Putting Some Pop Back in CPG Loyalty

one-on-one with John Gaffney

If we lined up everyone who has ever developed a secret sauce for brand loyalty the line would probably be longer than the one I saw at the Fifth Avenue Apple Store this past Christmas. Trust me, it was long.

Wittkopf isn't claiming a secret sauce, but his team has conducted some very telling research about brand loyalty as it relates to consumer engagement and related behavior. The findings have a closer tie to customer strategy than any research I've seen in a long time. I spoke with Wittkopf, project director for the report "Building Relationships for CPG Brands," about key elements of the research.

Will, this project surveyed more than 1,900 consumers last year. What did you want to find out when you started?
We wanted to know how consumers engage with brands. We wanted to know what they drink and how much, their impressions of different media, their responses to different types of media, and their use of websites. We wanted to know what types of engagement activities they were most interested in, and which ones they believed might influence them to buy more of the product. Most important, we set out to understand their participation in loyalty programs.

Why did you pick the beverage category?
Because everybody drinks soda and most of those brands have some variation on a loyalty program that includes multimedia touchpoints.

So does brand loyalty actually exist for consumer packaged goods? Do I want a relationship with my soda?
Yes, you do, John (laughs). We found that, overall, more than 15 percent of the respondents have either been to their favorite brand's website, and more significantly, more than 15 percent have participated in a loyalty program.

In the customer strategy space, executives have done very well by
segmenting customers. Can we group customers by their loyalty behaviors?

I think this was the most fascinating part of our research. We found four groups. Just over half of the respondents (59 percent) could be grouped into a "disengaged" cluster. These people indicated very
little past engagement behaviors other than buying and consuming their favorite brands of soda. Another 28 percent of respondents fell into a "moderate engagement" group. They showed above-average participation in a broad spectrum of activities, such as participating in loyalty programs, redeeming coupons, and visiting their favorite brand's website. This group also showed somewhat higher-than-average consumption.
Then we found two smaller, "highly engaged" groups. Both showed above-average participation across almost all types of engagement activities. The primary difference is that one group, the "switchers," was much more likely to have redeemed coupons for alternative brands than the "loyals." Both groups were marked by above-average personal consumption. However, the "switchers" had a higher average household consumption. This could be explained by the fact that "switchers" tended to be older with teenagers living at home, whereas the "loyals" were considerably younger and more likely to be single-person households.

How does engagement fit?
If I ask an ad guy, it's the ability to interact with an ad. If I ask an HR person, it's the ability to consistently interact with employees. Now I'm asking you. "Engagement loyalty" is a blend of traditional advertising, B2B and partner relationships, and interactive marketing designed to attract participation in branded experiences and communities. That's the long definition. To break it down a bit, I think it's important to understand that the concept of currency changes within engagement loyalty. Instead of exchanging points, miles, or discounts for repeat purchases, engagement loyalty efforts tell consumers, "Give me information, time, and attention and I'll give you information, or I'll allow you into my community, or I'll give you access to some kind of exclusive experience."
Of course, not all consumers are interested in every type of engagement activity. However, understanding those interests and preferences can help marketers seek out the right consumers, provide them the most relevant engagement opportunities, and, ultimately, drive loyalty.

What does this mean in terms of customer strategy?
Treat different customers differently. Not every customer wants to be engaged. And of those who do, not all will want to engage in the same ways. Younger CPG customers tend toward social media, for example. Many affluent customers will still respond to coupons and loyalty programs. This kind of differentiation should be applied to CPG marketing as companies continue to drive toward increased customer loyalty. The research strongly suggests that marketers should determine who their most engaged customers are, and the points at which they engage. Then determine the relative value of those customer groups, and treat them accordingly.