The consumer packaged goods (CPG) industry is approaching a tipping point, driven by rapidly evolving customer expectations, and an unprecedented growth in the range of digital channels and technologies. To sustain relevance in a dynamic business landscape, manufacturers need to redefine their product distribution and consumer engagement strategies.
Some leading CPG brands are, therefore, increasingly looking to harness social media, mobility, cloud computing and other technologies to bypass retailers, and forge direct, enduring relationships with customers across the buyer lifecycle.
Complex business landscape
CPG firms today face a slew of challenges, including margin pressure, portfolio complexity, retail fragmentation, complex pricing demands, and shorter product lifecycles. All these factors have contributed to lackluster revenue growth for manufacturers across categories, with fiercely competitive private labels eating into their market share.
Adding to this complexity is the growing breed of discerning, demanding, and digitally savvy customers who use a variety of platforms, websites, and mobile apps to make purchasing decisions.
For the new age customer, ease of transactions in-store, online and across devices is as important as availability, assortment, and product quality. Furthermore, buyers’ purchasing pathway–discover, search, locate, buy, and post purchase–has become dynamic and fragmented, with webrooming and showrooming adding new dimensions to the whole process.
All these trends translate into a clear, urgent mandate for CPG manufacturers: gain direct access to the target audience by reimagining product development, supply chain management, marketing, distribution, and sales.
The direct-to-customer advantage
In an era of consumer empowerment, direct, two-way relations with their customers can help CPG brands differentiate themselves, and gain competitive advantage. Companies can increase revenues, reduce churn, and compete effectively with new entrants, through digitally driven product innovation, direct marketing, and cross-channel selling.
Disintermediation of the traditional distribution and customer engagement value chain can also help CPG firms improve margins, reduce time to market, and significantly boost customer loyalty and evangelism.
Using digital to win over customers
In order to cut through the market clutter, and effectively reach out to consumers, manufacturers must embrace new digital tools and interaction models. The overarching emphasis in this regard must be on simplifying the purchasing pathway for consumers, and ensuring hassle-free transactions across channels and devices.
Companies can generate higher return on their marketing investments (ROMI) by using influencer campaigns and targeted events on social media sites such as Twitter and Facebook for effective brand storytelling while monitoring conversations on third-party platforms to control negative feedback.
Another key imperative for brands, with regard to direct-to-customer initiatives, is the need to focus deeply on mobility. Leading CPG companies have begun offering mobile-linked features to help customers navigate stores easily and quickly. Moreover, geographic targeting campaigns can enable companies to reach customers in the moment, and tap into their high interest levels.
It is also important to build comprehensive digital assets that allow CPG enterprises to create sustained brand awareness with content must not only be optimized for search results, but also provide visitors with relevant insights.
A brand that has been highly successful on this front is Oreo, which has achieved manifold ROI on its digital efforts by creating culturally relevant and creative content. With the aim of positioning itself distinctly in a fragmented marketplace, the firm launched Colourfilled, which allowed consumers to customize the packaging of the brand’s various cookies.
Gearing up for the future
CPG manufacturers can indeed achieve enhanced ROI on their direct-to-consumer initiatives by unlocking value from a complex and evolving set of technology solutions. This, in turn, can pave the way for faster business transformation, reduced time to market, and better consumer connect, translating into increased brand loyalty and accelerated revenue growth.
Over the next five years, the U.S .CPG marketplace is poised to become a ‘1-5-10’ market 1, where digital’s share of total sales will grow from 1 percent currently to 5 percent by 2018, accelerating to 10 percent soon after.
To stay ahead of peers under such a scenario, CPG companies need to craft long term digital strategies that can help them build a strong loyal customer base.
- Design innovation: Brands such as LEGO, Pepsi and Unilever are counting on crowdsourcing, 3D printing and rapid prototyping to generate new ideas for product development, and create winning portfolios.
- Consumer touch points: CPG firms must provide seamless omnichannel experiences, offering consumers a multitude of opportunities to interact with their brands online and offline
- Robust demand management: The ability to capture, and act upon, real-time and forward looking demand signals is key to building effective relations with new age consumers. This calls for well-oiled supply chain operations and on-demand visibility into inventory.
- Data and insights: To thrive in a tough marketplace, CPG companies need to master data. The first step in this direction is to combine data modeling and data warehousing, and integrate disparate data sources to create a ‘single version of truth.’ Robust data mining and management tools can capture and analyze the exploding volumes of data from diverse sources, including point of sales, in-store engagement, mobile platforms, and social media.