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Building Consumer Loyalty in a Changing CPG World: AI & Digital Technologies Are Leading the Charge

Not too long ago, just a decade or two, any established CPG brand name ensured the loyalty of generations of customers. Familiarity and trust were everything.

 

But, with consumer expectations changing, consumer loyalty isn't what it used to be. Consumers are increasingly willing to experiment with niche, homegrown brands. A BCG report found that ultrasmall D2C brands (under $100 million in sales) and small brands ($100 million or more in sales) gained approximately four sales dollar share points between 2018 to 2022. Large brands (over $6 billion in sales) lost approximately 3.7 share points over the same period.

 

CPG majors looking to bring consumer loyalty back in fashion have realized that digital technologies and AI can help. For example, Unilever now uses AI to forecast flavour profiles, understand consumer preferences and boost food portfolio analytics. Nestle uses proprietary AI tools to respond faster to market trends, reducing its product ideation time from six months to six weeks.

 

Omnichannel is the New Gold Standard in

 

CPG          

 

Modern consumers have embraced digital technologies and online shopping. But, while they love the speed and convenience of online shopping, many crave the familiarity of physical stores. The secret sauce for brands, though, is not just being present across online and offline channels, but to offer a seamless experience between them.

CPG majors are now using “phygital” strategies in innovative ways. Starbucks, for example, recommends drinks and menu items based on seasonality, location, customer data and preferences. Customers can order online and seamlessly pick up at the restaurant. Marks & Spencer’s List & Go app in-store gives customers an on-screen path to find items on their shopping list, down to their exact shelf location.

 

5G and 6G are taking these omnichannel experiences even further. As sharing data between physical and online platforms becomes quicker and more seamless, CPG brands are integrating AI with IoT and Augmented Reality to create omnichannel shopping experiences. This allows them to offer innovations like interactive shelf displays, smart mirrors and real-time inventory updates. Nearly 2 billion consumers are already on 5G, with adoption projected to reach 7.7 billion by 2028, making it the next big thing in technology. The future of these technologies promises to take CPG brands and their consumers from omnichannel to omniverse - it's just a matter of time!

 

How to Build Lasting Consumer Loyalty in the Shifting CPG Landscape

 

Based on our experiences of helping large CPG brands retain and grow their customer base, here are a few key action points that CPG brands should keep in mind.

 

 

Tip 1: Evolve with Technology

 

Every CPG brand needs to think like a digital-native brand, focusing on data-driven insights and holistic customer journeys. Consumer data is complex and needs advanced tools to analyse it and gather actionable insights.

 

Besides using technology to understand consumers down to the most granular detail, AI, especially Generative AI gives brands the opportunity to create dynamic, personalized content at scale. With IKEA’s Place app, for example, consumers can virtually place furniture in their homes, allowing them to see how well it integrates with their existing furniture. Similarly, L’Oreal’s skin analyser app scans a customer’s skin, providing individual insights and skincare tips.

 

As 6G technology becomes more pervasive, the metaverse is the next battleground for CPG brands. By enabling real-time omnichannel experiences with ultra-low latency, brands can create virtual storefronts within metaverse platforms, further integrating virtual and retail experiences.

 

Tip 2: Be Privacy-Conscious and Transparent

 

Consumers love personalized experiences,  but are also increasingly concerned about how their data is used. A 2023 Twilio Segment report suggests that only 51% of customers trust organizations to keep their personal data secure and use it responsibly.

 

Brands must balance the demand for personalization with the need for privacy. This requires them to be transparent about how and why customer data is collected, building trust through regular audits and updated privacy policies. Adopting AI-powered privacy solutions, such as federated learning, can also address this challenge. Google, for example, uses federated learning for its Android devices, ensuring user data remains on devices while still improving machine learning algorithms. Brands should not only comply but also communicate their compliance with regulations like Europe’s GDPR to create trust while delivering personalized experiences.

 

Tip 3: Be Culturally and Contextually Aware

 

What’s Christmas without Santa Claus? A good example of cultural and contextual awareness is Unilever’s move to rebrand its Fair and Lovely skin cream to Glow and Lovely in India. The rebranding drew praise as a step against the age-old obsession with fair skin and stereotyping skin tones. Similarly, Netflix remains relevant to a global audience by offering personalized viewing recommendations based on individual behaviors and geographical locations. The OTT platform tailors its recommendations and content library to align with local viewing trends and preferences.

 

Examples from global behemoths like Unilever and Netflix make it clear that brands that embrace nuances of local cultures are more likely to deliver more meaningful and engaging experiences to their customers.

 

Besides conventional market research, AI tools can also help brands anticipate cultural trends by analysing social media chatter and customer feedback to identify emerging sentiments. This, in turn, helps brands craft relevant and timely strategies.

 

Tip 4: Articulate an Integrated Strategy Between Online and Physical Customer Touchpoints

 

A successful brand loyalty strategy needs smooth integration between offline and online experiences it offers its customers, without the siloed online and offline mindsets. What's even more critical is product and brand consistency across the online and offline journeys.

 

Using digital technologies and AI brands can map the entire customer journey holistically, considering every touchpoint from discovery to purchase and post-purchase support, across online and offline. This takes out the guesswork and bias that inevitably creep into human analysis and predictions, ensuring each touchpoint meets customer needs and expectations. Walmart, for example, has generated close to $1 billion – a 10% to 15% increase in sales, just by using big data to optimize its customer journey, whether they are in a Walmart store, browsing the Walmart website or browsing through mobile devices on the move

 

To Sum Up

 

Consumers, CPG brands and the tech landscape are all changing quickly. This calls for brands to be agile and innovative, embracing the twin approaches of an omnichannel strategy, coupled with the adoption of emerging technologies like AR, VR, AI, and high-speed networks.

 

Technologies will evolve over time. What will not change is the need for CPG brands to stay responsive to customer needs, and I invite these brands to do so to thrive in changing times.

 

About the Author

Siddharth leads Mindsprint’s Industry Digital Solutions, where he has been instrumental in scaling digital supply chain solutions, enhancing customer engagement platforms, and expanding offerings for smart farms and factories. With over 24 years of experience, Siddharth has held key leadership roles, including CFO for India & South Asia, prior to joining Mindsprint. He is dedicated to driving growth through digital transformation, focusing on innovation and customer success to deliver impactful business outcomes.  

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