Customer loyalty is vital for the success of your CPG brand because repeat customers are what makes a company profitable. According to Bain and Company, retaining 5% more of your customers can make your brand 25% to 95% more profitable.
It is also true that 20% of customers typically generate 80% of a brand's revenue and that keeping an existing customer can cost five times less than acquiring a new one.
The bottom line is, your CPG brand needs loyal customers to be profitable over time. It is unlikely that you can afford to spend enough money to keep acquiring new customers on a continual basis. But if you spend just a fraction of that money, you can retain a significant number of your existing customers if a customer loyalty program is part of your CPG marketing.
There's something even more important that customer loyalty programs do, however.
Building an Emotional Connection
The biggest value of customer loyalty programs is the emotional connection they build between a brand and its repeat customers. When a brand rewards customers for purchases, that helps begin the process of emotional connection. People like getting discounts and free stuff, but that's only the beginning of the connection.
Loyalty programs can also use messaging that conveys appreciation for customers' repeat business. Saying "thank you" or "we appreciate you" builds another layer of connection and makes customers feel valued.
Finally, CPG brands can use customer loyalty programs to foster a sense of shared interests and culture by forming partnerships with other companies that cross-promote their products. In these types of programs, CPG brands can give other products as rewards for purchases of their brand products. These brand partnerships must be well thought out in order to foster the emotional connection that will increase loyalty.
Word of Mouth
The reason emotional connection is so important for CPG brands is that emotionally connected customers are the ones who will tell their family, friends, and neighbors about your brand. They will post glowing recommendations on social media. They will suggest the brand's products as a solution to people's problems.
Of all ways to get new customers, word of mouth is the most effective and usually costs a lot less than any other method. If a customer loyalty program can generate new customers through referrals and word of mouth, it will be a bargain at almost any price.
Another way customer loyalty programs generate higher sales is by giving brands an opportunity to upsell new products or products with higher price tags to customers that are already invested in the brand. Through email, text, or social media marketing to loyalty members, CPG brands can present these upsell products to customers who may then spend even more money with the brand.
Hangar12 has many ways to help your CPG brand with marketing, including customer loyalty programs. Want to learn more? Check out our Resources to evolve your CPG brand!