GILLIAN EWERS, VP Marketing at PragmatIC looks at reinventing packaging as a fully interactive customer engagement tool…
With so much noise and competition in the retail market, companies can face a real challenge to communicate and engage effectively with their customers. It is becoming increasingly important for brand owners of fast moving consumer goods (FMCGs) and retailers to come
up with new and inventive ways to reach out to their customers and deliver the personalised experience that the ‘Millennials/ and ‘Gen Z-ers’ now expect. One option being explored is NFC-enabled smart packaging which has the potential to help build and retain customer loyalty, and can provide a much better understanding of what drives purchase decisions.
The initial hype around NFC technology in smart packaging has died down in recent years. However, the interest is still there with new research from Markets and Marketing claiming the smart packaging market size will reach $39.7 billion, growing at a CAGR of 4.8% from 2014 to 2020. So how exactly can smart packaging help FMCG brands and retailers connect with customers in novel and creative ways, and what other benefits could this technology bring?
OWNERS AND RETAILERS
For brand owners and retailers, NFC offers opportunities to interact like never before with customers at an individual level to build direct and personal engagement. This is because NFC tags can contain unique identifiers by item, not just by product type. By delivering exclusive content, such as coupons for previously purchased or related goods and advice about a
recent purchase, or by providing opportunities to engage with the brand/retailer, it is possible to build strong customer loyalty. IBM stated in a research piece in conjunction with the NRF in July 2017 that 66% of Gen Z-ers once they find a brand they like will continue to buy it for a long time, highlighting the importance of establishing that relationship.
On the practical side, unlike barcodes and QR codes, NFC devices are small, unobtrusive and do not need to be visible. These can therefore be integrated underneath existing (even flexible) packaging and labels discreetly, without interfering with the brand identity. Other applications are in smart shelves, so retailers can implement NFC even if it is not added by the brand owners. Either way the information gathered from the interaction of the customers at the point of purchase, the point of use, and even the point of end-of-use, can provide valuable insights that can be used to enhance that relationship even further.
Retailers can also benefit in terms of managing inventory, improving supply chain and operational processes, as this technology can operate without line of sight, offer rapid read rates, and is more reliable than traditional barcodes. Another application could be to verify if products have been damaged in transit or even counterfeited, as NFC technology is particularly difficult to duplicate.
BENEFITS TO CUSTOMERS
According to research by Strategy analytics, 50% of customers prefer using NFC to retrieve product information, vs 23% for QR codes, as
it is faster and easier to use. With a simple tap, smartphone users can access anything from recipe ideas, to ‘how-to’ guides and reminders to re-order the product. They can also receive promotional offers and get interactive with games and competitions. Content can be tailored, so customers receive personalised messages and different content before, during and after purchase.
In an increasingly connected world, with smartphones an integral part of daily life, goods wrapped, boxed and bottled in smart packaging which connects seamlessly to these smart devices is the next logical evolution.
Despite the many benefits to retailers, brands and customers, NFC technology is not yet ubiquitous in the packaging industry. So, what’s holding back this technology from transforming the face of retail? The main obstruction is price. To date, NFC has mainly been used for limited volume marketing campaigns of high value goods with a high profit margin. One example, is the prestigious Bordeaux winery Château Le Pin, which produces some of the most expensive wines in the world. NFC tags were applied to allow customers to authenticate the vintage and access information such as the grape variety of the wine.
TIME FOR TAGS
There are few examples where NFC has been integrated into FMCG products because, until now, the cost of NFC solutions has been too high for low cost, low margin everyday goods. For NFC to break into the FMCG, world prices need to fall dramatically. Although the cost of NFC tags is now more than 50% lower than it was 10-years ago the goal posts have moved from a hoped for price point of five cents to one cent per tag.
New technologies and processes are emerging that will bring significantly lower costs, not just of the IC (integrated circuit) that is the brains of the tags, but also in how the antenna and tag is assembled (see www.pragmatic.tech for more information). This will, in turn, drive NFC smart packaging to roll out en masse in the next few years. I fully believe that the 1 cent target will one day be achieved and all the benefits that come with it will follow suit.