What’s the Deal with the CPG Industry?
Over the last year, Setup has kept our finger on the pulse of different industries to note the new ways marketers are innovating during and after a world crisis. We’ve spoken to a number of marketers in a variety of industries including Restaurants, B2B, IT and Services, and Entertainment. We’ve also discussed ecommerce and paid media trends with marketing leaders - noticing trends that are temporary or here to stay.
Recently, we interviewed marketing experts from Learning Resources, Three Five Two, and Response Media about the changes they’ve noticed in the Consumer Packaged Goods (CPG) Industry.
“The pandemic has altered the ways consumers shop, compare, and buy CPG products, all in somewhat permanent fashion, in my opinion. Since the start of the pandemic, dramatically more consumers are buying through ecommerce, using delivery services, or picking up their purchases using click-and-collect (buy online, pick up at store).”
Q1 | What innovative changes are happening in the CPG Industry business? What changes do you think will remain permanent?
Increase in Direct-to-Consumer (DTC or D2C) Practices
“Historically, CPG brands have been retail-first but the pandemic expedited the need for DTC channels. We don’t see it as a trend that’ll go away, but rather DTC will become a fixture within the CPG space,” shared Dr. Alvin Glay, the VP of Growth and Insights at Response Media.
DTC offers multiple benefits to companies, including access to more consumer data to improve and influence future marketing campaigns.
Three Five Two contributors Sara Saxner, the Vice President of Growth, and David Yeend, the Director of Innovation, chimed in, “We're seeing a continued rise of D2C in various forms (i.e., P&G buys Dollar Shave Club to benefit from subscription stability, owning the customer relationship, and expanding product lines without the need for retail partnerships. Or new "Insta-Brands" that rise from nothing on Instagram to reach a meaningful scale faster than ever before.)”
Build Partnerships
Brands are bringing their services to consumers, especially through digital means. Marie LaPlante, the Chief Marketing Officer for Learning Resources, shared that they have formed partnerships with apps during this time.
“We have partnered with savvy app companies who can reach our targeted audiences in a unique way – for example, we sell educational toys to both parents and teachers for their classrooms, so we partnered with the ClassTag app to advertise and offer incentives as teachers and parents communicate via this app during school lockdowns and beyond.”
Focus on the Consumer Relationship
Josh Perlstein, the CEO of Response Media, noted that companies are turning back to building a more direct relationship with the consumer, similar to historic retailers. “For CPG brands, this means more data-driven marketing activity around website optimization, personalization, CRM, and a new level of importance for first party data.”
Brands are investing more in the consumer relationship by increasing incentive services and chatbot features.
“We are working with brands to help maximize consumer incentivization. This comes in the form of distributing digital coupons to consumers across multiple retailers compared to the historic method of incentivization – paper coupons. We are also driving brands towards 2-way communications with consumers through chatbots and SMS marketing tactics,” added Dr. Alvin Glay.
Importance of Convenience
The increase of digital everything has increased expectations - consumers want what they ordered right away. The same goes for instant delivery. LaPlante stated, “Consumers have become used to the convenience of delivery for everything, via Amazon, Instacart, restaurant delivery – so even when they start venturing out, they will still want the convenience of delivery or curbside pickup when their schedules start getting busy again!”
Utilize Ecommerce to Drive Sales
Everything switched to digital in the last year, focusing companies to update their processes or consumer approach. The rise of ecommerce was a huge part of that.
Read - Ecommerce in 2020 + Beyond
Michelle Rainbow, the VP of Media and Campaign Management at Response Media, stated, “We are seeing more CPG companies making more valiant attempts at DTC sales. Many CPG companies added ecommerce to their sites a couple of years ago, but now they seem to be utilizing more tactics to drive sales such as livestream events, email, and SMS. I think they will continue to evolve as ecommerce grows.”
Q2 | How has ecommerce/online offerings transformed the CPG business?
“Most CPG companies have been deep into digital advertising for a while now, but with Covid lockdowns, they needed to really ramp up the digital sales via direct or retail. Even if they are on shelf, the customer may not be there physically to purchase it (e.g., Food sales via Instacart or curbside pickup with online ordering) – so brand and search term relevancy is more important than ever.”
Three Five Two representatives Saxner and Yeend shared, “‘Ecomm’ can be viewed more than simply selling units; it can be offering services, creating relationships, offering training and education, etc. We see it as more than simply an online store.”
They went on to list the following examples of brands innovating online efforts to support their consumers during the last year:
One CPG client in the oral health space is banking 100% on ecommerce to drive exponential growth, both via their own site and via retail partners' ecomm site (i.e., Amazon, Walmart.com but not yet in physical stores). They start online, prove their market traction, and then may choose to broaden into brick-and-mortar.
Some clients connected to digital as they were porting their key value creation into a scalable digital product. They offer advice and initiate relationships that may grow into their other service line offerings.
Another client was originally an in-person school, and had to evolve radically during COVID to online offerings. They now understand that their survival move is actually a fast way to increase scale far beyond their local, physical footprint.
“Ecommerce is a critical piece of their DTC strategy – it provides brands the who, what, and when of consumer insights. This strategy helps define what loyal consumers look like and provides first-party insights that brands didn’t have before.”
Marketers are more likely to focus on driving consumers to online services over physical locations - especially in the last year. Perlstein added, “We see much more focus, measurement, and investment in direct to consumer efforts, and support of ecommerce customers (Amazon, Walmart.com, Target.com, etc.) from CPG brands. In fact, all digital marketing we do now has some level of attribution and accountability to driving ecommerce sales. This is a severe departure from 5-10 years ago, where most of the CPG brand marketing investment was focused on driving a consumer to a brick-and-mortar retail location.”
Q3 | What are the top trends you have noticed for 2021?
Consumers are exhausted and need breaks
From the constant news cycles to continuing to grieve old lifestyles, consumers are tired. Saxner and Yeend said people need little escapes and are leaning into more self-care routines to positively grow themselves.
This even applies to children. LaPlante mentioned that “parents are really concerned about their children’s loss of social and emotional skills, as well as academic skills, during the pandemic,” so they are looking for resources to help their kids “catch up.”
Consumers are rethinking needs and lifestyles
Consumers are reshaping their lives, or “flipping fundamental,” according to the Three Five Two team. “Real estate and new car sales are seeing implausible growth in 2021 and 2022. This can be attributed to people exerting control over the fundamentals of their day. People are creating their dream life since location no longer matters for many. In automotive, people are re-thinking their needs, downsizing to one car, and upgrading. With no commutes, people are looking to exert control over their happiness. People aren't making small adjustments to standing bills, but rather rethinking assets.”
First party data growth
Rainbow shared, “There’s a big push for this as outside targeting solutions might not be available or as effective in the future. We are big proponents of this, but we also strongly believe that CRM and DTC should play together to have the most effective CRM strategy. It’s confusing to the consumer when they get emails from marketing and then completely different message streams from DTC. They should not be working in silo, rather in collaboration.”
Perlstein backed up this claim that the increase in ecommerce and digital DTC combined with the evolving demise of cookie-based targeting will lead to a heavy investment in first party data collection, CRM, identity resolution, and data-driven martech.
Conversational SMS
The last year proved that people need people in order to function. Even though everyone was physically separated, people turned to technology to stay even more connected. Brands, wanting to provide the same value as an in-store experience, can connect with consumers in the same way digitally. Dr. Glay expressed that the benefit of SMS for brands is that “You can have an entire customer experience in the environment that they’re used to.”
Omnichannel importance
LaPlante urged brands to keep investing in, advertising, and selling via omnichannel. “Convenience is not going anywhere once we are free to move about the country.”
Pulse on supply chain
“Supply chain is pretty ugly in 1H for any goods not manufacturing domestically,” stated LaPlante. Online ordering and consumer preferences rapidly changing make inventory preparation hard to update. “So keep on top of it, and be prepared with a Plan B if you hit delays.”
Even though retailers are finding new, digital methods to reach consumers, the root of their actions is always the same: to form a connection and serve a need. The world around retail may change, but the CPG Industry will continue to focus on relationships and service.
In the fast-paced world of digital marketing, it might feel impossible to keep up. Staying ahead of the curb is as important as having your morning coffee – miss it, and you might find yourself dozing off at the wheel.
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