Knowledge Bank Blog, Pricing & Promotions

Are you rewarding loyalty or promiscuity?

Incentivising the right shoppers in the right way.

In most FMCG categories, shoppers are rewarded for being promiscuous. Often, the more promiscuous they are, the more they get rewarded.  As an industry, we have implicitly told shoppers to shop around.  Buy a different brand each time, whichever is on discount, and save money.  If you are rewarded for shopping around, the most rational thing to do is continue shopping around.  The end result is that brand loyalty slowly gets eroded.  And the shoppers who buy you the least often pay the lowest average price.

Yet in many other industries, the most loyal shoppers are the ones who get most rewarded.  Airlines, magazine and newspaper subscribers, coffee shops all reward their most loyal customers.  And in return they get more loyalty.  I was behind someone in Starbucks last week who was loading up their Starbucks card with £100 – that’s a lot of coffee!

Yes, but those are different industries I hear you say.  That can’t be done in the FMCG world…

Well, it is starting to be done.  Amazon have been re-setting the rules with Subscribe & Save – giving shoppers 15% off regular, repeat purchases of FMCG brands.  Waitrose increase the money off they give shoppers on each of their first 5 online shops – from £5 off the first shop to £25 off the fifth shop.  P&G sells brands in bundles on their E-Store, the more you buy, the more you save.  Andrex have Puppy Points which you collect each time you buy.  Pampers Rewards does the same thing, at very little cost to the brand.

So, what if we put as much effort into incentivising the second, third and fourth purchase as we do the first purchase when we launch NPD?  Would more new products succeed?  What if we prioritised the promotional mechanics that lock shoppers into a brand, not just ones that deliver short term sales spikes?  Would we drive brand loyalty rather than eroding it?  What if we tailored the incentives we offer by type of shopper instead of one big hitting offer that every shopper sees?  Would we give better value to the shoppers we want to give value to?

So, next time you are thinking about which promotions to run, ask yourself ‘are you rewarding loyalty or promiscuity?’

Have a great weekend.  Speak to you next week.