‘Direct to Shopper’ Marketing and How it Can Activate Today’s Shopper
Consider a shopper just 10 years ago. When she walks into the store, she likely has a handwritten list documenting the items for purchase. Coffee, milk and eggs could be at the top of the list, but the exact brand or company may not. The shopper works her way through the supermarket, arriving at the coffee aisle. Perhaps one coffee is advertised as fair trade and certified organic, while another is a more recognizable brand name. The shopper will decide on which product to choose based on these labels, her past experience with the brand and what she likes to think the brand says about her.
Fast forward to today. That same shopper with the same grocery list has many more resources to inform this purchasing decision. When deciding between brands of coffee, she may take out her smartphone and look at what her friends have pinned on Pinterest or look up an article about the business practices of a specific brand. Before she enters the store, she has already planned half of her purchases and may have already looked at the available brands and sales. Even after the purchase is made, she might review the product online and tell her friends how great (or not so great) the coffee was.
Put simply, shopping today is vastly different than shopping 10 or even five years ago for today’s consumer. As such, marketers need to quickly adapt so as to reflect the needs of the new-look shoppers.
Examining today’s marketplace
Consumer Packaged Goods (CPG) manufacturers need to have a more dynamic understanding of today’s shopper if they want to see marked revenue growth through product sales.
The economic conditions of the past 10 years have brought today’s CPG manufacturers to a major crossroads. Today’s marketplace has changed along with its shoppers. However, CPG manufacturers have been comparably slow to evolve with these new realities.
After the 2008-2009 recession, roughly 66 percent of shoppers changed their purchasing behaviors, according to PricewaterhouseCoopers (PwC).As a result, shoppers became more demanding of the products they purchased. Operating on tighter budgets, shoppers needed to be sure that their purchases were worth the expense.
Additionally, data continued to grow at an impressive rate. PwC expects that the 2.7 zettabytes of data created in 2012 will climb to 7.9 zettabytes by 2015 and 35 zettabytes in 2020. To put this into context, a zettabyte is equivalent to the amount of data stored in 250 billion DVDs. With the volume of data continuing to explode through the growing use of social media and other online outlets for researching and purchasing goods, CPG companies will be challenged to develop a much clearer perception of a single shopper.
The problem facing CPGs
While the capabilities for effective direct-to-shopper marketing are certainly there, this does not necessarily mean that CPGs are using them. As a result, CPG manufacturers have seen stagnant revenue growth. This has come from three pressure points:
1. Economic Pressure: The country’s shopping population has not notably increased, meaning that there are no significant additional shoppers in the marketplace. On top of this, according to the Economic Policy Institute, wages across white and blue collar sectors have remained rather stagnant, meaning that shoppers are purchasing on tight budgets. This reinforces the notion that today’s consumers are looking for better value now more than ever.
2. Competitive Pressure: These economic pressures have in turn influenced the pressures of competition within the CPG landscape. As a result, CPG companies have been engaged in a race to the bottom when it comes to pricing, with the lowest costing product assumedly winning out against the competition. This has led to anemic revenue growth for CPGs.
3. Consumer Pressure: Consumers have less money to spend, but at a time when expectations are higher than ever. A personalized shopping experience, whether online or in the store, is the expected norm, not a treat. Shoppers now influence brand perception through social channels more than they ever have been able to in the past. These factors are putting the shopper in charge, and CPG manufacturers have no other choice but to listen, understand and be relevant to their consumers.
The Direct to Shopper approach
CPGs need to have wing-to-wing capabilities in place to market directly to today’s high-demand, value-focused shopper. This strategy provides the best method for significant incremental greenfield growth for CPG manufacturers. However, in order to develop such a marketing strategy, companies need to better understand how today’s shopper has evolved.
New technologies are putting the power to choose and review products squarely into the hands of consumers. The mobile, social and digital spheres all provide new avenues for shoppers to share their opinions and perceptions of products. While this may seem like a cause for concern among CPGs, it also opens up a wealth of opportunities, namely because almost all of the touch points with a shopper have moved into the digital realm.
In order to leverage a truly successful Direct to Shopper (DTS) marketing strategy, CPGs need to better understand their shopper. Numerous trends are fragmenting the shopper landscape. According to PwC, first generation Asian and Hispanic citizens will soon represent 25 percent of the U.S. population, and will be looking for elements of their heritage to be woven into their shopping experience. Another growing demographic will be people who are over the age of 65, and looking to maintain some familiarity in their shopping experience.
A massive new demographic group is the so-called Millennial generation, which is composed of young adults in the 18-34 age range. These shoppers are the first adopters of new technologies and digital outlets (like social media), and are the most likely to use new resources and social interactions to inform their shopping decisions. According to the U.S. Chamber of Commerce, this generation of shopper already has about $200 billion in direct purchasing power, but that will grow dramatically as Millennials gain economic clout. Millennials, more than any other demographic, expect more in terms of personalization, and will complain through digital networks if brands fail to deliver on their promises.
There are numerous implications of this fractured marketplace. On top of consumers holding value in high esteem, they are using touch points, like social media and mobile devices, to inform their purchasing decisions. It is important to note that mass marketing is continuing to decline in effectiveness, so CPGs need to start leveraging data that reflects this new-look consumer population. More than just using this data to influence purchasing decisions, CPGs need to be involved in each of these various touch points so that they can play a greater role in the shopper’s journey.
How to implement effective DTS marketing
Implementing a DTS marketing strategy that can leverage all shopper data can be a large and daunting task. Taking a crawl, walk, run approach that can provide quick wins, without having to get hung up on every piece of information, is essential to being able to market directly to the shopper.
A great place to start is through simple email address and shopper preference collection. This allows shoppers to indicate product interests, lifestyle preferences and communication channels. CPGs can build a framework of shopper interests and lay the groundwork for a more holistic view of the shopper. Next, CPGs can start to analyze the simple data and develop basic shopper segmentations. These segments can then be tied to shopper preferences, and develop offers and shopping experiences based on these findings. This can also help evaluate DTS e-commerce viability and help devise a strategy to work ecommerce into the greater business model.
Finally, CPG manufacturers can collect full shopper data, including browsing and purchase behavior information, and analyze it on such a level that CPGs will be able to develop a true 1:1 personalized shopper experience.
Ultimately, the key for CPGs to make meaningful revenue growth is to directly activate today’s shopper. The only way this can happen is by honing in on the shopper’s journey. Shoppers are constantly interacting with brands and their peers through digital and mobile mediums. If CPGs can carve out their own role within this space and interact directly with shoppers, they can more easily zero in on customers’ needs. Doing so will lead to greater shopper activation, beat the competition and drive stronger revenue growth.