The rules are changing for executing loyalty programs in the consumer packaged goods business. Now it's all about tying engagement to loyalty.

Engagement, like many other customer-focused strategies, has been around for ages, but perhaps not called by that name or not purposefully put into a formal strategy. Think about how long people have been tattooing themselves with Harley-Davidson logos. But in terms of loyalty, engagement is starting to be recognized as a long-term strategy that trades on the continued time and attention of a specific customer group. And that sounds better than an end-cap display at Kroger's to a CPG firm.

Many CPG companies are starting to weld engagement tactics to loyalty efforts. For example, in the U.K., Budweiser has taken a page from the Pepsi and Coke playbook in the U.S. It has launched a product code–based promotion called BudBucks that allows U.K. customers to enter points earned from purchases via the Internet and mobile in exchange for online games, contests, and prizes. The brand may not need that in the U.S., but in the U.K. this kind of "engagement loyalty" gets Bud what it needs: time and attention from young men.

"The concept of engagement loyalty widens the scope of CPG relationship marketing," says ePrize marketing vice president Matt Kates. "For engagement loyalty the desired outcome is increased interaction with brand content and experience. In addition to rewarding product purchase, engagement loyalty needs to reward consumer's time and attention."

A lot of the engagement loyalty concept centers around community. The thinking, somewhat unproven by actual data at this point, is that if consumers provide information, time, and attention the brand will reward that engagement with co-creation in advertising and packaging. It may also lead to interaction with other participants. Doritos used this strategy to collect customer records on more than 750,000 customers and is now tapping that community to choose new flavors as well as new marketing approaches.

Many CPG firms have used an engagement loyalty strategy in the past to reward time and attention. According to Stan Roach, CIO of SoftCoin, which has administered several CPG loyalty programs over the past two years, engagement programs have encouraged key customer groups to interact with packaging, media, and advertising. Digitally downloaded points have often times replaced purchase rewards for customers that frequently engage in those immersive materials. In Roach's experience, customers that engage more than once a quarter in some kind of continuity-based content or marketing materials can purchase up to 20 percent more product than the control group.

Engagement versus loyalty
Does engagement breed loyalty? The answer may come over the next two quarters as such brands as Doritos and Pepsi report results on sales-lift data. Pepsi started Q2 with a "design a Pepsi can" promotion. But some experts argue that new metrics are needed other than lift.

"We think relationship marketing efforts up to this point have been measured improperly in the CPG category, says Carlson Marketing executive vice president Andy Wright. "The metrics have not been balanced. Many CPG companies expect points programs to show a percentage of sales lift at retail, or even achieve a percentage goal showing return on investment. These metrics fail to consider the relative strength of the supporting media and competitive brand activities. If the creative for in-store signage as well as advertising fails to effectively communicate the presence and value of a points program, it won't work regardless of how rich the rewards are. And if a competing brand has an effective program to counter it, perhaps the relationship marketing tactic has saved some share points that might have been lost."

Wright believes engagement will lead to the kind of long-term frequency and incremental revenue that loyalty marketing has been measured by. He also believes that engagement loyalty programs are branding. "Loyalty programs, points-programs included, are branding," he says. "When a customer considers a loyalty program for beer, soda, aspirin, diapers, or anything else, that's an impression. It should be taken as no less than that. Loyalty programs in the CPG space are about creating intent to buy and brand awareness. Isolating any one of those measurements is not accurate."

In the CPG space, engagement is what drives that loyalty. Succeed at one, and the other will follow.