Can subscription box offerings help CPG brands restore loyalty?
CPG brands face a loyalty crisis unlike any they’ve faced before.
But the source of many of their loyalty challenges – the rise of ecommerce and digitally-focused disruptors, which have changed the consumer culture – also offer potential solutions.
For example, in an effort to keep their most loyal customers on side and build new customer relationships that are loyal, CPG brands are increasingly turning to direct-to-consumer subscription box offerings. For example, Procter & Gamble has experimented with a subscription service that delivers Tide laundry detergent to customers. And Unilever reportedly spent a billion dollars acquiring razor and personal grooming subscription upstart Dollar Shave Club.
But subscription services in and of themselves aren’t enough to win the battle for consumer loyalty. CPG brands that launch subscription offerings must also do the following.
Access to customer data is a challenge for most CPG brands. Historically they have sold through third parties, limiting their ability to gather deep point-of-sale data.
Direct-to-consumer subscription offerings are one of the ways that CPG brands can change the game so-to-speak and data should be a focal point of their efforts. Put simply, brands should assess what customer data they can extract the most value from and to the greatest extent possible, ensure that their subscription offerings are capable of extracting it from day one.
They must then also ensure that they have the means to analyze that data and apply it.
Loyalty programs are commonplace in many markets but CPG brands have not embraced them to the extent brands in other industries have. That, however, is starting to change. For example, L’Oreal’s new Worth It Rewards program incentives customers to purchase its products across multiple categories. Members of the program earn points by linking their retailer loyalty cards or uploading receipts and can redeem points for gift cards as well as magazines and charitable donations.
In addition, Worth it Rewards members receive a welcome package, birthday present and product launch samples.
While loyalty programs can obviously exist as standalone initiatives, as CPG brands implement subscription offerings, they would be wise to look for ways to merge the two. Procter & Gamble, for example, offers members of its Gillette On Demand subscription service every fourth order free. While this is obviously a very simple loyalty scheme, it demonstrates a recognition that even within subscription services, CPG brands need to ensure that they’re fostering and rewarding loyalty.
According to Deloitte, which publishes an annual American Pantry Study that looks at hundreds of brands across dozens of CPG categories, nearly a quarter of consumers will pay a premium of 10% or more for a product that they perceive to be new or innovative, and a third will pay a similar premium for a “craft” version of a food or beverage product.
This is a reminder to CPG brands that to build and maintain loyalty, they need product innovation, not just a strong brand.
Innovation doesn’t have to take the form of better products; it can also take the form of branded solutions.
A great example of this is the Tide Spin on-demand laundry and dry cleaning service that Procter & Gamble launched in Chicago last year. While available on a pay-per-order basis, P&G also makes Tide Spin available through a subscription service that offers discounts of up to 30%.
Customers use a Tide Spin app to schedule laundry pick-ups, “tide-trained professionals” do the cleaning using P&G brand detergent and fabric softener and return the cleaned, and folded clothing is brought back in two days in a reusable Tide Spin bag.
While P&G did experiment with a similar service in 2000, the proliferation of on-demand services that aim to make consumers’ lives easier means that CPG brands have a better opportunity than ever to reimagine how their products can be leveraged.