A day in the life of a consumer-packaged goods (CPG) company has changed considerably over the past few years, with the surge in online shopping being a key driver.
In the US alone, online sales penetration remains well above 2019 levels, with many consumers across all categories saying they intend to continue shopping online for good. To meet shoppers there, global consumer brands are increasingly engaging in direct-to-consumer (D2C) sales. Along the way, they’ll need to rethink core promotional strategies, spanning advertising to coupons, keeping the following objectives in mind:
Maximize Loyalty With Behavioral Insights
Brand switching is commonplace among shoppers now. As for loyalty programs, only about half of enrolled consumers actively participate in them.
CPGs venturing into loyalty programs as part of a D2C play can maximize member engagement via apps and geolocation technology, making timely offers to consumers as they shop both in-store and online. Purchasing-behavior insights generated by artificial intelligence, machine learning and predictive analytics will further help targeted overtures hit their intended marks.
Is it worth the effort? Decidedly, yes; placing the right technological bets to woo fickle shoppers pays off handsomely. The loyal top 10 percent of customers spends three times more per order than the other 90 percent. To top it off, brands excelling at customer loyalty grow revenues roughly 2.5 times faster than industry peers.
Optimize Price With Real-Time Data and Analytics
Better value for price paid is a top reason that consumers switch brands, surpassed only by product availability. However, as D2C-focused CPGs competitively diversify price points, they must also preserve their bread and butter by not outpricing or undercutting their current partners.
To maintain this tricky balance, CPGs need rigorous real-time data and analytics capabilities to react to short-term consumer demand shifts while also predicting longer trends across their end users, retail customers and brand competitors. Ongoing multichannel price monitoring will prove crucial to detecting and correcting pricing conflicts and seeking opportunities to create joint value with retailers.
Personalize to Differentiate
Although price is the primary factor in purchasing decisions, CPGs need to compete on more than that — especially when up against white labels and other discounted brands. Personalization can be a key differentiator. Indeed, most consumers are more likely to make a purchase when they receive tailored recommendations.
With screen time at an all-time high, consumers have never been easier to reach by brands looking to target shoppers via digital avenues. Meanwhile, those avenues have never been more critical for habitually high-touch products in regional markets where social distancing prevails.
L’Oréal and other beauty brands have bridged the high-touch/low-touch chasm by offering individual consumers virtual try-on options via augmented reality and voice-based shopping technology. In the safety of their homes, makeup shoppers can mix and match personalized recommendations suggested by a brand’s AI, based on real-time consumer information and machine learning. At the same time, the brand collects valuable data on the individual’s product preferences and purchasing behaviors, fine-tuning future personalization.
Digitize Coupons for Increased Redemptions and Improved Efficiency
Although most consumers still use coupons, they probably don’t relish the time spent redeeming paper versions any more than CPGs do. No wonder digital redemptions are expected to surpass $90 billion by 2022, with mobile redemptions predicted to account for roughly 80 percent of that. CPGs that don’t want to end up paper pushing the other 20 percent should start looking into digitizing their coupon program today; that way, they’ll save money not only for consumers but also for themselves.
With this in mind, Sutherland recently helped a leading battery manufacturer cut its coupon fulfillment costs in half by digitizing the company’s program. Doing so eliminated the costly production of paper coupons and the inefficiency of manual mailroom processing.
Eliminate Wasteful Spend With Targeted Advertising
Thanks to digital capabilities such as data analytics, CPGs can reach the right audience with the right ad at the right time, eliminating wasteful advertising spend. Procter & Gamble believes that digital advertising will also soon be automated, generating even further savings.
In the meantime, P&G is creating “smart audiences” by collecting its own consumer data via D2C engagement.For example, P&G engages newly expectant parents in their initial online search for information by encouraging them to download the company’s Pampers app. Both instantly and over time, the app yields valuable information that P&G can use to sell far more than just diapers directly to the consumer. Not only does this D2C approach help P&G avoid wasting money on ads that might miss their intended audience, it also reduces the company’s expenditures on ad agencies and media outlets.
Setting the Course
As CPGs pivot closer to their end users by digitally transforming their promotional efforts, they should map out these critical steps:
- Develop data intelligence capabilities to anticipate and navigate demand volatility, price sensitivity and loyalty preferences
- Reimagine personalized omnichannel consumer experiences through design thinking and journey mapping
- Create closed-loop AI systems that learn and create consumer and business intelligence
- Digitize and optimize operations to contain costs, manage revenue and handle D2C logistics
To learn more about how digital transformation can help you engage your consumers more directly and successfully, let us hear from you. We’d love to talk.
1 8 Customer Loyalty Trends to Follow in 2020, HubSpot, December 2019
2 Are You Undervaluing Your Customers? Harvard Business Review, February 2020
3 23 Coupon Statistics to Help You Save Money in 2021, Digital in the Round, July 14, 2021