From an e-commerce revolution driving shoppers to new channels, to underlying demographic changes, to the rise of the digital consumer, the CPG landscape is changing faster than the endcaps at your local supermarket.
Fundamental market shifts are bringing an end to long-established assumptions and practices. For example, the shopper journey now begins before a person sets foot in a store, shifting conversion tactics from purely in-store promotions to digital marketing. Taking advantage of their own data, CPG retailers are acting more like media publishers, sparking a shift in how audiences are reached and how outcomes are measured.
While change isn't easy, proactive CPG companies have new opportunities to prosper. Disruptions in the CPG market provide new information and ways to communicate, connect, and sell products and services. And the secret to taking advantage of these opportunities is data. Data that can help answer critical questions such as which marketing campaigns and tactics are working, how to optimize marketing spend, or how to validate marketing initiatives to retailers or corporate stakeholders.
Disruptions Driving CPG
Like it or not, CPG companies must face new realities caused by many disrupting factors that the digital shift is creating. Even if a CPG company's market position is now strong, organizations face the challenge of realigning themselves to compete in a rapidly changing retail and consumer environment that includes many new challenges:
-- E-commerce is driving shoppers to new channels. Even for basic items such as toothpaste or razor blades, Amazon and other online stores offer consumers time savings, greater selection, and price advantages when compared to brick-and-mortar options such as the local supermarket or drugstore.
-- Digital consumers now shop the world rather than rely solely on local retailers. As a result, retailers and manufacturers have lost control of the retail conversation, ceding it to websites filled with user-generated reviews and content as well as social media channels and influencers.
-- Age shifts are altering the marketplace, influencing how CPG brands must market, advertise, and sell products.
-- Demographic shifts, such as the growth of the Hispanic population in the United States, are also altering the CPG market.
- The rise of premium private-label goods is reshaping retail strategy. Premium tiers of private-label products now represent over 19% of sales and make it even harder for traditional national brands to compete.
-- Securing shelf space is harder than ever before. CPG companies will have to fight even harder for shrinking shelf space by proving their ongoing value and profitability.
-- Values and ethics really matter. Over the past decade, consumers have upped their expectations and demanded that brands invest in great sustainability, provide more transparency on products and ingredients, have greater honesty and ethical practices, and take social responsibility seriously.
-- An epidemic of disloyalty means consumers are more open than ever before to switch loyalties when given easy access to more choices and perhaps lower prices.
-- A dramatic increase in direct-to-consumer products and services undercuts traditional CPG approaches.
Implications for CPG Marketers
Taken individually, each of the challenges of the current CPG landscape can realistically be overcome. Taken altogether, however, they give rise to strategic problems that CPG companies must address in a broader context. These challenges have six key implications for marketers:
-- Planning is more difficult. With today's shifting landscape of local, digital, and international competitors and market changes, planning for CPG companies is much, much harder. The move to an always-on digital consumer is rewriting rules for both retailers and the suppliers of retail products.
-- Companies need more, not less, dialogue with customers. With so many changes, CPG brands should be working to communicate more directly with consumers, providing value-add services and products while listening more closely for market changes and new opportunities.
-- It's harder than ever to justify marketing spending and budgets. From a business perspective, it's never been more important to ask if an organization's marketing spending is achieving the desired goals. With all the challenges in the marketplace, though, it's a question that's never been tougher to answer.
-- It's difficult to respond effectively or determine when to change tactics. CPG organizations that can't quickly and easily change tactics, try new media, identify new market segments, and create new opportunities are doomed to see declining market share and lower profits. CPG companies relying on traditional approaches will be a few steps behind the nimbler competitors or upstarts redefining the market.
-- Planning is more dynamic and less seasonal. Rather than rely on historical planning cycles, marketers need to be able to measure sales more directly, via both traditional and new e-commerce channels, so they can adapt to the marketplace at any time of the year.
Keys to CPG Success
Even with disruptions, proactive organizations can take advantage of the dynamic and fast-moving CPG market to retain and grow market share, develop nimble marketing programs, and put a consumer-oriented, long-term strategy in place to power future growth.
The key to such a strategic realignment is data—the right data.
By using audience targeting data based on actual in-store purchase behavior and media measurement data, marketers can gain new insights into the marketplace to dramatically boost the efficiency, effectiveness, and speed of their marketing programs.
For example, when sales data from loyalty cards, food/grocery scanners, and credit card transactions is matched with the complementary media data (digital, TV, mobile, radio, print, outdoor), marketers can analyze changes in purchase behavior to understand the impact of their marketing campaigns. Integrating these data sources gives marketers the information they need to leverage disruption and capitalize on a constantly changing market.
For more details on the keys to CPG success and tips for empowering CPG marketing, download our ebook, 5 Ways CPG Brands Can Thrive in an Age of Disruption.
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