April 29, 2015
The primary sales channel for CPG (consumer packaged goods) firms is through the retailers’ distribution networks. Retailers who are directly facing the end consumer have an upper hand in the CPG value chain. Furthermore, some of the retailers have their own white labeled products competing with those of the CPG firms. As a result, the biggest challenge for a CPG firm is to overcome the conflict of interest arising from private label brands and ensure direct real time customer interaction in addition to the conventional point of sale terminal reports. CPG companies also constantly compete for better shelf space and visibility in the store, and many times things get out of control. There is a lack of systems for monitoring and reporting information from a store to a CPG, and in many cases they don’t seem to be receiving proactive support from retailers. Considering all these arguments, what should a CPG company such as Nestle or P&G do?
Post recession, the retail industry had seen some consumer segments beginning to show their interest move from branded products to white labeled products. According to industry experts, engaging directly with the customers can offset this development by increasing loyalty and by improving insights on individual consumer needs. This can in turn lead to more accurate targeting of products and promotions. Thanks to technology, CPG companies can today think of reaching out directly to their consumers.
Many companies in this industry have found ways of going directly to consumers by offering services rather than just products. For example, Johnson & Johnson’s BabyCenter provides an online community where parents share advice and product recommendations. P&G currently uses Bayesian analysis to scan the universe of comments originating from social media, categorizes them by individual brand, and then places them on the screen of the relevant individual. In addition, P&G shares a standardized data warehouse with large retailers that helps them to gather real time product and sales information.
Coca-Cola focuses on direct engagement with users via their social media infrastructure and big data. Wisely recognizing the power of owning its own content and democratizing access to it, Coca-Cola had partnered with Thismoment, providing Coca-Cola with the ability to consolidate valuable content and streamline access to it through a central registry, regional content rights, analytics, collaboration, future-proofing and a simple, easy-to-use interface. This provides Coca-Cola with the ability to execute their marketing strategy without the retailer in the picture.
In 2014, McCormick & Co.’s Zatarain’s became the first CPG brand to adopt beacon technology to directly engage with the consumer while in a retail location. The app based beacon campaign helps shoppers receive grocery list reminders, and provides loyalty points on their mobile phones. Although the beacon might be a significant new technology in the retail industry, experts believe that CPG brands are not ready to fully embrace beacons and in-store technologies without the support of a retailer due to labor and capital investments. However, the CPG brands need to keep in mind that the majority of new devices entering the store, which includes Apple iPhone, Nokia Lumia, Samsung Galaxy, and Nexus, are BLE compatible. So in the next few years the beacon will become the foremost medium to address customers directly.
Similarly, Hillshire Brands organized a campaign to push Craft link sausages by deploying beacons in grocery stores across the U.S. The campaign sent push-notifications to the shoppers and thus connected them to an interactive shopping list featuring additional product suggestions as well as opportunities to earn rewards points and redeem special coupons. It was estimated that the campaign augmented the intent to buy the company’s product by 20 percent and lead to a 36 percent increase in brand awareness, as well as an overall lift in sales.
Powerful location based analytics provide CPG firms with real data on where their customers are seen frequently. This combined with social media analytics and household level insights can help CPG companies target the right customer segment and location for marketing. Likewise, beacons provide brands with the means to establish a closer one-on-one relationship with the customer. Furthermore, location based marketing (possible through use of beacons) will also help CPG firms measure the ROI on marketing spend, which would be too difficult otherwise.