How CPGs Can Rise To The Direct-To-Consumer Challenge

In 2020, more than one-third of consumer-packaged goods brands (CPGs) started to develop direct to consumer (D2C) channels. ^[1]  This is a major shift for an industry that traditionally relied on retailers to distribute their products and to provide customer intelligence. This has forced many CPG firms to focus on learning more about their end consumers, what motivates them, and how they transact at the point of purchase.

Nike is an example of an early success story in this channel. They launched D2C sales a full decade ago, have achieved 35% digital penetration in 2020, and expect to reach 50% D2C sales by 2022. ^[2]

To avoid playing catchup, here’s what your own brand should consider as you start forging a D2C strategy today:

Strengthen your data capabilities

To get D2C right, CPGs need to “get” their consumers. And as any CPG marketer can tell you, intelligence about consumers’ buying decisions is generally held captive by retailers. Supplementing scant retailer-supplied details with intel from CPG-run focus groups and product trials doesn’t yield nearly enough consumer intelligence to get a full and accurate view of purchasing behaviors and shopper expectations. The largest CPGs have consumer purchase databases roughly one-tenth the size of those maintained by retailers. By removing retailers as the middlemen, or creating new data-sharing partnerships, CPGs can open the consumer-insight floodgates.

The catch? Unprepared companies can easily drown in a data deluge. As the CIO of a specialty coffee roaster told us, they have warehouses of data but no idea what to do with it. They’re not alone. A recent survey shows that over two-thirds of consumer product companies struggle to accelerate consumer engagement models such as ecommerce, citing limited data and analytics capabilities as chief obstacles.

But it doesn’t have to be that way. Working with the right partner to capture and analyze consumer data, CPGs can put that information to valuable, actionable use -- and leveraging tools like ecommerce content services can help you execute insights gleaned from that information. Ideally, your partner not only helps you collect and interpret your consumer data, but also enables you to turn it into profitable consumer engagement and operational cost savings.

Obtain a 360-degree view of the consumer

By selling directly to consumers, CPGs can harvest intelligence across a shopper’s entire consumer journey, including point-of-sale data. The right data capabilities also enable D2C companies to obtain valuable demographic and segmentation details such as age, gender, and shopping-channel preferences. The latter intel is especially vital, since meeting consumers where they are at each digital touchpoint of their shopping journey, in whatever channel they favor, delivers a rich, textural view at a very granular level.

CPGs can engage with shoppers even during brick-and-mortar retail visits by staying digitally connected via loyalty programs and product-query apps. In fact, many in-store shoppers prefer consulting their smartphones over speaking with a store clerk when looking for product recommendations or discounts. ^[3] CPGs should take advantage of that.

Focus customization on promoting profitability and reducing costs

Until now, most CPGs have relied on a blurry, low-definition view of their end users. With data-driven insights culled from D2C omnichannel engagement, CPGs can create a crystal-clear, high-definition consumer image. The shaper the image, the better CPGs can devise strategies for maximizing shopper profitability —for example, by tweaking customized offers to grow the dollar amount of an individual’s shopping basket, based on that person’s prior purchasing behavior. CPGs can use that same information to extend a consumer’s lifetime value via predictive analytics.

Data-driven customization also saves CPGs the unnecessary expense of reaching the wrong consumers with the wrong offers. Take Coca-Cola, which uses AI-powered soda dispensers to collect and activate data in real time to better target consumers and improve their experience. Based on people’s purchasing behavior, the AI adjusts the dispensing machine’s “mood” so that it matches the collective consumer mood, promoting the most popular drinks on any given day. Coca-Cola also uses the machine’s data to inform product innovation — in essence, free R&D.

Create a consumer experience command center

An ideal way to achieve and maintain all the above is by setting up a consumer experience command center. While D2C and other consumer experience objectives can certainly be met in a more decentralized, piecemeal fashion, doing so can lead to inefficiencies and suboptimal outcomes. That was the experience of a diversified multinational food products manufacturer after it let various segments and regions follow their own protocols for delivering consumer care and interpreting the company’s consumer experience goals.

Wanting to increase consumer loyalty, satisfaction, and lifetime value while also cutting costs, the company decided to consolidate its consumer care footprint, align its global policies and processes, and build an omnichannel platform for delivering consistently personalized and frictionless consumer experiences across each of its end user’s preferred channels.

While this was no small undertaking, the company successfully rose to the challenge by creating a global command and control center (CCC). The CCC managed the necessary day-to-day transformations across consumer analytics, process design, service innovation, and technology, including the rollout of consumer self-service tools and digital assistants. The results? Fifteen percent higher consumer satisfaction and 20 percent lower company costs.

Whether it’s by establishing a CCC or through other means, CPGs should start pursuing greater direct engagement of their consumers today to keep pace with competitors tomorrow. Here’s what they should do along the way:

• Embed analytics that move past descriptive narratives and provide predictive insights

• Build proprietary platforms and process engineering across the enterprise

• Create closed loop AI systems that learn and create consumer and business intelligence

• Reimagine consumer and channel experiences through design thinking and journey mapping

• Deliver personalized omnichannel consumer experiences

• Develop data intelligence capabilities to anticipate and navigate demand volatility

• Digitize and optimize operations to manage revenue and contain costs

To learn more about how digital transformation can help you engage your consumers more directly and profitably, let us hear from you. We’d love to talk.