Lessons in the development of CPG loyalty initiatives


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When Coca-Cola launched its landmark My Coke Rewards program in February 2006, the fizzy, thirst-quenching leader was at the front edge of an emerging, bubbling trend: the rise of CPG efforts in the loyalty space. Consumer packaged goods companies had long harbored “data envy” toward their retail counterparts, who could easily gather consumer transactional data. And with some retailers beginning to use increased analytics capabilities to gain new insights into shoppers through loyalty and other data, CPGs realized they needed to build their own consumer databases and leverage them to foster customer relationships.

Just a few months later, COLLOQUY reported on the mounting evidence of CPGs using loyalty-marketing principles and practices in the July 2006 white paper, CPGTalk: The Total Package. The white paper delved into two huge challenges CPGs faced in developing loyalty initiatives: The lack of a direct-to-consumer loyalty mechanism, and an inability to track transactional data on individual customers buying product at various retail outlets (creating a world of “invisible” customers). CPGs were just beginning to recognize two central possible models if they wanted to join the loyalty party: A relationship model, in which the CPG engages with consumers directly, and a retail-centric model, in which they leveraged retailers’ purchase measurement ability.

Since the publication of The Total Package, there have been significant shifts in the world of CPG loyalty, particularly regarding the relationship model—thanks in large part to the success of My Coke Rewards, as well as the challenges the program has faced and the learnings it has acquired over the past four years. My Coke Rewards has led the way as an incubator of learning, while other CPGs have observed what the program has gone through and apply its lessons to their own efforts.

Another wave of CPG-based programs are now in the market, at the gate, or in the pipeline. I believe many of them will enjoy a permanent place in consumers’ hearts, minds and wallets thanks to what they’ve learned from the CPG pioneers before them.

Two steps forward, one step back
At the time of its launch, My Coke Rewards was the largest program ever debuted at Coca-Cola—and its code-based program issuing points redeemable against an extensive rewards pool was ground-breaking. By 2007, however, weaknesses in the program’s design began to become public, including consumer confusion; code-entering fraud; a constantly-changing value proposition; and significant liability on the company’s books.

Coca-Cola stuck with the program, however, and revamped it considerably: Today, it continues to succeed thanks to clearer and more relevant communications, more easily accessible redemption options, and online practices that reduce potential for fraud.

I’ve seen other CPGs clearly take the experiences of My Coke Rewards to heart and develop programs that work more smoothly right from the start. For example, I admire Tropicana Juicy Rewards, which launched early this year, for their careful work on the process of on-pack consumer code entry. And programs such as Huggies Enjoy the Ride Rewards have built long-term, equity-based relationships between the CPG and the consumer. These programs and others are building a permanent presence and becoming best-in-class examples that can guide the rest of the industry in the way that My Coke Rewards has.

New opportunities—and current challenges
One of the most drastic changes since 2006 has been the meteoric rise of digital, mobile and social media initiatives. Offering promotions on Facebook fan pages, posting videos on YouTube, offering quick connections on Twitter, and participating in Foursquare have opened up vast opportunities for CPGs to engage consumers directly and, at least in some cases, to gather data on those interactions and measure those relationships.

Those exciting options in social media, however, come with possible pitfalls that must be carefully considered. Consumers are savvier than ever and will talk about the problems or the disappearance of loyalty programs—so while no CPG wants to be left out of the relationship-building game through loyalty, it’s more important than ever that the game is played well.

Playing it well means building teams that can handle the challenges of this new CPG loyalty territory. For example, most CPGs may not have data and loyalty-focused experts already on their staff, since a merchandising, product-driven model has been in place for most of these companies’ histories. Today, CPGs are creating new teams and acquiring experts from the loyalty space to guide them in pursuing these long-term, relationship-building, data-gathering opportunities—as well as to make sure sustainable financial models are put in place.

No matter what strategies CPGs employ, however, loyalty success boils down to mastering the basics—what I call the 3Cs of CPG loyalty:

Craft. It all goes back to planning. Management buy-in is essential, the right value proposition must be fully developed, and program/system set-up must be developed carefully.

Commit. CPGs shouldn’t be afraid to establish the direct relationship with their consumers. Years ago, many CPGs feared disrupting relationships with retailers. However, there is a much stronger acceptance of the CPG direct relationship now. CPGs should make sure they’re in loyalty for the long haul so their campaigns aren’t perceived as promotional flashes in the pan.

Communicate. CPG loyalty marketers—as those in other industries such as travel, financial services and retail have learned over the past two decades—must make their program rules and value proposition perfectly clear. This includes developing a well-designed, well-communicated exit strategy.

The CPG loyalty crystal ball
In my mind, there’s no question that CPG loyalty programs will continue to emerge forcefully at a fast pace—the space has grown since the 2006 publication of CPG Talk: The Total Package, and as mentioned previously, CPGs have taken learnings of early programs to heart regarding issues such as liability and availability. I believe membership numbers will continue to grow as we head toward the conclusion of 2010.

The question we asked in CPG Talk: The Total Package, was, “Do you really want a relationship with your beverage brand?” The answer is a resounding yes—if it’s the appropriate product with a program developed with the above 3Cs in mind.


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