The boom in ecommerce has paved the way for new disruptor “Direct to Consumer” (DTC) brands that engage directly with their consumers ⁠— increasing competition in an ever more crowded sector.
Loyalty Strategy

How CPG Brands Can Win the Battle for DTC Engagement

Photo by lip hui on Unsplash

Over the past ten years, the landscape that CPG brands operate in has evolved rapidly. Historically, these brands (also referred to as FMCG) have been dependent on ‘middleman’ retailers to sell to the consumer and have relied on costly mass media advertising to engage with audiences.

By: Daniel Schmidt

However, the boom in ecommerce has paved the way for new disruptor “Direct to Consumer” (DTC) brands that engage directly with their consumers ⁠— increasing competition in an ever more crowded sector.

Many CPG incumbents have been caught in a race to the bottom, resorting to price promotion and discounting to win share of wallet and stave off the advances of agile DTC competitors. While this may allow for short term sales targets to be met, at a time when consumers expect relevant and tailored brand experiences, heavy discounting risks devaluing the brand while failing to foster any meaningful engagement with target audiences. And this poses a significant challenge for CPG brands.

The DTC advantage

The direct connection between DTC brands and their customers has given them the advantage, allowing them to better understand their audiences and own their customers’ brand experience and purchasing profile. Indeed, by communicating directly with consumers, brands can harness first party data, insights from which they can use to make data-driven business decisions, curate their customer experience, provide personalized offers, and thereby boost engagement.

Without access to this data, legacy CPG brands are powerless when it comes to precise, targeted digital marketing activity. And the death of the third-party cookie means that even those brands that have made headway with DTC engagement using third party data need to find new ways to understand and target customers.

But to gather, interpret and harness this data, brands need to offer something valuable in return as part of a “value exchange”. And here’s where rewards and recognition ⁠— and loyalty programs ⁠— can help CPG brands to engage with their consumers on an ongoing basis.

Opening a direct door to customers through loyalty programs

When done well, loyalty programs offer multiple benefits for CPG brands, allowing them to engage more personally with consumers, enhance the brand experience, and keep collecting first party data to nurture omni-channel strategies. They also reduce brands’ reliance on high-cost set piece advertising campaigns ⁠— offering a lower cost way to directly engage and understand their consumers, while increasing lifetime value. Some good examples are MyCooler by Anheuser-Busch, Pampers Rewards Club, Premio by Nescafé Dolce Gusto, or Starbucks Rewards.

Solutions like Loylogic’s Pointshub rewards platform recognise that consumers expect an experience that goes beyond the transactional. With the help of its patented points-plus-cash payment feature, program members are empowered with greater choice and flexibility when collecting and redeeming points — all the while gaining access to an exciting range of special offers, personalised recommendations, and rewards tailored to the program’s brand.

The rewards platform can be easily integrated with a brand’s existing technology across different channels to ensure the user experience is seamless. And, powered by latest breakthroughs in artificial intelligence, Pointshub enables marketing teams to engage more members through personalized and highly relevant rewards and experiences. Ultimately helping them to retain existing customers, and convert anonymous consumers into engaged members and brand advocates.

Instant rewards for instant engagement

Points-based loyalty programs are, however, not without complexity and driving consumer engagement while building loyalty cannot be achieved overnight. Success is usually realized over the mid-term, building on multiple transactions, and is contingent upon consumers collecting enough points to access a reasonably valuable reward.

To mitigate these challenges, CPG brands may benefit from starting with a solution that rewards consumers for every engagement, without having a need for points-based loyalty programs. Whether offering discounts, prizes, exciting content or even donations for local charities, such solutions allow brands to engage via various triggers across the complete consumer lifecycle.

The defined triggers could be anything from initial program registration, to scanning an on-pack code or social media interaction, which then launches a pre-defined campaign and rewards the customer with instant gratification. This kind of positive engagement between brand and consumer can generate loyalty even in short-term. And, what’s more important, these solutions can be very affordable for CPG brands when they allocate a portion of their promotional budgets to loyalty.

Crucially, CPG brands should embrace retailer partners and work with them, rather than against them. After all, not only do they move the vast majority of volume for their brands, with retailers on board, brands can achieve additional leverage.

Loyalty now a vital part of the CPG DTC toolkit

In summary, in today’s fragmented media environment, it is becoming increasingly important that CPG brands develop a direct and cost-effective relationship with their consumers if they are to remain competitive. First party data gathered through consumer engagement solutions is key to developing the personalised marketing capabilities needed to drive engagement and enhance the customer’s experience. Meanwhile, short term rewards could be a new lucrative route to explore for many CPG brands that need to drive loyalty, quickly.

That’s why, even though loyalty programs and rewards may be a relatively new discipline for CPG brands, they are fast becoming a vital part of the new CPG DTC toolkit.

Daniel Schmidt, Program Consultant CPG at Loylogic, has worked in the consumer goods industry since 2004. In his current role at Loylogic, he’s helping FMCG brands on their consumer engagement journey. With integrated solutions, those brands are able to get and remain connected with their consumers (DTC) while reducing their dependency from mass retailers, gaining ownership of overall brand journey and leveraging digital marketing capabilities.

How CPG Brands Can Win the Battle for DTC Engagement
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