As competition in the FMCG industry intensifies, understanding and maximizing the customer lifetime value (CLV) of each distributor or retailer has become an important way to boost business profit. B2B businesses are now investing billions of dollars into increasing customer lifetime value through loyalty programs, trade marketing, and other rewards that improve customer relationships. In fact, customer relationship management software is the largest and fastest growing enterprise software market and is expected to double in size to $80 billion within the next 5 years.
To actively increase customer lifetime value, FMCG marketing leaders in emerging markets must adopt an integrated approach by leveraging digital technology systems to improve loyalty among their most important channel partners and drive economic growth in the long term.
Lack of visibility leads to wasted trade spend
FMCG marketers have long used trade promotions, loyalty schemes and merchant rewards to increase their customer lifetime value. CPG companies worldwide invest 20% of annual revenue in trade promotions, however, available data shows that 59 percent of these investments are wasted. Conversely, the best promotions were 5 times as successful as the least efficient promotions, and a 10% improvement in the share of wallet captured from high-value customers can increase market capitalization by an average of 12 percent, showing that trade promotions are effective, many marketers are just not doing it right.
There is clearly a huge opportunity for FMCG brands to improve the ROI on their trade promotions spend, yet many marketers cannot maximize this opportunity, as there is lack of data visibility across the distribution chain. The traditional FMCG distribution chain leaves marketers in the dark, lacking insights into:
- Who is buying from them?
- What their customers are buying?
- Why there is a change in the demand for their products?
Without end-to-end visibility across the distribution chain and access to actionable data collated at POS, CMOs are stuck targeting the same set of customers with generic and largely ineffective promotions and are unable to accurately segment their audience to account for new buying habits and preferences.
The pressure continues to mount for marketing leaders as the demand for FMCG brands and products via traditional channels have slowed in recent years, especially in canned goods, food & beverage, and laundry categories. This slowdown is driven by huge shifts to non-traditional channels like e-commerce, where smaller, digitally enabled brands can provide precisely targeted promotions and loyalty schemes that increase engagement and drives sales.
Data analytics is key to creating successful targeted promotions
To increase CLV and drive long-term growth, FMCG brands need an advanced data analytics solution that provides granular insights into customer behavior and segments customers based on multiple criteria, leading to higher returns on promotional investments. Studies show that 30 percent of FMCG leaders already consider trade-promotion optimization through advanced data analytics their number one priority. The primary question for brands is how to make it happen.
First, marketers must build an ecosystem of supporting data with a data analytics solution that captures real-time actionable data at POS across the distribution chain to provide a granular view of buying habits and history. This would be a major win for both FMCGs and retailers, as brands that adopt granular data analytics tools to optimize promotions achieve sales growth and top-line growth that outpaces the inflation of trade investments while retailers experience increase in operating margins by up to 60 percent through efficient promotions.
Analyzing the data on CPG promotions shows that volume-based promotions do not entice retailers who buy infrequently in a particular category to purchase more, rather, they subsidize retailers who are already loyal to the brand. However, promotions focused on smaller package sizes in regions of low brand market share attracted retailers who were not loyal to any manufacturer and enticed infrequent retailers to buy more from the brand. Insights like this are invaluable for FMCG marketers in emerging markets and are key to increasing market share while driving long term growth.
Increase customer lifetime value with RedCloud
RedCloud, the world’s first open commerce platform provides FMCG brands, distributors, and retailers with real-time, actionable data collated at POS and syndicated across the traditionally fragmented distribution chain, enabling marketing leaders to:
- Drive customer lifetime value through deep analytics: By transforming every industry connection into a potential data point and integrating the massive amounts of data generated, RedCloud provides you with a 360-degree view of your customers and enables you to make data-driven decisions proven to increase CLV.
- Optimize loyalty programs and merchant rewards: Leveraging on the in-depth insights RedCloud provides, you can build integrated, cross-functional promotions to target specific customer segments and generate outsized ROI on trade investments.
- Implement front-line transformational change: With insights into customer buying patterns, FMCG marketers and sales reps at the front lines can translate these insights into action, taking advantage of the micro-consumption patterns in the market to cross-sell or upsell their products, increasing revenue by up to 60 percent.
Schedule a demo today to see how RedCloud is partnering with FMCGs across Africa and Latin America to drive growth and increase sales by up to 25 percent.
