Kellogg Builds Loyalty Through Family Rewards
Through a special arrangement, presented here for discussion is a summary of a current article from the monthly e-zine, CPGmatters.
Kellogg is gleaning lots of valuable consumer data and encouraging sales of multiple brands with a one-year-old portfolio-wide loyalty program called Kellogg’s Family Rewards. Family Rewards points are rewarded to purchasers of more than 90 percent of products falling under one of Kellogg’s brands, and then shoppers can use them to collect discounts and prizes.
"We get a significant positive sales lift out of Family Rewards," said Dan Keller, VP of customer-relationship management and loyalty for Kellogg, citing Nielsen data comparing program participants versus non-participants with similar attributes.
Even more important, "Many shoppers have moved from single to multiple categories and brands under Kellogg based on rewards points."
Kellogg’s 16-digit loyalty codes, unique to each package, signal product type, size and flavor of something an individual shopper has bought, in addition to where consumers purchased the items and the location of the store.
Those loyalty codes are tied to its "K Numbers," the company’s internal product codes, providing the company an understanding for the first time of exactly what people are purchasing.
"That gives us actual behavioral or transactional data," Mr. Keller said. "With the five million households registered for Family Rewards, we can do a much better job of targeting, to motivate the desired incremental behavior and provide differential outbound content to those people based on who they are and what we know about them."
For example, using Family Rewards data, Kellogg can identify households that are purchasing Special K cereal, but not other Special K products, and then extend offers for Special K breakfast snacks and bars.
Family Rewards insights can also help Kellogg sell other products to customers who already favor another. A consumer may register under the program that there are kids in the household and already purchase Rice Krispies and Eggo Waffles, but are choosing Nabisco cookies instead of Kellogg’s Keebler brand.
Kellogg sends out more than 10 million e-mails each week after identifying those most likely to be interested in new products and extending special offers such as double points under Family Rewards. Program members who might be most likely to express interest in line extensions may be given incentives to do so. E-mailing editorial content about healthy and nutritious eating can help gauge members’ interest in Kellogg’s cutting-edge better-for-you offerings.
At the chain level, Kellogg has used the program through Walmart to provide participants with a free rental from Redbox; through Target to get a $5 gift card for Kellogg online; and through purchases of Pop-Tarts at Family Dollar stores to qualify for Family Rewards bonus points.
Discussion Questions
What do you think of Kellogg’s Family Rewards program and vendors rewards programs in general? How valuable are they to the brand? What benefits fall to retailers?
If the research was done correctly (not clear from the article) and they really increase their franchise, then as long as it pays out it’s a great idea. But I wonder how annoying multiple emails per week would become (5mm members, 10mm emails per week = 2 per week). I also wonder how much of their promotion budget goes to support this – with only 4% of US households participating (for a company that has very high penetration), not a lot of acceptance. Again, it’s a bottom-line question of whether it’s good or not.
In its first year, the Kellogg rewards program has delivered impressive results. It’s easy to collect, enter and redeem rewards points. There are a variety of reward options, many requiring only a few points. Using the reward points, Kellogg can glean valuable information about individual consumers and can incent future purchases.
The key will be how and whether consumers participate as the program ages. Two years from now will the proffered rewards still be desirable? Will consumers experience email fatigue? Will Kellogg continue to deliver relevant offers? If the answers to these questions are “yes,” Kellogg will have created one of the more successful packaged goods loyalty programs.
Way cool, a brand successfully going around all the retailer’s programs with their own loyalty program and creating affinity directly with the consumer. Now that starts to shift some of the power from the retailer back to the brand company.
The consumer is already overwhelmed by the number of retailer loyalty programs out there. Now a loyalty program for every brand they want to buy in order to get “rewarded”? It seems retailers and brands are on an unending mission to complicate the consumer’s life, when the feedback that consumers give us is they want us to make life simpler.
First I want to say I love the idea of Kellogg building a loyalty program to better serve their customer base. My concern is over how many loyalty programs a consumer can be part of. On average, consumers belong to 14-18 loyalty programs.
Some challenges with attempting to manage your own program:
1) Data integrity – Do consumers provide the correct email, address, age, etc.?
2) What happens when someone moves? Consumers tend not to go into their 14-18 loyalty programs to update their personal information in each.
3) Great data about your brand, but it’s still a silo of data. Knowing more about their shopping behavior across multiple channels could really help target the right product to the right person at the right time.
Recently some retailers and brands have started to talk about a universal Loyalty Card. One card that works across multiple retailers and brands.
Benefits:
1) One place for customers to update and maintain accurate information.
2) One place for customers to look at all their loyalty offers.
3) One CARD to carry.
4) Much deeper customer data since you can see behavior across multiple non competitive retailers and brands.
It’s a bold move, but I like it.
From a consumer’s perspective, this is a nice-to-have program that ultimately ends up being an awful lot of work. It takes about 1,000 rewards points to earn anything meaningful, and the average points per product is roughly 100. Which means you have to tear apart 10 boxes of cereal or waffles or whatever, to find those pesky hard-to-read little codes, enter them into the system and earn – you guessed it – a coupon for another Kellogg product with another code inside.
Extreme couponers who can acquire ten Kellogg products in the blink of an eye, have learned to wait for double-points promotions, half-price rewards, etc., and “roll” their purchases, earning coupons to buy more products, which in turn help them earn more coupons.
Presumably these are not the shoppers Kellogg set out to reward. So how many boxes of cereal does the average person have at one time then? Will they be patient enough to save and enter up to a dozen codes, over the course of several months, to earn a little discount on their next box?
If it’s working for Kellogg, and enough people are happy to play along, then good for them. But with personalized discounts, digital coupons that automatically apply, etc., the trend these days appears to be “make it easy” – and for everything that Kellogg’s Family Rewards might be, easy it is not.
Loyalty in the CPG space is challenging and very few brands have figured out how to do it well.
Retailers have long been the “man-in-the-middle” managing the relationship between consumer – packaged-goods companies and their customers. But now CPGs are leveraging loyalty to facilitate an increasingly direct connection with the end user.
Kellogg’s loyalty program doesn’t directly benefit the retailer. It would only benefit the retailer if Kellogg uses the data collected from their program to make their products more compelling or to introduce new categories. That could lead to incremental sales that, in the long run, help the retailers.
COLLOQUY published a cover story about CPG loyalty earlier this year. You can read it here.
Some excellent caveats here already by my fellow BrainTrusters: Yes, Kellogg’s Family Rewards seems like a lot of effort for consumers. Yes, there seems to be a gap when it comes to direct retailer benefits. Yes, there is some risk of “loyalty fatigue” for shoppers. Yes, there will be some extreme shoppers who “game” this program.
Those are significant issues, but I’d like also to offer some praise for Kellogg’s effort to assemble a picture of its consumers across brands and categories. This has historically been very difficult to accomplish at the CPG giants, where brand groups tend to be silo’d from one another and may even operate incompatible consumer databases.
Like many so-called “loyalty” programs, this one is really a trade: rewards for data. The resultant insights may prove valuable in key account presentations and category plans. If a few incremental sales result for Kellogg, that’s a fine thing. If they can demonstrate it boosts retailers’ category sales too, it’s a home run.
Lots of great comments already.
It would be really interesting to compare to real customer level sales data to provide a new level of insight, activation and benefits. This would reveal things like share of wallet/requirement, category and brand preferences and behaviors, response to marketing levers, purchase versus capture timings and so on that would really fine-tune the program.
Of course this is all possible and relatively straight-forward in our big data world….
My gut says this will appeal to customers who are really into coupon-clipping. Nothing wrong with that except many of them will be really price and deal sensitive. For the rest of us, life is too short to spend time on another rewards program, unless the rewards are significant and the niche the program covers is worth it. I’m not anti-loyalty programs, just cautious, having signed up for dozens over the years.
With all of the programs now available to consumers, many households have become quite “picky” as to which programs they join based on their ability to manage and acquire value based on the linear nature of each program. The idea of a single user id and passcode that would allow consumers to basically join an unlimited number of programs and then manage all of them from a single dashboard makes for a highly consumer centric solution. The value to the brand increases because they gain higher participation and above all else, they prove they are listening to their customers and reacting accordingly. Simplify the process and you will reap the benefits.
I joined the program to better understand the value delivered and communication methods used. From that perspective, the cadence of email communications is “comfortable,” indicating Kellogg has resisted the temptation to bombard program members with offers.
I’ve also seen relevant offers that are complementary to what I have purchased and provide evidence that Kellogg is using the data collected in an intelligent way.
For CPGs, this is the type of program that can be highly effective to collect valuable consumer purchase data at a manageable cost. For the consumer, the interaction with the program is reasonably “light” and the value received makes participation worthwhile.
Bottom line, as a consumer, I’d rather interact with a brand like Kellogg through this type of program than spend my time clipping coupons on my kitchen table.
For consumers who enjoy playing the game of deal-seeking, this is very appealing (as their 5 million person database attests to). People who don’t like this type of thing won’t register and engage. But that is not the consumer group Kellogg is targeting. This is a great way to further engage casual fans, as well as fully engaged consumers. The danger will be when other big players get into this and saturate the consumer with too many offers to keep track of. But by then, the savvy players (a la Kellogg) will have moved onto the next engagement and purchasing behavior mining tactic.