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Beyond the Aisle: Where Consumer Packaged Goods Brands Meet Technology to Drive Business Results
Tim Ross
Published by SolutionSet at Smashwords
Copyright © 2012 Tim Ross
Smashwords Edition, License Notes
Thank you for downloading this free ebook. Although this is a free book, it remains the copyrighted property of the author,
and may not be reproduced, copied and distributed for commercial or non-commercial purposes. If you enjoyed this book,
please encourage your friends to download their own copy at Smashwords.com, where they can also discover other
works by this author. Thank you for your support.
Beyond the Aisle:
Where Consumer Packaged Goods Brands Meet Technology to Drive Business Results
Dedication
To Gloria, Maddie, and Allie who make everything in my life better
Acknowledgements
I would like to thank a number of people without whom this book would not be possible.
HMI’ers Zain Raj, Paul Kramer, and Peter Cloutier taught me about the CPG business and the
marketing problems web, mobile and social technologies could solve.
SolutionSet’ers Alex Kaplinsky, Frank Anan, Robert Balmaseda, Dave Kilimnik, Adam Trissel, and
Dessy Stanley who are great partners and even better people.
Chapter co-authors Joe Robinson, Stacey Rubin, Peter Cloutier, and Paul Kramer, who gave key
insights and applications across strategic domains.
Amy Westervelt, who for years has made me appear far smarter and more productive than I truly am.
My friends and family from whom I steal many of my best ideas.
Table of Contents
Preface
Chapter 1: Market Shifts
Chapter 2: Understanding the Digital Consumer
Chapter 3: Understanding Digital Marketing
Chapter 4: The Benefits of Building Active Customer Communities
Chapter 5: Mobile Tech and Capturing the Always-On Shopper
Chapter 6: Building Customer Loyalty Through Gamification, Interactive
Marketing and Rewards Programs
Chapter 7: Turning Video into Value
Chapter 8: Leveraging Video Analytics to Improve Everything from Customer
Service to Visual Merchandising
Chapter 9: Using Web CMS to Manage Not Just Content, but Brands
Chapter 10: Digital May Be Different, but Content Is Still King
Preface
In 2012, SolutionSet, the second largest independent marketing service agency in North America and
D.L. Ryan Companies, the nation’s largest independent digital, shopper, and promotional marketing
agency, merged to form Hyper Marketing Incorporated (HMI). That merger didn’t just create one giant
integrated marketing services company, it also brought together some key pieces of the digital
marketing puzzle for consumer packaged goods (CPG) companies. With DL Ryan’s long history of
working with CPG brands and SolutionSet’s experience using technology to change brands, we
quickly realized we could help transform the way CPG companies leverage technology.
Over the course of several months we brought our best thinkers together to look at all the different
aspects of digital for CPG companies—from how they might use web systems and mobile
technologies to how such strategies as gamification could help CPG companies build their brands
and solidify their relationships with consumers.
Those conversations led to a series of tips and articles and ultimately to this ebook, which we
envision as a quick and easy primer on digital marketing for CPG companies. Enjoy!
Chapter 1: Market Shifts
Ten years ago, consumer packaged goods (CPG) companies had very little direct interaction with
their customers. They dealt with distributors and retailers, and they had a corporate marketing team in
place to tend to the company’s brand more generally, but the day-to-day relationship with consumers
was left largely to retailers. And that relationship was mostly managed in person. Shoppers would
head to the grocery store, coupons in hand, and browse for what they wanted. While there, they
might happen across an end-cap display showcasing a two-for-one deal or someone handing out
samples of some kind.
Those days are largely gone. Digital technology—particularly mobile and social technology—has
transformed the consumer experience in every industry. For CPG companies that means not only
learning how to sell to consumers online, but also playing a bit of catch-up when it comes to digital
marketing. It also means a wealth of new opportunities to reach and sell to customers. Online CPG
sales were projected to reach $16 billion by 2012, according to Nielsen, up from $12 billion in 2010.
Though that’s still just a fraction of the $475 billion total predicted value of the CPG market, it’s
nonetheless a growing segment worth courting.
The key to tapping into those consumers, and to the potential of digital more generally, lies in
understanding how consumers have changed over the past several years and how marketing needs
to evolve to deal with that change.
First there was the initial shift to digital when people realized that it was easier to order things like
giant bags of dog food online and have them delivered, rather than lugging them home from a store.
Today, it goes far beyond that. Consumers can use their smart phones to find out where each piece
of produce in the grocery store came from or search for particular coupons while they shop.
According to Nielsen, the web is the fastest-growing CPG sales channel, with more than 10% of
some categories’ sales occurring online. Although CPG companies have mostly caught up with the e-
commerce side of things, many still lag behind when it comes to understanding how to market to
digital consumers.
Chapter 2: Understanding the Digital Consumer
It’s not just the distribution channel that has changed. Customers and their whole approach to
consumption have changed. Over the past decade, the way customers move through the purchasing
process for any type of product or service has fundamentally shifted. Consumers have become
increasingly suspicious of “push” marketing techniques—placing information in front of people in
order to influence purchasing decisions—opting instead to “pull” in their own information. Today’s
consumers turn more often to friends and family for advice on what to buy than a company’s website
or ad campaign.
In its 2010 study, “The Consumer Decision Journey,” consulting firm McKinsey posited that the
traditional way of thinking about how customers make purchasing decisions—typically represented by
a funnel, with consumers narrowing their decisions down over time as they are influenced by various
factors—no longer bears any resemblance to the way customers make decisions. The firm’s analysts
found that consumers no longer move neatly and linearly toward a purchase. At any given point, most
people are only aware of a handful of brands in a given product space. However, once they decide to
purchase a particular type of product—a TV, say, or a smart phone—they set about researching that
category, asking friends and relatives, reading consumer and media reviews online, and (less
frequently) paying attention to ads in the space.
CPG companies that understand this new customer—and meet them where they’re at—stand to gain
substantial market share. Those that don’t will spend the next several years looking over their
shoulders at Amazon. Not only is the e-tailer setting up regional distribution centers all over the
country, but it also bought Diapers.com and Soap.com in 2011, and it has been hinting at taking a
bite out of the grocery industry.
Customers “pull” more information these days because there’s plenty of it available and more than
half the planet now has access to it. There is no end to sources of relatively unbiased information,
from the running commentaries of friends on social media sites to crowd-sourced product reviews to
plain old word-of-mouth suggestions. Not only have consumers become quite good at finding the
information they’re looking for, but they can do so anywhere and any time. According to recent Pew
research, nearly half of all Americans are smart phone users. And according to the latest comScore
report, four out of five of those 85.9 million people use their smart phones to research and make retail
purchases.
Thanks to the proliferation of DVRs and streaming video sites, it’s becoming easier for consumers to
avoid “push” messages. Consumers have always been able to avoid being influenced by web ads. As
mobile ads increasingly geo-target consumers and serve up more relevant content, they are proving
more effective than standard web ads. However, their peers still influence consumers more than any
campaign, no matter how personalized.
Then there’s the public’s widespread mistrust of advertising in general. A Forrester Research survey
found that between 2002 and 2004 alone, there was a 40% drop in the number of respondents who
agreed that ads were a good way to learn about new products. There was also a 59% drop in the
number of respondents who had bought products because of ads, and a 49% drop in the number of
respondents who said they found ads entertaining.
The thing about social networks—both digital and physical—is that they constantly influence
consumers. Unlike the traditional advertising paradigm, wherein the natural campaign “end” is a
purchase, in today’s digital world, companies need to ensure customer satisfaction long after the
purchase date or face the dip in sales that could come if customer complaints start cropping up on
Twitter and Facebook. No company wants a hashtag that marries its name with the word “sucks” to
start trending on Twitter.
So there’s the availability of information, consumers’ ability to avoid advertising, their general mistrust
of advertising, and the communal nature of the web, which lends itself to constant social influence.
When you throw technological innovation into that mix—in the form of apps that tie products,
information, and your Facebook page together, for example—it doesn’t take long for the masses to
take it and run with it.
In the past, CPG brands focused the bulk of their marketing efforts on in-store promotions and
coupons. When they began to use digital channels to reach customers, CPG companies tended to
cling to similar strategies, simply making them slightly more digital—coupons on a brand’s website or
a push alert to consumers’ phones about a two-for-one offer. CPG brands must start looking beyond
the in-store experience and begin thinking about how to interact with their customers everywhere—at
home, online, in-store, on devices, and on review and social media sites where customers might
share their product experiences with others. It’s no longer enough to release the occasional coupon
on a brand’s Facebook page. Although such activities are worth pursuing, they’re the low-hanging
fruit of digital marketing for CPG brands. Consumers expect at least that much, but to truly
differentiate themselves, CPG brands need to do more. They need to connect with consumers on
multiple levels by providing content and tools that are applicable to their daily lives.
Gluten Freely, a site recently launched by General Mills, is a great example. The site is content-rich
with plenty of info and tips on gluten-free diets, not just product information. By providing an easy
portal for gluten-free consumers, General Mills has not only connected with a new market segment,
but it has also created a great way to keep tabs on what sorts of products this segment is looking for
—both by tracking what customers search for on the site and by providing easy ways to post
questions and comments.
ConAgra’s “Give Every Night New Flavor” program, launched in conjunction with several retailers, is
another good model. The company created a microsite, which offered recipes and all the products
needed to prepare them, built in-store displays that showcased the recipes, provided digital coupons,
and advertised both online and in print. The program delivered double-digit growth in units, dollars,
and profit over the prior year.
Both programs highlight the importance of every part of the customer journey for CPG marketers,
beyond the initial interaction or the point of sale. CPG marketing needs to happen all the time now,
not just in the aisles. It also needs to provide real value to consumers, not just more ads to ignore.
Marketers can no longer post the occasional digital coupon on their brand’s Facebook page, create a
viral video, and call it a digital marketing strategy. Although the idea of completely rethinking how
marketing is done may seem daunting at first, we’ve boiled it down to two fundamental changes: CPG
marketers need to re-think how customer value is calculated, and they need to start thinking more like
product managers.
Chapter 3: Understanding Digital Marketing
The traditional Lifetime Value Formula (LTV)—used for the past several decades to figure out
marketing budgets—is being upended by the shift in how companies and customers interact. The
Lifetime Value formula predicts the net profit attributable to a company’s entire relationship with a
customer. The math is complicated; it takes into account churn rates and retention rates, retention
costs, contribution margins, and time period. Traditionally, if the cost of acquiring customers is lower
than the LTV of those customers, marketers got the go-ahead to spend more on campaigns aimed at
finding new customers.
Today, that’s not always a good strategy. Ideas about Customer Lifetime Value and Customer
Acquisition Costs need to change because the markets they describe and predict are changing.
Customers don’t want to be bought, they want to be wooed. They still seek immediate gratification to
a certain extent, but they’re much more concerned about identifying with a brand and its values than
they were in the past.
Beyond that, consumers don’t want to hear about a product or service from the company that sells it.
They want recommendations from their trusted friends and family. Study after study has shown that
word-of-mouth marketing—while slower to pay off—delivers nearly twice as much long-term customer
value to companies as advertising does.
Word-of-mouth marketing is particularly crucial in new markets. A 2010 study by McKinsey found that
although advertising and previous product usage continued to be the primary drivers of consideration
in mature product markets, word-of-mouth was the most important factor at every stage of
consideration in new markets.
The thinking around word-of-mouth needs an update, too. Traditionally viewed as low-cost advertising
with a high return, it could perhaps be better described as high-cost brand building with a high, long-
term return. Companies could spend quite a bit of money creating apps, tools, and customer service
programs that their audience view as cool enough to share with their friends and family or to tweet
about. But because all of those investments have a long shelf life, unlike a month-long ad campaign,
they will continue to generate returns for years. They are also likely to deliver ongoing word-of-mouth
returns, which traditional marketing formulas don’t account for.
There’s an additional shift underway, not just away from marketing’s obsession with new customers
and toward building long-term brand loyalty, but also toward baking that eventual loyalty into a
[...]... marketers can make marketing about adding value to a product, they will capture the attention of consumers Marketers must identify gaps to fill in parts of the experience chain that their competitors are missing To be effective in today’s market, they need to develop digital tools and experiences that extend and enhance their brands In other words, they need to be product managers as well Part of being... leverage the power of your current users and their shared interest in your brand Let them amplify your messages to their friends Let them suggest answers to typical user questions Let them find it easy to “buy now.” Let them add value to your brand experience—you just need to provide the opportunities and tools Turning Your Customer Community into a Valuable Asset We all know that building customer communities... sites, do so at their own peril RightNow’s latest Customer Experience Impact report showed that 89% of consumers began doing business with a competitor following a poor customer experience, and 50% of consumers give a brand only one week to respond to a question before they stop doing business with them Despite these risks, companies ignore four out of five consumer complaints according to the RightNow... cross-functional team It used to be that a marketing VP could go to an ad agency, commission a creative campaign, and worry about tacking it on to the website later Today, marketers who want to incorporate digital tools into their strategies are going to have to get a lot more comfortable with technology Adding technologists to the team is a great place to start, but creating good digital marketing tools requires... social customer service done right The company’s message boards feature discussions on a wide range of baking topics, and consumers who are uncertain about how to prepare a particular on-pack cookie recipe can tap into the wisdom of other visitors to the message board Active board members love getting to share their expertise, and newbies appreciate the quick response, which they associate with the company,... will generate increased business, and 77% have had it with all the talk about brand equity that can’t be linked to actual firm equity or any other recognized financial metric Part of the problem is that many marketers have lost touch with what customers really want Consumers want companies to show them the value of a product, not a cool concept vaguely related to the product To the extent that marketers... acquisition strategy from the beginning Companies that are able to turn marketing efforts into content or tools that are of real value to their customers will typically build a customer base that is loyal for life rather than acquiring the one-off customers drawn by catchy ad campaigns Even the idea of a viral video, once considered the Holy Grail of marketing, has gone the way of the dodo Sure, that Old... younger customers this year But a clever video doesn’t provide real value or guarantee long-term loyalty Focusing on the customer experience isn’t just about building a brand or finding and engaging customers, it’s a way to ensure that the customers you acquire will be more valuable (better) customers over the long haul, and that they will be customers who continue to help spread the word to other potential... numbers add up to sizable revenue Thanks to the success of gaming in various sectors, many users are primed for the social gaming experience This opens the door for Consumer Packaged Goods companies to more fully reach curious, engaged consumers in the aisle and in their homes Here are three ways gamification can benefit CPG firms 1 Encourage Future Loyalty Rewards programs remind consumers to return again... marketers to embrace a product management-style process, they need to shift their thinking in three key areas: Bring Technology and Creative Together The right team for a digital marketing product includes top-level technologists who are involved in the process from the beginning Make sure you have your tech folks at the table vetting technology solutions early on, and ensuring that your concept will either . Beyond the Aisle: Where Consumer Packaged Goods Brands Meet Technology to Drive Business Results Tim Ross Published by SolutionSet at Smashwords Copyright. friends to download their own copy at Smashwords.com, where they can also discover other works by this author. Thank you for your support. Beyond the Aisle: Where Consumer Packaged Goods Brands Meet. just a fraction of the $475 billion total predicted value of the CPG market, it’s nonetheless a growing segment worth courting. The key to tapping into those consumers, and to the potential of
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