Build loyalty into your supply chain with Open Commerce

Published: November 3, 2022

Over the next few years, over 1 billion new consumers will be created in emerging markets, leading to unprecedented demand for consumer goods as these new consumers gain more spending power. Consumer goods brands must build brand loyalty across their supply chain to capture this demand and capitalize on one of the biggest growth opportunities in history.

However, building brand loyalty has become increasingly difficult ever since the pandemic. In this new post-COVID world, 50% of consumers and retailers report that they will switch brands when faced with shortages. This is a cause for concern, as 75% of retailers surveyed reported encountering problems with supplier and distribution footprint, while 85% struggled with inadequate digital technologies across the supply chain, which resulted in “out-of-stock” situations at inopportune times.

Consequently, as supply chain crises and distribution problems continue to prevent consumer products from reaching the shelves in time to meet existing demand, brands will lose more customers, sometimes permanently.

This article closely examines how driving loyalty differs in emerging markets from developed markets and shows how leveraging digital technology like Open Commerce can help consumer brands unlock and maximize the growth opportunities in their respective markets.

Why loyalty is crucial for FMCG brands

FMCG brands have long sought ways to increase the lifetime value of each customer, as retaining and incentivizing an existing customer to make repeat purchases can be 5 to 25 times cheaper than acquiring new customers, according to research by Invesp.
For decades, the best way to achieve this was with loyalty programs, especially points-based loyalty programs where customers could earn points by making repeat purchases and redeem the points for rewards such as discounts on future purchases, gifts, and other special offers.

While this strategy worked well, and an estimated 90% of all consumer companies today have a loyalty program, it is beginning to fail. A 2018 report by Oracle on Loyalty shows that less than 30% of consumers believe that the loyalty rewards they receive are valuable. In addition, the pandemic radically changed consumer behavior and had a negative impact on brand loyalty. A recent McKinsey consumer sentiment survey shows that over 35% of consumers have tried a new brand since the pandemic, and 79% intend to keep exploring new channels, stores, and brands.

These reports also show that while consumer sentiment has changed significantly in the last few years, loyalty programs are yet to catch up. For example, a recent Financial Times survey of the loyalty programs of the top 100 brands shows that over 50% of the loyalty programs are still point-based, with only 2% evolving into ecosystem offerings.

While consumer brands in developed markets struggle to drive loyalty with loyalty programs, it’s even worse for brands in emerging markets.

The problem with loyalty programs in emerging markets.

In developed economies, most consumer goods are bought in supermarkets and hypermarkets, many of which already leverage technology in their daily processes. This sophisticated model is a perfect fit for traditional point-based loyalty programs, as customers can easily gain points by scanning receipts in an app or sharing posts on social media.

However, implementing a loyalty program is difficult in emerging markets, where over 80% of all consumer goods are sold in small roadside shops and open market stalls, and brands have little or no direct connection with their consumers. In addition, most end retailers only accept cash and do not even provide receipts, which makes any point-based loyalty program of little use. Therefore, FMCG brands must focus on channel partners, specifically retailers, to build loyalty in emerging markets rather than end consumers. If manufacturers can incentivize distributors and retailers always to carry their products, they will successfully convince end consumers to make repeat purchases.

Available research shows that most emerging market consumers are heavily influenced by word-of-mouth recommendations by friends and families and make most of their purchase decisions at the point of purchase.

Unfortunately, incentivizing retailers to carry their products and recommend them to consumers has proven to be almost impossible for many manufacturers, given the current state of the distribution chain. Currently, consumer brands in emerging markets depend on a scattered, fragmented network of wholesalers, distributors, and retailers across multiple geolocations to deliver their products.

This fragmented distribution model does not give brands visibility at sales outlets or direct connections with retailers, making it hard to build loyalty across their supply chains. In fact, many retailers and distributors will gladly switch to any brand that can provide them with a better deal.

How consumer brands can drive loyalty in emerging markets

For years, FMCG brands in emerging markets have depended on “earn-and-burn” or pure discount-based trade promotions to attempt to increase sales and generate loyalty, but it is no longer enough. In addition, the true value of any loyalty program, access to real-time data, is lost. FMCG brands in developed economies can at least track the performance of their points-based loyalty programs in real-time as each consumer redeems their points, but brands in emerging markets do not have the same advantage.

Most existing trade promotions are communicated by brand sales reps or field officers to the few large distributors and retailers they can reach, which means that many smaller retailers across multiple geolocations do not even know about or take advantage of the available programs.

Fixing this problem and building loyalty into the supply chain will require FMCG brands to adopt a digital solution that provides real-time visibility into the consumer goods supply chain in emerging markets, consumer goods manufacturers need a digital solution that provides visibility across the supply chain and provides direct access to retailers.

They need Open Commerce.

Build loyalty that works with Open Commerce

Open Commerce is a new, digital way of trading that provides a level playing field for brands, distributors, and retailers in emerging markets. It allows brands to engage directly with their distributors and retailers and sell to them digitally, providing real-time visibility across the entire supply chain. With the visibility Open Commerce provides, brands can access data from every single distributor, wholesaler, and retailer in real time and leverage the insights generated to identify and better serve their most loyal customers. At the same time, also create personalized trade promotions targeted at increasing the loyalty of both new and existing customers.

RedCloud has built the world’s first open commerce platform, Red101, where brands can unlock the full value of their distribution chain and build loyalty into the supply chain. With the Red101 app, retailers and distributors can order their products directly from the brand and access customized promotions that can help increase brand loyalty. In addition, brands can harness a network of internal and external partnerships to create loyalty programs that tap into the Open Commerce ecosystem and provide unbeatable cross-sectoral value propositions for the customer. Ecosystem-centric loyalty programs, such as providing vouchers on digital products or providing access to credit facilities that can be used across the app have been shown to have a significantly higher success rate at changing customer behavior and driving brand preference.

Schedule a demo today to see how RedCloud can help your brand unlock loyalty across the entire supply chain.