Digital CPG Blog

Companies are losing out on billions of dollars and pounds in revenue due to a poor online experience, according to research published today by Econsultancy and Tealeaf. A global survey of more than 500 businesses for the Reducing Customer Struggle report found that companies able to quantify site abandonment estimate they are losing the equivalent of 24% of their annual online revenue due to a bad website experience.

Ouch.

“This focus on understanding customer acquisition and giving less emphasis to the rest of the sales and marketing cycle mirrors the marketing bias towards acquiring customers which has been a feature of the business landscape over the last few years,” the report argues.

I believe that user interfaces and experiences, not data will redefine online commerce in the next wave. I would love to see an interface that allows me to see what strangers and my friends are browsing in real-time. I’d really love to invite my best friend in Madison to go on a shopping date while I’m in DC and browse a site simultaneously while I glance at her and what she’s browsing.

If you try to imagine these experiences in the web’s current architecture, it seems clunky, unrealistic even, but I assure you, the interfaces that use the data of web 2.0 will evolve and become increasingly important in web 3.0. And that’s what will define social on the Internet.

Common predictions are that “the first phase of e-commerce was the utilitarian hunt for staples, the next phase of e-commerce will be about recreational shopping where the merger of social and interest graphs will drive buying decisions,” but here’s my prediction: after the data, it’s going to be the experience. Data is useless without a meaningful experience to plug into. How the interface and experience of social is formed will drive the next evolution of online commerce.

This is the kind of graph we all like to see:

For CPG manufacturers, going online enables a deeper, more personalized relationship with the shopper, reports Nielsen.

Five things to know about online grocery shopping:

1. Consumers love online grocery shopping, but it takes time getting used to. You can simply the process by improving the online experience with navigation, search, online help and porting over shopping lists. Deliver a better time-saving experience and consumers will hang on.
2. Online baskets are different than offline baskets. The average transaction size is much larger for food and beverages ($80 online / $30 offline) and health and beauty purchase ($30 online / $10 offline). And online shopping offers a greater mix of pack sizes and categories.
3. Consumer perceptions and purchase behaviors are affected in important ways. The interactions with the online ‘store’ environment are fundamentally different than an in-store experience. The online experience is fueled by a needs-driven experience as a greater variety of options are made available on screen.
4. Online shopping “levels the playing field”. Big brand ‘physical’ advantages do not translate online. With universal distribution and search functionality an inherent bias toward niche players is created. Ultimately, price transparency, connectivity and open content favor a purely ‘rational’ market.
5. Large and small brands can win online by combining marketing savvy with digital capabilities to add value. With interactive websites, smartphone applications and social media connections, expanding your brands in new and innovative directions is virtually limitless.

“Consumer packaged goods giant P&G has indicated a desire to source 10% of its sales online. Given that it currently sources less than 1%, that sounds like an aggressive goal but one that it is putting its formidable resources against delivering. Many other CPG companies from Kraft, J&J and General Mills to Pinnacle Foods are placing a strategic imperative on the etailing selling space,” reports Chief Marketer.

With the numerous options to sell online through retailers and the ability to sell direct to consumers through other platforms, it shouldn’t take P&G that long to reach their goal. Etailers are well positioned to deliver on convenience “and selection (the online shelf set doesn’t have to adhere to the space limits of the brick and mortar shelf).”

“Etailers can also provide a experience, enabling consumers to customize the online “shelf” in a wide variety of ways, such as by size, product feature, price, brand and manufacturer. In this way, online is not just an incremental sales channel but also strategic marketing medium that engages consumers.”

As a result, customers are responding. “Close to 50% of online shoppers have purchased personal care products online within the last six months and 40% have purchased food items, according to an etailing solutions CPG eCommerce Study developed with Catapult Marketing.”

Not everyone agrees that social commerce has taken off – or will. We talked recently about how Forrester said that commerce would not be driven by Facebook.

And while we disagreed, we also know that a Facebook like is not social commerce. Here’s another synopsis on why social commerce has not quite made it to the big leagues yet, and what you can do it about, from Ad Age’s Judy Shapiro:

Agree or not — no one can debate that social commerce has not really happened yet no matter how cool Mashable or TechCrunch describe a new marketing technology. Is it too much to ask for these technologies to be designed to sell something — anything? Or, how about, just for a change, we stop chasing the ever elusive “Producers” or “Influentials” or whatever we call them and we get down to the business of actually selling them stuff online? Why does it seem like “cool” marketing technology and “commerce” are mutually exclusive?

I can’t say for sure but here’s an observation — marketing technology is rarely built by marketers. Most often it is built by entrepreneurs who know how to make it cleverly cool, but who don’t get the commerce/ social link yet. This means we end up with technologies which marketers then must contort into measurable programs (a huge challenge right there) that they hope they might actually drive a sale (at some undefined and hard to measure future point in time).

That’s a real pity because, well applied, the real beneficiaries of commerce ready marketing technology are not just big companies, but lots and lots of smaller e-tailers (translate this to lots and lots of market potential).

Some of the cleverest tech companies are recognizing the huge market potential of merging local, mobile and social to drive commerce. Take these two examples. First is the recent deal between Addoway, the online trusted “social” marketplace and Reply/Buy, a mobile platform that lets users actually purchase product via phones. These companies have come together to curate a user experience that makes m-commerce almost frictionless (hooray). Or, take the example of a company called Big Door. This is a tech company that creates mini toolbars based on gaming theory so every action lets visitors earn points redeemable for products. It’s the first toolbar I have seen that drives commerce forward (double hooray since most mini toolbars just enhance the share function).

I agree with Shapiro that it will be the user experience that next defines the next era of the social web, not the utilization of Facebook.

Generation C is here and we’re always connected and want everything at the speed of a click. What does that mean for the stalwarts of CPG? Well, it’s another C word – change!

“Most people are not as good at dealing with change as they think they are,” said P&G’s VP of e-commerce, Alex Tosolini. While he personally has moved about once every three years in his P&G career, he said some employees have essentially been in the same office for 27 years.

“I personally believe one of the skills of the future will be the ability to thrive on the change,” he said.

Blurring of the marketing and sales/distribution functions is one of those changes, Mr. Tosolini said, noting that Facebook is both a marketing and a distribution channel as P&G has worked to develop “f-commerce” capabilities on its fan pages, fulfilled by Amazon, which has become a top 10 retail account for Pampers.

“All of a sudden the traditional model of marketing does this, sales does this is blurred,” he said. “Think about the implication for big companies on their need to adjust their reward system, their skill development, their training of their people to understand how to cooperate and work in this new environment.”

Are you seeing your organizational structure change? Are your marketing and sales departments mesh and merge? How will the new digital economy shape how your company is structured?

The race for who can dominate e-commerce just got heated. Last month saw two significant announcements from major retailers Walmart and Walgreens.

First, Walgreens announced the company was in a deal to acquire Drugstore.com. “Our acquisition of drugstore.com today significantly accelerates our online strategy to leverage the best community store network in America by becoming the most convenient choice for health and daily living needs whether customers shop online or in our stores,” said Gregg Wasson, president and CEO of Walgreens, in a press release.

“This acquisition offers a unique opportunity that will provide us immediate access to more than three million savvy, online loyal customers, and will allow us to move even closer to our existing customers through relationships with new vendors and partners, adding approximately 60,000 products to our already strong online offering,” said Mr. Wasson.

Next, Walmart launched a full-scale, national rollout of Pick Up Today. “The service enables customers to purchase items online and receive free same-day pickup at a local Walmart store, providing even more savings and convenience to customers,” reports CGT.

“Wal-Mart is uniquely positioned to combine the power of e-commerce with our national retail footprint to offer a leading, multichannel experience that delivers the best savings and convenience to our customers,” says Steve Nave, senior vice president and general manager of Walmart.com. “We’ve seen strong customer response from initial tests of ‘Pick Up Today,’ and we’re pleased to expand the program to customers nationwide in the coming months.”

Interesting and different strategies for each retailer. It will be edge-of-your-seat material as to who can win the e-commerce game.

I’ve been talking to several bloggers and changemakers about video lately and most seem hesitant about it. Most even come back with, “I don’t watch any video online.”

Really? I seriously doubt that. Instead, I think watching video online is so natural to a lot of us that we don’t even notice we’re doing it. When I asked one marketer to pay attention to how often he clicks play, he admitted that he watches many more videos than he originally thought.

The rest of us are doing the same.

New figures released by Unruly Media show that online video sharing has doubled in volume in the past nine months, reports Chris Lake.

And they must be good videos too, because the firm, which runs the Viral Video Chart, measured sharing activity across Facebook, Twitter and blogs and found that sharing has increased by more than 86% since May 2010. Most of that sharing is done on (surprise!) Facebook. The Facebook platform lets you play video links directly on Facebook, which is no doubt a reason why the trend has picked up so much in this area.

Video content used to be expensive to produce, but now consumers and viewers don’t need anything fancy (and it just might hurt you if it is). So, if your brand has included a video content strategy into your marketing plans, what’s stopping you?

The news just keeps getting worse for brands trying to reach that millenial generation.

“According to a new report from Forrester Research, just 6 percent of 12-17-year-olds who use the Web desire to be friends with a brand on Facebook, despite the fact that half of this demographic uses the site,” reports ReadWriteWeb.

“”Even scarier for brands: Young people don’t want brands’ friendship, and they think brands should go away,” reports AdWeek.

“So what should brands do? According to Forrester’s report, they might be better off being more reactive than proactive, and they should listen. Just 16 percent of young consumers expect brands to use social media to interact with them, and 28 percent expect those brands to listen to what they say on social sites and get back to them”

Eh, I’m not so sure. Maybe brands could just be smarter about how they’re engaging online, as I suggested last week. That doesn’t mean not getting involved, but creating campaigns, content and engagement that has been deeply curated and cared for. The thing with Gen Y is, they can see right through you. Brands will have to be better, and all consumers will be better for it.

Ad Age recently had a great interview with Virgin America’s top marketer Porter Gale. Some of the more interesting revelations were that Virgin does see a positive financial return from it’s social media efforts and why they won’t be using TV anytime soon for their marketing efforts. Read our favorite excerpts below:

Ad Age: What are you getting out of Twitter and Facebook?

Ms. Gale: We found social media is an amazing channel for us in terms of engagement with our fans and guests. We are also finding that it is a nice channel for guest service. When we have had to cancel flights due to storms we have been able to connect with people via Twitter and re-accommodate them. It has a revenue component for us that we have been able to track and can actually see when sales are closed if someone has come from Twitter or Facebook. So it’s serving a lot of functions for us.

Ad Age: Is it driving a significant amount of revenue for the airline?

Ms. Gale: It is constantly increasing in terms of the revenue that it is bringing in so we are happy about that. In particular, at one point we did a sale with Twitter called the Fly Forward, Give Back sale and they used promoted tweets to help push it. And that was actually our fifth-most successful day ever in terms of ticket sales.

Ad Age: How far do you think word-of-mouth and positive buzz can carry you before you have to start investing significantly in TV and print media?

Ms. Gale: The positive halo around our brand is amazing right now. We have increased our Net Promoter score to a number that rivals Apple. Word-of-mouth can carry us a long way, so I don’t believe we will be doing TV anytime soon, being that we are still in only local markets. We don’t have the footprint where TV makes sense for us. The other reason TV isn’t that high on our list is that a large percentage of our sales are done on our website and things we can do that can capture a person while they are on their laptop is that much closer to a sale. So I don’t see TV in our future. We, potentially, will use more print as we try to get more business travelers into the brand. Now that we have more cities and will be announcing more in the near future we become a more interesting play for business travelers. But the bulk of our buy will continue to be online, out-of-home, partnership marketing and untraditional efforts.

Do you think that CPG marketers could take the same approach or is the CPG market so entrenched in television advertising and marketing that a statement declaring Twitter and Facebook superior is way far off?

We first told you about the just-in-time consumer back in December, and now Nielsen has done the research to back up the trend.

“We can confirm that the biggest increases in small trips to the big-box supercenters and club retail channels have increased and Nielsen’s research shows that those increases are driven by affluent consumers. On the flip side, while smaller trips are of greater importance to the grocery, drug, convenience/gas and dollar channels, larger trips are gaining ground. Here too there are differences across income classification, providing opportunities for retailer/store-specific and consumer segment trip-type solutions.”

To see exactly what’s going on where, check out what’s going on by channel:

• Grocery – Immediate trips fell in importance by almost one percent as the channel saw minor gains in fill-in, routine and stock-up trips.
• Supercenters – Immediate and fill-in trips have gained in importance over the past two years, while routine and stock-up trips declined.
• Mass merchandisers (excluding supercenters) – Fill-in trips showed slight gains, while all other trip types posted minor declines.
• Drug – Fill-in and routine trips were up, while immediate trips declined.
• Warehouse Club – There was an up-tick in immediate trips, but the staple of club stores – routine and stock-up trips declined.
• Convenience/gas – Immediate trips – the hallmark of this channel – have declined by more than two percent, most likely due to rising gas prices.
• Dollar – Basket size increased, but the immediate trip type continued to dominate.

What should you takeaway from all this?

“Smaller immediate trips continue to capture the greatest share of Americans’ shopping trips. The interesting trend, though, is how the smaller trip is gaining in importance at the larger formats such as supercenters (which have seen an erosion in larger trips over the past two years), while formats such as grocery are seeing increases in larger trips. There are differences across income groups, with more affluent consumers hitting the big-box retailers for more immediate needs and trip compression among lower income consumers.”