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Creating Persistent GrowthThree Strategies for Consumer Packaged Goods (CPG) Brand Transformation

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2020: Beyond RecallAs consumers stocked up on goods for their homes, the pandemic created a record-setting year for consumer packaged goods (CPG) topline total revenue as well as created new habits and consumer expectations. CPG brands had to adapt and pivot many aspects of their business go-to-market to remain competitive during a year of many changes, including:

Changing behaviors: Over 75% of U.S. consumers changed their shopping behavior and purchased new brands during the COVID-19 pandemic. (1) The top three reasons for buying a new brand were value, availability and convenience.Additionally, research shows that 75% of global consumers tried new websites, stores or brands during the pandemic. Further research showed that 60% of them expect to integrate these new options in the future.(2)

Physical retail struggled while ecommerce surged: Research shows that overall retail sales dropped 10.5% in 2020 to $4.894 trillion, a level not seen since 2016. However, ecommerce surged 18% or more.(3)

Traditional brand awareness opportunities have been disrupted: while lockdowns have enhanced the consumption of media, the rise of streaming platforms and other adless forms of content have limited CPG’s reliance on advertising to create brand awareness. Similarly, the cancellation of live events used to connect with cultural moments has impacted their ability to reach audiences.

Consumers came to care more about values: Our own research shows that consumers want to see brands commit to societal values and take concrete action/stances to effect meaningful change. For instance, “37% percent of Millennials say that social justice is more important since the beginning of 2020”(4) and that “66% of consumers believe that by 2030 a company’s reputation will depend on the action it takes to address climate change.”(5)

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Magnifying the Weak Links in the CPG Chain

The CPG industry has most likely experienced changes that will stay beyond the pandemic-induced complications that exposed the frailty of a business model centered around intermediated and delegated consumer relationships. When store-based access was no longer a reliable option, mediocre digital experiences were instantly brought into the spotlight. While creating tremendous distress and hardship for some CPG brands in the market, 2020 also acted as a forcing function for a long-needed reassessment of an out-of-date business model. Here are some of the challenges CPG faced that have been exacerbated in the last year:

Retailers and marketplaces are both partners and white label competitors to CPG companies that need to invest in branding to re-energize their relevance: In their disintermediated relationship with consumers, CPGs rely on physical and online retailers as partners. However, both are also becoming their competitors with their white-label products. For example, Target built and launched a $1B food brand to cater to the buying habits that emerged during the pandemic. (6) While marketplaces offer great advantages for CPGs, ultimately, they have their own interests at heart. They can take advantage of their position as hubs for online product searching and shopping to attempt to dominate certain categories with their own products. For instance, Amazon now has over one hundred white label brands that sell quite well on the self-owned platform.(7) Third-party online hubs are powerful vehicles for CPG businesses – but they can only thrive as long as their brands are recognized by the audience.

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Shortened buying cycles made the separation between consumer and shopper collapse, creating a greater demand for ecommerce readiness: According to a recent study, eight in ten CPG brands have seen a shortening of purchase cycles even though consumers are visiting stores less frequently.(8) Higher exposure to media and the exponential growth of ecommerce has cemented the expectation that everything should be immediately ‘shoppable’.

It’s easier for startups to create attention with new audiences through engaging customer experiences: Innovative technologies have created an atmosphere where consumers expect all brands to have a presence on emerging channels and be able to build bespoke experiences that inherently belong in that context. Being born in the digital era, startups are better suited to use emerging technologies to test new modes of engagement, attract new audiences and rapidly launch new products and experiences. In turn, established brands are burdened by technical debt and find it harder to move at the same velocity. 51% of CPG executives claim that their brands are lacking the skills to drive growth and agility.(9)

How can CPG brands resonate with consumers in this quickly changing environment? How can they identify potential customers and understand their behaviors from their disintermediated position? How can they make sure their products are available where consumers expect them to be immediately ‘shoppable’? This ebook will outline three strategies to help CPG brands address these questions.

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Create Cultural Relevance in the Attention EconomyStrategy #1With more time passed by consumers at home, the average amount of time spent with media grew from 12 hours and 30 minutes per day to 13 hours and 35 minutes per day.(10) However, this increase has not necessarily meant that exposure to advertising has grown in parallel. Today, there are more than 200 streaming services, many of which provide consumers with ad-free entertainment options.(11) Additionally, experts estimate that at least a quarter of internet users have at least one add-on ad blocker installed.(12) This means that earning consumer attention has become more difficult than ever before. So, how do you build relevance and resonate with consumers today?

The answer lies in human-centric marketing solutions and powerful storytelling. By creating original content that addresses modern problems, adds value to society or works towards common goals, brands can build empathy with consumers - as long as they are demonstrating authenticity and commitment to meaningful progress. Studies have shown that 83% of Millennials find it important that the companies they buy from align with their values and 71% of the same sampled audience will pay more for a product if a portion of proceeds benefits a charity.(13) In a time where consumer trust in media is diminishing, a corporate identity genuinely adherent to these values and reinforced by trusted sources like influencers can ensure that consumer attention is maximized by the cultural significance of the brand’s elevated purpose.(14)

A terrific example of creating cultural relevance is Crayola’s ‘Colors of the World’ campaign. The brand wanted to emphasize their belief that every child has the power to create their place in the world. Dentsuteams developed the strategy to launch Crayola’s new Colors of the World product, featuring 24 specially formulated crayons designed by Victor Casale, current CEO of MOB & Pure Culture Beauty. The campaign reached beyond the traditional single-sided story of diversity to focus on the wider story of inclusivity. The campaign resulted in 2.4 billion media impressions and all units were sold out during the pre-sale phase.

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How We Can Help

Brand ConsultancyKnowing what you believe in is the key to knowing how to behave. Our brand consultancy experts help companies define category distinctive, culturally disruptive and customer persuasive brand purpose and positioning. By combining insights on consumer behaviors with our Modern Masterbrand Framework, we create inspiration that informs the entire customer journey.

How We Can Help

Influencer MarketingIntegrating your brand within a broader cultural discourse is a powerful strategy to create relevance as long as the integration is perceived to be genuine. Associating your brand purpose with a trusted source within a community is the key to gaining credibility and authenticity with your target audience. Our influencer marketing network ensures your campaign is supported by the most relevant and recognizable talent to maximize your reach and engagement potential.

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How We Can Help

Original Content Production& Distribution The popularity of streaming platforms has transformed media consumption habits and consumers have become accustomed to ad-free entertainment. Our original content production solution enables CPGs to reach audiences where they are most engaged by integrating their brands with entertainment content, rather than interrupting it. Brands can create holistic marketing programs, earning attention through the connection to culture by leveraging original content on packaging, in stores and through media amplifications.Additionally, marketing investments have the potential to become cost-neutral, or even revenue-generating, as the brand retains IP ownership and can monetize distribution rights over time.

Case Study

P&G brand, Gillette, was looking for a way to create an emotional connection with young male consumers aged 18-34 by effectively reaching them on popular platforms with communication that aligns with their interests and values. The solution was a four-episode premium documentary series titled The Cost of Winning, produced by dentsu, co-owned by P&G and distributed in the U.S. by HBO and HBO Max. The premiere of The Cost of Winning reached 800,000 viewers on HBO across platforms. Additionally, the series received a Sports Emmy nomination in the Outstanding Serialized Sports Documentary category.

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Strategy

The accelerated growth of ecommerce has led many brands to invest in building or evolving owned online commerce properties to sell their products directly to consumers. However, in the case of CPG brands this approach may only be applicable to players within certain product categories but be less relevant and desirable for others. This determination depends on consumer habits, the cost associated with managing the entire supply chain and distribution lifecycle at scale, regulations that add complexity to the sale of certain products and whether an owned online commerce store can generate additional value for the brand – in the form of sales but also in terms of brand identity and loyalty.

Nevertheless, CPG brands can no longer ignore that consumers now expect to be able to shop ‘in the moment’ and that all the products they want will be instantly available for online purchase from their preferred channels. 53% of online product searches carried out by U.S. consumers take place on the Amazon marketplace.(15) Online retail and marketplace partnerships ensure products are there to be found by consumers and also help brands take advantage of established distribution and fulfillment

infrastructures. While many CPG brands may feel threatened by their white label competitors, investing in the optimization of their product listings and ensuring their brands are properly represented in third-party ecommerce environments can ensure they have a strategic online presence without having to implement, maintain and secure direct to consumer (DTC) operations.

Whether they are selling online through their own DTC stores, through third-party ecommerce hubs or both, CPG brands need to build data foundations in order to remain competitive. As ‘mass marketing’ opportunities such as commercials interrupting television broadcasts, live event sponsorships and out of home advertising are less reliable, harnessing data about consumers and their behaviors is necessary in order to produce targeted and personalized ads to prompt them to either take part in brand-owned digital experiences or simply buy branded products from third-party vendors.

#2 Future-proof for an Evolving Commerce Ecosystem

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Traditionally, online advertising audiences have been segmented on the basis of data generated by third-party cookies. However, both the enforcement of new privacy regulations like the CCPA in the U.S., GDPR in the E.U. and the deprecation of third-party cookies by players such as Google are revolutionizing the ad tech space and driving a paradigm shift towards first-party data-based addressability.(16) This creates both a challenge and an opportunity for CPG brands. On one side, their disintermediated position may put them at a disadvantage in the bolstering of first-party data, which is often carried out through direct interactions with consumers. On the other, CPG brands investing early in the development of privacy-safe identity graphs, which securely collect and resolve customer identifiers, will be able to network them with retail partners and publishers looking to increase addressability, using them as currency in their ecosystem relationships.

A timely investment in first-party identity resolution allows CPGs to take full advantage of the emergence of Customer Data Platforms (CDPs). These platforms bring together disparate data sources in unified customer profiles and propel the benefits that identity-based data unlocks throughout their entire technology stack, setting in motion or cementing CPG brands’ transformation into customer-centered enterprises.

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How We Can Help

Retail Marketplace Consultancy From logistics assistance to pricing and retail advice, to building and refining optimized media plans, this solution helps clients leverage every possibility on Amazon and other third-party ecommerce hubs. Our consultants use proprietary and third-party tools and technologies to conduct audits that deliver thorough, measured and actionable recommendations to optimize brands’ performance across the entire ecosystem.

Case Study

We helped a leading kitchen appliance brand revamp and recreate product listings and pages on Amazon to be more competitive ahead of Prime Day. Within two weeks, dentsu helped transform its brand content, build media support and launch several new products. As a result, their flagship product was the #1 seller in its category and the #2 most sold non-Amazon product during the online retail event.

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How We Can Help

Data Resolution and CDP EnhancementWe deliver excellence in data transformation and, thanks to the enterprise identity management platform Merkury, we enable brands to build owned identity graphs. Our identity resolution capabilities leverage first-party data, enrich it with 10,000+ data attributes based on U.S. households and consumers and manage audience information in privacy-safe ‘clean rooms’. We are recognized for our expertise implementing and integrating the leading CDPs in the market, enhancing their unified profiles with first-party data to fuel personalized experiences and activate cookie-less media connections with premium display publishers.

Case Study

We helped a leading global snack company create deeper, more engaging experiences across its sub-brands by using first-party data assets for efficient and effective marketing. By migrating over 20 data sources into the Lytics CDP and integrating with Merkury, we built a single customer view for marketing efforts. This resulted in 100% more signups, 15% more pages visited per session, a 4.7 times more effective cost per submission form and a 12 times higher submission rate using email-based look-alike audiences for one of the sub-brands’ media activations.

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Strategy #3As previously discussed, consumers have started trying out new brands more frequently. This is in part the result of the fact that startup businesses are positioning their products on the digital channels consumers engage with the most and this strategy is paying off particularly well now that physical retail is struggling.

For example, 30% of consumers say that they are now comfortable completing transactions and making purchases on social media.(17) This is not only an indicator of where CPG brands need to ensure their products are represented in order to remain top of mind and compete with startups today, but it also demonstrates what type of expectations consumers are developing for all emerging channels and technologies. Between 2020 and 2027, the virtual reality market is expected to grow at an average of 21.6% every year.(18) Delivering customer experiences that are built for these new modes of engagement is the key to retaining consumer attention in the future.

Invest in Customer Experiences to Market like a Digital-Born Business

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Startups have the advantage of being digitally native businesses founded on agile martech stacks that allow them to launch experiences on emerging channels and technologies at high market velocity. Conversely, established CPG brands built their infrastructure around back-end operations to fulfill their disintermediated business model and support retail sales. This puts many of them in a position of disadvantage in the launch of consumer-facing experiences as the majority of their investments in technology have been focused on supporting back-end processes like logistics, distribution and supply.

CPGs now need to be forward-facing and proactive in identifying the gaps in their martech stacks so they can be faster in responding to new consumer expectations and the demand for disruptive experiences. The scale and complexity of multi-brand businesses operating on a multi-national level create a number of variables that need to be carefully assessed when building or optimizing a martech stack to ensure that investments in best-in-class platforms are reaching the maximum level of return.

Some of the questions that need to be addressed in order to achieve this are: Do I have the right technology in place? How do I evolve my capabilities? Should I be investing in point solutions to launch brand- or channel-specific experiences or do I need to first consolidate an enterprise architecture to simplify the management of both back- and front-end operations?

CPG brands that address these questions by defining a strong digital transformation strategy will be able to bridge the gap with startups and compete with the customer experiences that are contributing to their popularity.

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How We Can Help

Martech Strategy and IntegrationThanks to 30+ years of experience in digital transformation, our experts assess the state of your marketing technology stack, help you define the vision for your brand’s personalized multichannel customer engagement strategy and deliver an actionable plan that outlines the people, processes and technologies involved in realizing it. As a leader in Adobe implementation services and the #1 Salesforce agency partner and a specialized provider for Google and AWS-based cloud services, we can partner to help you accelerate your transformation journey with the integration of world-leading customer experience platforms.

Case StudyAs consumer shopping channels continue to shift online, Hershey’s asked dentsu to develop a strategic plan to gather first-party data to better understand customer behavior and extend its lead in the confectionery industry. We interviewed Hershey’s stakeholders and commerce fulfillment partners and conducted an assessment of the brand, its products and competitors. This included a content evaluation, Alteryx data append, cross-channel media analysis and an organizational study for the creation and ongoing support of a DTC commerce team within The Hershey Company. Since the relaunch on Salesforce Commerce Cloud, Shop.Hersheys.com has seen a 98% growth in orders and a 105% increase in sales compared with the previous year.

Note for creative: this is from the case study on the DEG website. Not sure if we have a better resolution image for Hershey we can use

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Get Started. Today.At dentsu we are on a mission to help clients navigate, progress and thrive in a world of change. As a modern marketing solutions company, businesses rely on our integrated network of agencies and specialized practices to champion meaningful progress through creative, media, commerce, data and technology.

We work on a global scale with leading CPG brands such as AB InBev, Kellogg’s and P&G, helping them connect with consumers and accelerate their transformation journeys.

Contact

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References

Written by:Jack Boitani, Content Lead, dentsuKelly Kirkham, Content Specialist, dentsu

https://www.zdnet.com/article/mckinsey-three-factors-drive-consumer-loyalty-in-the-next-normal/

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/five-fifty-the-quickening

https://www.emarketer.com/content/us-retail-sales-drop-more-than-10-2020?ecid=nl1014

March%202021%20Edition%20Recovery%20Navigator.pdf

https://brands.dentsu.com/consumer-vision-2030/start

https://www.forbes.com/sites/louisbiscotti/2020/11/23/private-label-soars-during-pandemic-battling-brands/

https://pattern.com/blog/all-you-need-to-know-about-amazons-private-label-brands/

https://www.warc.com/newsandopinion/news/why-cpg-marketers-need-to-reassess-their-strategies/44359

https://consumergoods.com/agility-new-competitive-imperative-cpgs

https://www.emarketer.com/content/us-time-spent-with-media-2020

https://gazette.com/arts-entertainment/all-the-major-streaming-services-from-netflix-to-disney-ranked/

https://www.statista.com/statistics/804008/ad-blocking-reach-usage-us/

https://www.5wpr.com/new/research/5wpr-2020-consumer-culture-report/

https://www.emarketer.com/content/where-do-us-consumers-begin-their-product-searches

https://www.theverge.com/2020/1/14/21064698/google-third-party-cookies-chrome-two-years-privacy-safari-firefox

https://www.isobar.com/en-en/insights/global/2019/november/isobar-launches-augmented-humanity

https://www.grandviewresearch.com/industry-analysis/virtual-reality-vr-market

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https://www.thedrum.com/opinion/2020/12/21/the-rise-transparency-influencer-marketing-202114