Loyalty in the FMCG industry. How to tie customers to you?

Loyalty in the FMCG industry. How to tie customers to you?

The holy grail of FMCG companies is to get on the shopping lists of as many consumers as possible. However, building loyalty in this segment is a demanding challenge. Today, shoppers have so many choices that it is increasingly difficult to develop loyalty to a single brand. In addition, pandemics and inflation have specifically affected customers’ purchasing decisions. The challenge these companies face is how easy it is for customers in the FMCG segment to change brands and existing habits. McKinsey & Company proves that up to 75% of consumers exhibit new shopping behavior, including interacting with new stores and brands.

Consumer loyalty in the FMCG industry – characteristics

The FMCG industry is otherwise known as the fast-moving consumer goods industry and is one of the fastest growing sectors of the economy. The main task of companies in this category is to supply stores with products that are usually necessities. There are many strong FMCG brands on the market, which have great potential for creating engagement and gaining customer data. Many FMCG brands have already introduced loyalty mechanisms that aim to increase repeat purchases, engage and retain customers by building mutually beneficial, long-term relationships.

For companies that deal directly with customers, such as retailers or hospitality companies, customer retention is often simpler. Because of the form in which products are sold, the challenge is to reach the customer. For the most part, these brands sell through other retailers or stationary stores. That’s why standing out on the store shelf is so important. Among FMCG brands, it is difficult to talk about a typical loyalty program or mechanism. Companies, in order to reward customers for buying their products, have to work a little harder. The key is to have a detailed mechanism to confirm each purchase made under the loyalty program. This is usually done by registering a receipt on the manufacturer’s website.

How can brands that sell their products through intermediaries directly engage their customers when there is often no direct contact between the brand and the end consumer along the customer journey?

Burands can increase customer loyalty 

Successful FMCG companies are analyzing customer data and buying behavior to provide a more personalized experience. Below are examples of the most common data that brands analyze and from which they draw conclusions:

  • Transactional data: purchase history, total spend average spend per purchase, return and refund rate, abandoned cart rate.
  • Engagement data: website and app activity, email open and click-through rates (CTR), social media engagement, customer service interactions.
  • Demographic data: age/gender, place of purchase, lifestyle and interests.
  • Behavioral data: site and app user paths, product views and clicks, user search queries.
  • Direct customer feedback:  Net Promoter Score (NPS), open feedback, social media conversations.

The main challenge for FMCG companies is the limited ability to have direct interaction channels, which leads to higher marketing costs. However, the brand’s direct communication with the end customer allows it to send notifications about contests or new products and encourage customers to buy a particular company’s products again. 

Lowest price = best strategy?

The price of a product is one of the most important factors in consumers’ purchasing decisions. For many companies, promotions are important elements of their sales strategy. Among FMCG brands, however, there are questions about their effectiveness. A simple analysis is often insufficient. Reducing the price of a product usually results in an increase in its sales. However, observing only the sales dynamics during a promotional period may suggest a favorable impact. In reality, it is necessary to find the answer to the question of how sales would have developed if there had been no promotion. Comparing these two values – actual sales and hypothetical sales without promotion – allows a more accurate assessment of the effect of promotion. Advanced data science models can accurately estimate baseline sales, taking into account factors such as seasonality, cannibalization, weather variability and calendar effects.

To effectively manage assortment and pricing, it is essential to use advanced data analysis. By examining the shopping cart, you can understand customer preferences. Receipt analysis allows you to identify related purchases and understand the relationship between different products. The brand gains access to all kinds of invaluable information, such as what customers buy, when they buy it, how often they buy it. This information helps the brand make informed decisions about which aspects of its business and products need to be improved, adjusted. In addition, companies can use the collected data to develop promotional strategies, create product bundles and provide personalized recommendations, which in turn increases customer engagement and builds long-term loyalty.

FMCG loyalty – summary

Building customer loyalty in the FMCG industry is becoming increasingly challenging in the face of changing purchase preferences, the impact of pandemics and inflation. Companies in this sector need to focus on personalized experiences, analyzing customer data and effectively managing assortment and pricing. Limited opportunities for direct customer interaction require innovative approaches to engaging consumers, such as leveraging transactional, engagement, demographic, behavioral and customer feedback data. Despite the challenges, FMCG companies have an opportunity to build long-term loyalty using advanced data science models. It’s also critical to skillfully differentiate themselves on store shelves and create mutually beneficial, long-term relationships with customers.

At Loyalty Point, we work for many brands in the FMCG sector. Holistic analysis of consumers and the characteristics of the products offered by the brand allows us to plan a schedule of loyalty activities. We successfully deal with the organization of all kinds of consumer promotions. Valuable support in the optimization of activities are dashboards created by our experts, which, providing automation of reporting, significantly improve the speed of decision-making and the ability to respond to the actions of competitors.

LOYALTY POINT is implementing a project with Contribution from European Funds. Learn more