Today’s consumers want instant product information — so they can check if the milk in their chocolate bar is safe or if the chicken curry they are about to purchase contains allergens. With higher levels of scrutiny of supply chains globally, CPG brands are turning to smart packaging to help track items from farm to fork to bring transparency to consumers. Smart packaging allows for digitizing products and is an upcoming digital trend in CPG (consumer packaged goods) operations worldwide.

While traceability has often been the primary reason consumer products are initially tagged with serialized tags, product digitization provides a significant opportunity for marketers — built around loyalty and direct customer engagement. Product digitization is a game-changer for CPG brands looking to deliver creative consumer experiences and build direct, fulfilling relationships with their customers.

Smart packaging is a form of intelligent packaging that opens a digital channel for products to capture and share information and interact with other devices. Smart packaging allows brands to create two of the most critical contributors to purchases: loyalty and advocacy through increased touch-points and direct interactions.

In its ability to connect brands directly with consumers, smart packaging is transforming CPG marketing practices in five distinct ways:

The consumer packaged goods (CPG) industry has historically relied heavily upon, if not solely, on retailers to sell their products, with little details about who their end-consumers are, let alone their post-purchase behaviors. In-store promotions remain the most common tactical tool in a CPG brand’s armory. Still, as heavy category users often drive the uplift, growth in market penetration is out of reach.

After the sale is completed, the best marketers want to be present at the point of consumption. A serialized QR code on a pack opens the door to this moment as this is the time for a brand to start a conversation. Brands can take advantage of this opportunity by turning the conversation into a value exchange by giving end-consumers a small gift, thanks for their time, and ask for feedback — all essential steps to signing up the customer for further rewards and benefits.

This is the purpose of your loyalty program — a retention effort built around your brand values, rewarding customer participation such as sharing experiences and encouraging re-purchase. Throughout the program, digitized products continue to link the physical and digital worlds, an invaluable tool to track transactions in real-time. Listening, learning, and improving the loyalty offer will gradually build one-on-one relationships between brands and consumers at scale.

With digitized products, consumer brands can now do a whole lot more than digitally duplicate what’s already on the product labels; they can deliver unprecedented tailored and targeted direct-to-consumer experiences.

CPG brands have to move from simply selling a product to developing branded solutions that deliver service around the product to leverage the opportunity. A great example of this is the Tide Spin on-demand laundry and dry-cleaning service that Procter & Gamble trialed in Chicago.

From detergent and hairspray to tortillas and alcohol, consumer products are already delivering category-relevant experiences to their consumers. With smart packaging, consumers get real-time access to products/services/information when they want and wherever they want. This combination of physical products with digital information will change how consumers perceive brands and, ultimately, how they engage with them.

With connections established between CPG products and their consumers, smart packaging needs a way to keep their customers engaged. While a loyalty program effectively encourages and rewards certain behaviors, the right engaging content is vital to make every interaction a positive and entertaining experience. Imagine this content as a layer of engagement on the digitized product.

Matching and then delivering specific content to a particular person has always been a challenge for brands. With smart packaging, content delivery can be optimized for each audience – maximizing its relevance – for higher levels of engagement and more memorable experiences.

For example, Diageo’s QR-code-connected whisky bottle, when scanned by a smartphone, can conveniently serve the consumer promotional offers such as a discount on a future purchase, provide suggested cocktail recipes, and supply exclusive content. Ads can then be served to the consumer according to their needs and product usage, enabling highly targeted ads at a contextually appropriate time.

Direct access to customer data has often been a challenge for CPG brands. Historically they have sold through retailers, limiting their ability to capture deep transactional data. Yet, with digitized products, the link between a specific customer and a particular package means that every exchange can be attributed to a particular customer – thus generating a lot of valuable data on each consumer’s behavior.

Digitized products can provide granular data on consumer spending patterns, behavior, and the most influential touch-points. Gaining such detailed insight in real-time has powerful applications. Campaigns can be fine-tuned for better results, content tailored for maximum impact, or consumers targeted with relevant promotions to increase conversion rates.

How brands use the rivers of data feeding in from smart packaging will lead to inevitable questions about privacy and security. Brands need a transparent approach to using data and ensuring there is a clear value exchange. Consumers will need to feel they’re receiving something tangible and relevant as a reward to share their information.

Trust and transparency are the top brand values in the digital economy. Because consumers now have higher expectations of brands — around how the brand enhances their lives, community, and society — brand marketing should be open about topics that have a broader societal impact: the environment, community, and supply chains.

Smart packaging is among the group of technologies that can help with the governance of supply chains and provide consumers with the timely information they need to trust the brands they are buying from.

Italian food firm Barilla, for instance, has worked hard to create traceability in its supply chain. By scanning a QR-code, consumers can view all the stages of the production process, from farm to fork, via a linked website. Details are provided about the origin of the durum wheat varieties and background detail on the harvest, milling, and movement through the supply chain to Barilla’s plant in Parma, Italy, through to the point-of-sale.

Smart packaging and product digitization are all about data and insight. These give CPG companies the power to understand their supply chains in detail and give brand marketers the ability to see how people are consuming the products in the context of their daily lives.

By combining these insights, brands can win consumers’ attention and continual engagement. They can build services and products that synchronize with consumers’ lives, making their presence vital and brand valuable. This is the exciting opportunity being offered by digitized products.