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Tada Loyalty & Customer Retention Blog

8 min read

Loyalty Points Program to Retain FMCG Customer

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Loyalty Points Program for FMCG (1)

FMCG brands have always sought ways to engage directly with their customers, but their ability to do so has been severely limited in the absence of point-of-sale (POS) systems.

Because of the lack of direct customer relationships, FMCGs must rely on retailers to reach their customers and obtain specific data and information about their customers' buying pattern.

FMCGs face higher marketing costs if they do not have direct access to their customers. FMCG brands must invest heavily in advertising to sell their products in an ever-increasing competition for consumer attention.

So, how can FMCG companies thrive in this environment and stand out in today’s crowded market? One of the best ways is having a point program to encourage repeat purchase from customers.  

This article will cover:

  1. What is Loyalty Point?
  2. Why does it Matter for the FMCG Industry?
  3. Designing the Best Loyalty Point for FMCG Industry

What is a Loyalty Points Program?

Loyalty Points Program for FMCG (4)

The point program is the most common loyalty program used by companies. Through this program, customers basically earn points by making frequent and repeat purchases. These points are converted into certain rewards such as discounts, gifts and  special offers. In this way the frequency of buying products will offer points which in turn can be changed for the rewards mentioned before. 

The general idea behind this loyalty point program is to alter the customer's repeat purchase behavior by fortifying the usage of the service or goods and retain the customers by raising the switching costs so as to generate a win-win circumstance for both the customer and the organization (Meyer-Waarden, 2007).

This particular technique urges clients to come back to a retailer while keeping in mind the end goal which is in this case rewards and or additional items and so acquiring extra goods or services in return for their loyalty (Noble & Phillips, 2004).

How Does Point Based Loyalty Program Matter for the FMCG Industry?

Loyalty Points Program for FMCG (3)

A study by Kamau (2017) in a supermarket case showed that customers started shopping more to collect points and reach their reward limits in time. The results also show that  the FMCG market loyalty system is building emotional relationships that encourage customers to have continuous and frequent relationships with supermarkets.

In general, the loyalty point program will lead the FMCG industry to some benefits include:

  • Customers can especially recognize the benefits of pleasure, in terms of being entertained. Customers are entertained by the fact that they earn points. Therefore, the customer buys and In return, they collect points that can be redeemed at some point and receive a so-called "free" bonus from the company.
  • Customers can perceive symbolic benefits because they can have both a sense of recognition and a sense of belonging somewhere. Customers who collect points may have the impression that they have been recognized by the company for receiving something in exchange for making a withdrawal from the company. 

Furthermore, the point system program can provide the customer with a social feeling by allowing them to belong to a group (customers accumulating points with each purchase) and thus share the same value (collecting enough points in order to redeem the reward). This could encourage the customer to make more purchases in order to obtain the reward, and thus encourage them to make a retention purchase.

  • Being a member of the point system program can also provide the customer with utilitarian benefits. At some point, the customer will be able to save some money due to the number of points accumulated and will be able to redeem them, for example, for discounts and thus perceive a monetary benefit.

Furthermore, the point program would shorten the decision-making process because the customer wants to exchange goods with the same company in order to accumulate enough points for rewards. It can thus be assumed that the utilitarian benefits of the point system program have a positive influence on customer retention behavior, because they want to accumulate enough points to save some money.

Designing the Best Loyalty Point Program That Works

Now, the question is how to implement the loyalty point program that works for FMCG business? Here are some steps in designing the best loyalty point for your business:

  • Understanding the customer types and profile

What is the most effective way to convert a regular customer into a loyal one? This is a critical question that every retailer should consider. The key to answering it is to learn more about your customers. Who exactly are they? What exactly are they looking for? What qualities do they look for the most in a product? What are their likes, dislikes, and desires? Building customer profiles and understanding customer types will assist you in answering all of these critical questions.

A customer loyalty ladder or journey is the simplest way to describe basic customer types. It depicts the progression of a customer from potential buyer to business advocate. Let's take a closer look.

Loyalty Points Program for FMCG (2)

There are numerous advantages to creating customer profiles, including the provision of a comprehensive set of information about a customer and the ability to change targets more quickly. It also, crucially, allows for personalization or customization, allowing you to offer targeted and meaningful discounts and gifts.

  • Channels of enrollment

While the primary goal of loyalty programs should always be to motivate customers to spend more money with the company, no matter how good your loyalty program is, it will never work if no one knows about it. Only a well-known and well-promoted program will be successful.

Businesses must reach out to customers via various means or channels in order for them to learn about all of the wonderful benefits that a loyalty program can provide. Every business can choose which channel works best for them in attracting and enrolling more customers, but in most real-world situations, a multi-channel approach works best.

The primary channels include mass media and paid advertisements; Desktop and mobile web, mobile apps; Direct mail, SMS, calls ; Social networks and word of mouth; In-store/POS; Reviews ; and Partners.

  • Customer engagement types

Customer engagement refers to the interaction between a customer and a business, specifically what the business offers and what the customer chooses. Customer engagement is all about the number and quality of interactions.

The more engaged customers are, the more they can form an emotional connection with a company and will prefer your company over a competitor. As a result, retailers should always encourage and reward any interaction between their company and its customers.

The engagement can build through various activities such as:

    • SHOP - Make a purchase, earn points based on order total; Make your first order and get free delivery.
    • CONNECT - Like Facebook to get 100 points, Share it on Facebook to get 100 points, and Follow the Instagram Account to get 50 points
    • Explore - Get 100 points after writing a review, Get 200 points after completing the survey.
  • Calculation of points, return policy, and point types

It's well known that loyalty programs encourage customers to buy more, return more frequently, and help you build a strong long-term relationship with your company. However, as modern customers' demands and needs become more complex, loyalty programs are increasingly combining elements from various disciplines such as behavioral economics, psychology, and the gaming industry. 

As a result, modern loyalty programs have shifted away from the basic model of percent off offers and discounts and toward strategies such as personalized interest-based gifts and tier upgrades.

Let's take a closer look at the currencies that loyalty programs rely on. The original and most well-known currency is "points," which a customer can earn for various activities and stages of communication with a retailer. Depending on the type of business, such points represent a promise for future purchases or services.

A level or tier is the next step in the point calculation process. By introducing tiers, a retailer can increase the complexity and interest of a customer.

Here are some examples of basic point systems:

    • 1 point for every $1 spent, up to a maximum of 500 points for a $5 reward.
    • 900 points for a $100 prize
  • Set  various reward options 

Customers can receive rewards based on points. Keeping customers connected to your business is getting harder and harder, and offering $ off or% off rewards isn't always enough. All retailers should always keep in mind that rewards work best when they are unique and memorable. TADA Loyalty Points have a variety of rewards that can be exchanged by customers, either in the form of physical gifts or vouchers at a number of major outlets in Indonesia. 

FINAL TAKEAWAY

Loyalty and customer rewards programs have proven to be an effective way to improve customer retention rates, increase customer lifetime value, provide good customer service, and inspire brand loyalty over the last decade. While the low-key punch card has its uses in some businesses, a truly innovative approach to customer loyalty programs can generate significant value for retailers.

So, how will you retain your customers?

TADA assisted many businesses in creating the most suitable programs that answer their specific needs; from customer retention to social commerce. Let us help you decide the right strategy and initiatives to help you thrive in responding to today's digitization challenges. Request Demo Now!

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Nuraini
By Nuraini

Content marketing specialist

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