that even within the same umbrella company (Unilever, P&G, etc.) one

size does not ft all brands. When determining the specifcs o your loyalty program, the ollowing

elements must be taken into consideration:

cliin . i g: Coalition programs come in various orms. There are

wide-based programs such as Nectar, Aeroplan, or Upromise that count all purchases

toward rewards and industry-specifc programs such as supermarket rewards. There are

coalitions ormed within a brand (the advantages being shared customer data and costs

o administering the program) and programs designed around a type o product (personal


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care, beverages, pet ood). Regardless o the type o coalition, it is important to choose theapproach early and stay ocused on the customer. Proprietary programs are intended or a

sole brand or product. When it comes to coalition vs. proprietary programs, ask the

ollowing questions:

Can my brand fnancially support the fxed operational costs o a proprietary program or

do I need to fnd partners to help me amortize these costs?

Can my consumers individual annual value to me allow me to both communicate

consistently and oer them rewards or incentives?

What do I stand to gain by aligning my brand with other partners: More consumers?

Better brand equity through association? The ability to oer my consumers a better value

proposition?

How can I group my customers according to value?

How does that value correlate to individual brands or groups o brands?

What will motivate that group o customers to spend more money with those brands?

h . bnf: Hard benefts are easy to calculate. They defne the transaction and

the currency o many loyalty programs. For example, the consumer earns 1,000 points rom

buying CPG brands and receives something tangible in return such as ree goods or discounts

toward other products. This process can represent a breakthrough in CPG loyalty because the

program can be automated, sustainable, and a driver o positive customer value. It is never

stale i the oers and rewards are resh.

Sot benefts (recognition, events, recommendations) can be part o the program as well,

although they are harder to measure. Example: I a loyalty program or diapers and baby

care products oers moms access to newsletters and expert inormation rom the brand,

the program will have to track back to incremental purchase behavior among that customer

group. It can work very eectively and once again is a key consideration in designing a loyalty

program.

When determining hard vs. sot benefts, ask the ollowing questions:

Will the customers I am targeting spend more with my brand to achieve tangible goods?

What are those goods and what will the cost be to my brand?

Do I have enough emotional equity in my brand to be able to engage my consumers with

content or inormation?

Can I operationally deliver sot rewards (like special treatment and recognition)?


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Lng innin . iixinin: The biggest dierence between

CPG loyalty circa 2000 and CPG loyalty uture

are market networks o partners. I a brand can

rely on one partner or all planning, execution,

tracking, and automation activities that

program is more likely to strengthen customer

relationships and become as sustainable and

valuable as any series o network TV spots.

When considering the longevity o your program,

ask the ollowing questions:

Is my current loyalty program primarily

designed to drive customer acquisition

and awareness or customer retention

and growth?

Am I really using the data I am collecting

to aect these consumers retention and

growth or is the data just going into a

database or uture consideration?

Is my current loyalty program active rom

a customer point o view?

Is it subject to a longterm plan?

Do we have a partner that can help answer

those questions?

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LoyaLtys New vaLue proposItIoN

As discussed earlier, CPG brands and their agencies have given points-based loyalty programs

a good run and sometimes ound them expensive, hard to administrate, or lacking in short-term

results. Perhaps the disappointing results were the natural outcomes o too narrow an approach.

It is also likely that a number o brands have tested loyalty programs and are now sitting on an

unused loyalty inrastructure, or even a data warehouse flled with outdated consumer records

and purchase data. These dead zones are a testament to the need or a dierent approach to

this kind o marketing. Loyalty marketing should be a business strategy not a marketing tactic.

It is sae to assume that consumers will make a frst purchase because you oer points. However,

the same eect can be derived rom a coupon or another advertising buy. So why consider a

loyalty marketing strategy? The answer is, because loyalty marketing is about sustainability and

organic growth. It is about encouraging consumers to make the 2nd, 3rd and 4th purchases.

This approach to loyalty marketing can be recognized through a ew distinguishing characteristics.

In: Loyalty programs live and die by their ability to generate and manage

consumer data. The system that supports the loyalty program should not only allow or

transaction and behavior tracking and point issuance and redemption, but also individualpurchase transaction analysis and member segmentation. The system should be able to

identiy the right customers at the right time with the right oer to encourage an incremental

purchase. Without this kind o ocus on the relationship continuum, money is wasted and

consumers can be alienated by a poor relationship or reward experience.

mli-nnl niin:Consumers learn about, interact with, and purchase

brands through many dierent media today. Loyalty programs should mirror this by oering

consumers the opportunity to engage and interact with the program whenever and wherever

they are. In order to achieve this type o embrace with consumers, loyalty programs o the

uture need to include not only an engaging Web site, but mobile, and online ads, and other

emerging digital touchpoints. Valuable consumers will continually engage with the brand, and

even the proper channels, i their communications and rewards are available through digital

touchpoints. Enorcing the point is the Mobile Marketing Associations prediction that mobile

coupon usage will rise rom 200,000 in 2009 to 70 million by 2013. Seventy-nine percent

o mobile phone users are interested in receiving coupons via mobile phone.


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m g ni: This is a big upgrade rom the programs CPG brands mayhave tried and ound rustrating. Many programs that were launched in the past were

ashioned directly ater airline or credit card loyalty program models that oer members

impressive travel and merchandise rewards in exchange or loyalty. With the average annual

value o individual consumers at one tenth or less than that o those industries, CPG

companies quickly realized that they could not sustain the costs or their loyalty program

designs. Todays successul CPG loyalty programs include much more creative and fnancially

appropriate rewards solutions. They are designed and managed by partners who understand

the individual consumer economics and have the talent to leverage the brands awareness,

reach, and brand equity assets to secure program reward options. Finding a partner that

understands this and can deliver the needed solution is a critical ingredient to the success o

todays CPG loyalty marketing.

t h e c a r L s o N m a r k e t I N G p r o c e s s :

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Codesmadeavailabletocustomerswhentheypurchaseaproduct.

Thosecodesareenteredelectronicallyatthepointofsaleandareconvertedintopoints/credits

n l in iniil b n.

Thosepoints/creditscanbeusedtoacquirerewards.


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Back throuGh the chaIN

Lets take it rom the top. There are a number o aults in the traditional stale loyalty program

model; however, loyal customers are proving more valuable now than ever beore. There is an

opportunity or real competitive advantage i CPG brands get it right. Instead o leaning on mass

marketing to drive a questionable ROI or a 10 percent sales increase, loyalty programs can

decrease media costs and potentially drive an even greater increase. Instead o only speaking

at customers, the programs can hear back rom them. Instead o fghting channel partners

or a shrinking share o shel space with no customer connection, loyalty program automation

can drive sales, make the case or more shel space, and push promotion through to the most

valuable or growable customers. Finally, instead o the stale approach o traditional media,

all this can be dynamically communicated through digital media, which is more efcient in

the long term.

In the past, the missing piece o the loyalty program puzzle has been long term vision and

consistent loyalty program partners with complete and versatile skill sets. With customer loyalty

on the line in a $2.2 trillion business, a new approach deserves a long term commitment and

partners committed to making it a long term strategy.

*inl pn #6,039

In accordance with this invention, there is provided a method or processing one or more product marketing rebateclaims submitted by a consumer in satisaction o one or more rebate oers having a value, each rebate oercomprising an oer to provide a cash value in return or a purchase o one or more designated products. Purchaseo the one or more designated products occurs in one or more qualifed transactions, each qualifed transactionhaving a transaction serial number assigned thereto. The transaction serial number is recorded in a point-o-saledata processing and storage system and recorded on a receipt issued to the consumer. The rebate processing methodcomprises providing a designated site connected to a global computer inormation network and accessible by theconsumer. A rebate claim is received on the designated site, the rebate claim comprising (i) at least one transactionserial number corresponding to a qualifed transaction, and (ii) identiying inormation corresponding to theconsumer. A data record is stored, comprising at least one transaction serial number and the identiying inormationcorresponding to the consumer. An electronic fle transer is received rom the data processing storage system.The electronic fle transer comprises at least one purchase data record comprising at least (i) the transaction serialnumber corresponding to the qualifed transaction in which at least one designated product was purchased by theconsumer, and (ii) an identifcation o each designated product purchased by the consumer. Each stored data recordis associated with a corresponding purchase data record having an identical transaction serial number, and thestored data record and the corresponding purchase data record associated therewith are then processed to validatethe rebate claim. Then, the value o the rebate claim is transerred to the consumer. The designated sitemay be accessible to the consumer by a computer connected to the global computer inormation network or via atelephone connected to a computerized telephone answering system connected to the designated site and accessibleby calling a designated telephone number.


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aBout carLsoN marketING

Carlson Marketing is the worlds leading relationship building company. As the largest

independent agency in the U.S. and the 15th largest marketing company in the world,

Carlson Marketing designs and delivers loyalty and engagement programs or some o the

worlds best known brands. Carlson Marketings two global service oerings Brand Loyalty

and Engagement & Events are supported by six core capabilities: Strategy & Brand Planning;

Creative and Communications; Decision Sciences; Award Services; Technology Services and

Customer Service. Carlson Marketing owned by Groupe Aeroplan, the global leader in loyalty

management employs 2,500 marketing proessionals across 17 countries.

Cpg Loyalty Final

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