How to use predictive analytics to activate the Millennial shopper
In order for consumer packaged goods (CPG) companies to capitalize on the collective buying power of the Millennial generation, they need to leverage the power of predictive analytics. These advanced analytics enable manufacturers to harness the omni-channel shopping behavior of Millennials and create greater and more meaningful touch points to activate this next generation shopper.
Shopping behaviors are rapidly evolving with emergent technologies, and that is creating a problem for CPG manufacturers. For example, the technology-driven changes to shopping behaviors have led to declines in actual purchases and revenue growth. According to a recent report from PricewaterhouseCoopers, both the strongest and weakest performing CPG companies experienced a slowdown in net sales growth in 2012. This is forcing CPGs to find new ways to connect with their shoppers – and that’s where predictive analytics really come into play.
The Millennial generation
One of the largest demographic groups that CPG companies need to cater to through their analytics strategy is the Millennial generation. According to the U.S. Chamber of Commerce, these consumers have roughly $200 billion in direct purchasing power.
This next wave of 90 million-plus shoppers holds massive potential – but also serious challenges – for CPG manufacturers.This figure poses massive opportunity for CPG manufacturers, but the question remains, why have they not been able to capitalize on this potential?
The answer lies in the ways that Millennials are shopping. With the increased connectivity that has emerged from social media, mobile and digital outlets, Millennials are influencing one another’s purchasing decisions with greater frequency. A report from Edelman, a global PR and marketing research firm, indicated that 74 percent of Millennials say they influence the purchasing decisions of others.
This is due in a large part to the technology that these shoppers use and the various channels through which they can make purchases. One can now use a home computer, smartphone, tablet and other devices to research a product and inevitably make a purchase, oftentimes, without even needing to step foot within a store. Barkley, a major advertising company, noted that more than 50 percent of Millennials use their smartphone or tablet to research products while they are on the go.
Because Millennials are the most adept at these new technologies, they were also the first to embrace them for shopping. These devices and services can provide a wealth of data to CPG marketers, but if they want to capitalize on the huge market potential in the Millennial generation, they need to do away with one-off, backward looking and isolated market data and embrace a more continuous data model that can predict shopper behavior. This will enable CPG companies to better understand and activate today’s tech savvy Millennial shopper.
Connecting the dots
The solution starts with taking a big picture approach. Rather than looking at the isolated channels through which Millennials shop, marketers need to develop a data infrastructure that can collect information across retailers and shopping channels. For example, instead of just operating based on what syndicated panels are reporting, CPG marketers need to be accessing shopper card data and retailer transaction level data, and augment it with primary research about the attitudes and preferences of shoppers.
Using the right predictive analytics strategy can help CPGs develop a more complete view of the Millennial shopper as they make their purchasing decisions. CPG companies need to develop competencies in working with unstructured data, break down the internal functional barriers and revamp their internal systems. The numerous channels used by this new shopper generation are now rendering isolated forms of data to be pretty useless. Consequently, marketers should take a holistic approach to understanding the shopper. Ultimately, this will provide them with greater tools to activate the Millennial shopper, which in turn will help manufacturers to drive strong incremental growth opportunities.
Make real-time decisions
Another essential when it comes to using analytics to understand and activate the Millennial shopper is being able to use analytical insights that reflect the speed at which Millennials are pursuing their shopping journey.
Because Millennials have the capability of researching a product as they stand in front of it at the store, these insights need be delivered with the same velocity of today’s shopping experience. That young adult in the grocery aisle accessing product reviews and recipes from her smartphone can either be the CPG manufacturer’s bane or best friend. Either way, she is using powerful technology to shape her shopping experience and buying decisions, and CPGs need to be ready to respond quickly and decisively to remain in the game.
Also, these insights need to be delivered to the frontline decision-making levels at the CPG manufacturer and their retail partners. This will allow marketers to react quickly and make decisions that can reflect the rapidly changing needs of Millennials. With technologies such as new apps or Facebook updates coming seemingly every week, this is something that is essential for creating and activating the right touch points with the Millennial shopper.
Analyze, decide, do
Those marketing touch points evolved rapidly over the last three to five years. CPG marketers can expect this evolution to continue and even accelerate in the next five to 10 years. It can be difficult to predict what the next major game changer will be for Millennial shoppers, but it is fair to say that one will certainly emerge within the evolving marketplace.
As a result, companies need to be prepared to adapt quickly as these changes take place in the shopping environment. By setting up a data analytics and insights infrastructure now, CPG companies can prepare for the coming tide. It is important that this infrastructure be able to reflect a democratized approach to analytics - that is one that can be manipulated and adapt rapidly to these evolving marketing touch points. Crucially, it also means that the right information and insights are delivered directly to the frontline marketers who need them the most and who can make them actionable.
This ultimately means that CPGs and their retail partners need to develop a relationship in which both parties are comfortable with ambiguity and experimentation, along with a willingness to learn and adapt to the myriad new ways that Millennials are shopping. Because this fast rising demographic cohort is so quick to embrace new technology, it is likely that what will work one year, may not the next. This means CPG marketing strategy and infrastructure need to accommodate the ever changing nature of the Millennial generation so that manufacturers can continue to create new revenue growth.