Digital CPG Blog

PricewaterhouseCoopers released a study in June predicting that digital ad spending in the U.S. will top print spending for the first time this year.

But “CPG companies on average spend six percent of their marketing budgets on online media, half of what other companies in other industries are spending,” Douglas Brooks reports.  “Clearly, there is an enormous untapped opportunity for the CPG marketer who gets it right. And that means having a clear, holistic view of your digital marketing spend across your entire organization.”

Brooks urges that marketers start with the following basic questions to get it right:

• Over the short term, what are the goals of the digital campaign and how do they tie with those of the broader advertising and marketing program?
• Over the longer term, how does this campaign contribute to brand goals such as share of shelf, sales and market share uplift?
• What specific consumer actions does the company want to drive—do you want them to visit a Web site, print a coupon, buy online, go to the store?
• How will the team track information disseminated and measure the success of the campaign, both in terms of direct consumer response as well as the effect on offline activity

Brooks later suggests that what’s great about digital is that it allows for – and requires constant experimentation and refinement. Indeed, the area is still so new it is ripe for innovation, particularly by the CPG industry, where consumers are pleading for products and conversations that respond to their modern lifestyles.

BrandWeek reports:

It’s time for brands to bring the commerce experience into their on-  line ecosystems.

How? Companies like Procter & Gamble and Columbia Sportswear are taking the first small steps in this direction by choosing to become e-tailers in their own right, even as they continue to sell their goods and services through their traditional retail partners. They’re linking to products on retail-partner sites, sharing transaction or revenue, and redirecting customers based on product availability. Whatever the tactic, these companies are gaining a first-mover advantage in a rapidly growing trend in online retail. Product brands are wresting control of their customers’ online shopping experience away from the retailers.

Certainly, here at Alice, we’re very cognizant of this trend and the desire manufacturers have to build a more direct relationship with the consumer. E-commerce is one way that manufacturers are going direct in order to gain access to the data that retailers have traditionally held onto to increase brand loyalty and sales.

While non-CPG brands find it easier to go online and direct, CPG brands have it a bit more difficult as the article points out. No one wants to go to ten different sites and ten different checkouts and receive ten different boxes for a purchase that is usually bundled in real-life. Marketplaces like Alice help replicate that real-life shopping experience  for the customer and allows manufacturers access to a shared industry cart. By allowing the manufacturer to hold the relationship with their customer, we also transfer all the benefits and savings to the consumer as well. The direct-to-consumer trend will certainly be exciting to watch as it takes hold of the CPG industry.

A young woman walks through the drive-through. Photo Credit: joelogon.

As someone who lives in a small downtown condo, walks everywhere, and has never owned a car before my current position and 20 minute commute, a culture much less dependent on cars make total sense to me. Jack Neff of AdAge reports on this growing trend and how it affects e-commerce for CPG manufacturers:

William Draves,  president of Lern, a consulting firm which focuses mainly on higher education, and co-author of “Nine Shift,” has a theory that almost everything about digital media and technology makes cars less desirable or useful and public transportation a lot more relevant.

Gen Y will be working on “intangibles” in professional jobs, not on tangible things that require physical presence, Mr. Draves said. “Time becomes really valuable to them,” he said. “You can work on a train. You can’t work in a car. And the difference is two to three hours a day, or about 25% of one’s productive time.”

Mr. Draves predicts a resurgence of urban living in denser housing surrounding train stations. As a result, suburban shopping malls and big-box stores such as Walmart, Target and club stores that rely on people hauling big purchases away in cars stand to suffer.

Gen Y’s driving-behavior shift, however, won’t just be about helping main streets return as big-box retailers fade, Mr. Draves said. E-commerce is likely to benefit, too, as categories at first resistant to e-commerce take another serious crack at it. Alice.com, which is providing the platform and fulfillment now for more than 60 mainly package-goods e-stores, is seeing a growing share of its business, which drew close to 700,000 visitors in April from Gen Y shoppers, according to Compete.com, said CEO Brian Wiegand.

“This new generation, their first thought is not ‘let’s drive to the store to get these things,’” he said, “but ‘let’s get them the easiest, fastest, cheapest way.’ We call them internet-first people. We think that’s an important segment for us, and it’s also the biggest segment for our iPhone app, which is almost all Gen Y.”

Read the full, fascinating article >

Several media outlets recently received a bar of soap from Diapers.com parent company Quidsi, inviting reporters to a launch party for their next project, Soap.com.

The card reads that it will be “one of the biggest retail launches in history,” promising “a fresh approach to ecommerce,” and that they are “raising the bar in online shopping.”

As more brands turn online to expand their reach, it’s no surprise that Diapers.com is trying to expand their reach beyond their existing market. How the company implements such big promises will surely be a launch to watch.

P&G went live with their e-store last week. It’s another great example of how CPG manufacturers are selling direct to the consumer online.

“Manufacturers of goods have been facing increased pressure and competition from their retailers for years,” eCommerce provider Shopatron argues.  “Any retailer worth his weight is offering store brands of their most profitable products – competing directly with their suppliers. And because they maintain the customer relationship, they have an unfair advantage.”

And so manufacturers are turning online to sell direct in order to have access to that data, diversify their revenue, optimize their digitial advertising and marketing dollars, and procure insights that help support the retail channel.

Jack Neff of AdAge reports that the CPG industry going direct-to-consumer is a major trend: “P&G’s e-store comes as other package-goods marketers are also ramping up e-commerce efforts. Alice.com is hosting e-stores on its site for about 30 marketers, most of them in package goods.”

P&G relied heavily on social media to launch the e-store, which is meant to be a ‘living learning lab’ for e-commerce in which the company will share what it learns with other retailers.

For this latest venture in e-commerce, P&G is adding social features such as “product ratings, shopper feedback forums for users to share tips and links to its Facebook brand fan pages, through which consumers can buy products directly.”

Consumer Packaged Goods marketers have a big challenge:  how do you create engaging content to effectively support your  digital marketing?  The digital consumer isn’t passive; you need to provide them a quality reason to pay attention to you.

Rob Go summarized this challenge nicely in a post yesterday in which he predicted a massive shift in CPG ad $’s to the web:

Auto companies can get a lot of engagement in their ads because people love looking at pretty pictures of cars.  But not a lot of people really want to watch a great online video about paper towels. 

Exactly. 

That’s why I found it so interesting to read in AdAge this week that some big CPG marketers are experimenting with the latest darling of the SXSW crowd—Foursquare.  I haven’t spent a lot of time on Foursquare, but I’ve really enjoyed watching their growth and speculating about all of the advertising opportunities that evolve from their location-based mobile platform. 

The Mayor of Pampers?

The AdAge piece, entitled “Would You Check in to Box of Tampax? For Charity?”, summarizes the efforts to P&G and Kraft to jump into this new location based world.  Using an app from start up CauseWorld, these CPG heavy weights allow consumers to “check into” their actual products on the store shelves (scanning the bar code) to accumulate points that can be donated to charity.

Will this work?  Are consumers willing to engage in this behavior?  If CPG can make this work on a location based mobile platform like Foursquare, getting consumers to engage in more mainstream web formats like Facebook should be a cakewalk.    

My opinion is that this kind of app will have an extremely small appeal, although I’d love to see it succeed. 

Commerce is the Key to Engagement with CPG

I think charitable efforts have a lot of potential for digital CPG advertising, but the mainstream consumer isn’t going to engage with CPG brands online without some tie in to actual commerce. 

Without the opportunity to buy or save money on my paper towels, I’m not going to pay any attention to them in the digital environment.     

Want proof?  Look at some of the data coming out of Facebook, which is clearly taking over the world.  Following a brand on Twitter or Facebook will make you more likely to buy a product from that company, according to a recent study by market research firm Chadwik Martin Bailey (results here and here).  But the study also revealed that the top reason people friend a brand on Facebook was to receive discounts and special promotions. Commerce is king. 

Want more evidence of the important of commerce to digital advertising?  Consider a recent experiment by P&G on Facebook.  P&G ran a special promotion to its Facebook fans last month that allowed fans to buy a new Pampers Cruisers product before the product hit the store shelves.  The promotion was a huge success, selling out the 1,000 packs it allotted for the effort in less than an hour (coverage here).  I think there is amazing potential here.   

I salute the creativity of P&G and Kraft in experimenting with Foursquare, but the real payoff involves tying digital marketing to some form of actual commerce.

 Agree or disagree?  I’d love to hear your thoughts.

Two big announcements this week that present more evidence of a growing trend in the Consumer Packaged Goods industry towards direct to consumer sales online:

Tuesday, January 12, 2010-Alice.com announces a new eCommerce platform that enables manufacturers to launch their own branded webstores that tie into the Alice.com retail experience (full release here and coverage in the Wall Street Journal here)

Today, January 14, 2010-P&G announces that it is testing a new “eStore” to sell its products directly to consumers online (news here)

CPG manufacturers have been talking about selling direct for years; 2010 is shaping up as the year that we finally see an aggressive move online.

For all you CPG veterans out there, did you ever think you’d see the day when major retailers would open up their stores to competitors?  A day, for example, where a small retailer could waltz into WalMart and put an identical product up on the shelf?

It’s happening online.  Today Sears joined WalMart and Amazon as the third big boy to launch a “marketplace” that opens up its online store to third party sellers (see news here, here and here).  eCommerce is certainly changing what it means to be a retailer.

For these big retailers, I can see how the marketplace concept makes sense, namely, by allowing them to leverage the power of their brand to expand their product selection for customers and gain incremental revenue without disrupting their own customer fulfillment costs (Sears, for example, charges each seller a listing fee and the seller drop ships products directly to buyers).  In many ways, it seems like a win for everyone involved.

Can this work for CPG manufacturers that are interested in selling direct to consumer?

In my humble opinion the answer is no for a very simple reason:  Shipping fees.

The mainstream CPG shopper expects to fill her basket with dozens of items from multiple manufacturers and take one bundled basket of goods home in a single trip.  That same shopper is not going to be excited about shopping online for these goods in a marketplace in which she has to pay shipping fees for 10 different manufacturers to drop ship a standalone box to her door.  10 boxes with 10 shipping fees doesn’t seem to work.

Is there a way to drop the shipping fees?  One method Amazon uses with their Subscribe and Save program is bulk CPG buying.  So instead of buying a four pack of bathroom tissue, I have to buy 48 rolls in order to get free shipping.  But is this really mainstream?  And even without the bulk, do I want a stand alone box on my door for bathroom tissue, toothpaste, trash bags, pain reliever and the dozens of other products I stock in my home on a regular basis?  That’s a lot of cardboard.

We’re taking a different approach at Alice.com, which like the marketplaces mentioned above, is open for manufacturers to sell direct to consumer.  But instead of consumers getting multiple boxes, they receive one Alice box of bundled goods from multiple manufacturers shipped free to their door.  By sharing the box and shipping costs (rather than drop shipping), the manufacturers can offer consumers the convenience and free shipping they demand.

Bottom line for CPG manufacturers?  The lines of what it means to be a manufacturer and a retailer are blurring online, and opportunities abound to innovate in how you get your goods into the hands of the consumer.

It looks like 2010 is shaping up to be a banner year (bad pun, sorry) for digital ad spending by the Consumer Packaged Goods industry. 

According to an Adversiting Age article this week (article here), digital CPG spending has seen a big upswing in the back half of 2009, with at least one agency claiming “a hockey stick of growth in CPG.”  Interestingly, most of this growth isn’t coming in measured media like online display ads.  Instead, the growth is happening in things like social media projects, digital POP, mobile, and eCommerce initiatives. 

And herein lies the huge question for 2010 and beyond: As CPG tries to scale its digital advertising, will the industry find enough high quality places to put those ad dollars? 

In my view, eCommerce will be a lynchpin to these efforts.  If CPG brands use eCommerce as a tool to energize their websites with real consumers, those sites can serve as a centralized collection point for a host of diverse online campaigns.  As always, I’d love to hear your thoughts as well.

As we’ve mentioned previously, manufacturers in non-CPG industries are increasingly using the online channel to sell direct to consumer (for example, Internet Retailer recently announced that manufacturers selling direct to consumer is the fastest growing online retail category in this year’s Top 500 Guide).

Mattel, the largest U.S. toymaker, made news this week with a new direct to consumer website that offers all of Mattel’s well known brands under one eCommerce site.  The site, located at Mattelshop.com, includes a number of innovative social features (full coverage here).

It is very interesting to see a manufacturer combine its broad brand portfolio into a single eCommerce effort.  But what I find even more interesting is the analogy to the CPG industry.  Both the toy industry and the CPG industry have a retail landscape that is dominated by a few giants.  Mattel, for example, generates approximately 1/2 of its revenues from three big retailers, Walmart, Target and Toys “R” Us.  The national CPG brands have similar distribution among a few retail giants.

The takeaway for me?  A big national manufacturer like Mattel can take bold steps to go direct to consumer online without disrupting  its traditional retail relationships.  

Shouldn’t the CPG industry be in the same position?  CPG manufacturers have an assortment problem in going direct on their own (something we are trying to help solve with our shared platform at Alice.com).  Are there other pitfalls to a CPG manufacturer going direct that aren’t present for Mattel?  If not, I think Mattel is leading the way in what is sure to be a bigger trend online.