CPGMatters: How Do Brands Benefit from Frequent Shopper Programs?
By John Karolefski
Through a special arrangement, what follows is an excerpt of a current article from CPGmatters, a monthly e-zine, presented here for discussion.
What key benefit do CPG brands derive from retail frequent shopper programs? There was no consensus among manufacturers who took an Instant Poll on the home page of the January edition of CPGmatters. The leading responses were "increased brand awareness" (voted by 26 percent); "increased sales" (24 percent); and "obtain trade support" (24 percent). Roughly one in ten said, "they don't benefit" (11 percent) or "other" (13 percent).
"It doesn't surprise me that none of these is leading the pack," said Michael Schiff, managing director of Partners in Loyalty Marketing (PILM), a Chicago-based consultancy that advises CPGs and retailers about these programs.
"There's a good and a bad here. The good is that it's a powerful tool that we can use for a variety of reasons. The bad is that neither retailers nor manufacturers have put the energy into really honing the tool to accomplish any of those goals specifically. They all look at it as, 'We'll do all of these,' as opposed to, 'I'm going to do one thing really well.'"
Write-in comments by survey respondents elaborated on how differently they perceive the benefits of these in-store loyalty programs.
"CPG companies have the opportunity to target shoppers likely to buy their products with a message or offer that drives the consumer to the CPG's brand," said one executive.
Another said, "Benefits are suspect at best because manufacturers would be experiencing a much higher rate of return if all the above poll choices were happening. And, returns are not really growing incrementally or base business as the industry is mostly stagnant."
In support of increased sales, one executive said, "In the event that the purchase of the product issues 'points,' then they increase sales."
Several write-in remarks under "other" benefits included:
- Back end shopper information
- Increased brand loyalty
- More efficient trade spend
- Insight into MVCs for direct marketing (direct mail, etc)
If manufacturers get involved with a program that works well with retailers, trade support shouldn't be viewed as a "solo tactic," according to Schiff of PILM. The strategy should be, "I'm going to do this program, put in the attention it deserves, bring it to the forefront of the retailer and help that trade support. So now you're increasing both sides of the equation, both your base sales and your trade dollars.
"I think a brand that just focuses on driving trade is just looking to get in good with the retailer. That really should be a complementary objective, not an objective in and of itself," he said.
Discussion Questions: Do you think the success rate of frequent shopper programs is being hampered by varying goals between suppliers and retailers? Do you agree that part of the problem is that many vendors are only looking to drive trade promotion rather than increase brand awareness?