Growing FMCG brands in the digital age
27 September 2016
Jenny Bullis, our CEO for EMEA, digs deeper into the transformative power of digital for FMCG brands in her latest column:
We hear about the transformative power of digital, yet few can explain - step-by-step - what this means for FMCG brands and how to get started. Teams are stretched, margins are thin and few if any have broken free from the shackles of the brick & mortar. At the same time, digital communications has struggled to deliver against our old broadcast definitions, yet we all know audiences have moved online and on mobile. What’s a brand to do in a digital economy and where can new growth be found?
There are many lessons to be learned from key industry leaders ranging from portfolio management to consumer relationships, only a few of which resonate deeply with digital.
1. Target at scale
So much of our approach to marketing is based on experience and historical approaches. However so little of this includes the impact of the digital economy. Those who are comfortable and safe with their ways of targeting and marketing need to adapt and that means challenging our historic frame of reference. Introducing the frenemy you’ve never met: Byron Sharp, professor at Ehrenberg-Bass Institute. His team’s work has explored the factors causing brands to grow in any given category from FMCG to finance to automotive. Documented in two books, he proves that much of the targeting obsession that has driven the advertising industry since the 1980’s proliferation of demographic-centric print titles and TV channels is wasteful. Instead, he outlines the importance of being the biggest, or seemingly biggest, in any given category. His teachings prioritize always-on reach as big brands achieve most growth from fickle light users - unequivocally. However, don’t assume this means TV and no targeting is the answer. Contrastingly, big TV still means big wastage. The promise of programmatic and social platforms is that they have the ability to pick up on consumer interest at scale. His teachings lead us to emphasize sizing of potential light audiences and waterfall planning above stereotypical demographics and personas targeting. Truth is, we all need a little laundry detergent, chocolate, cheese, and razors at some point in our life, and when that time comes, we will think of the category leaders first; and therein lies growth. Even P&G seems to embrace this approach. CMO Marc Pritchard recently stated in the Wall Street Journal: “(regarding Facebook) we targeted too much, and we went too narrow...and now we’re looking at: what is the best way to get the most reach but also the right precision?”
2. Make it measurable
While our industry has been obsessed with targeting, it has been less fixated with measuring success during and post-campaign. For FMCG brands, every media placement should be measurable. Yes, even big brand-building ‘awareness’ campaigns need to be held accountable. Whether measuring brand lift, views, or click-through, channels with measurable outputs instead of estimated inputs should receive preferential treatment. Increasingly, all communications should be held to this standard, especially as more and more media become digitized. Sadly, many channels like TV, cinema, OOH, and print are largely genuinely unmeasurable, but brands that work with the media industry to change this will win through experience and insight. As digital penetration and smartphone usage continues to rise in every given region, so should digital media spend, and as more and more offline channels come online, e.g. addressable TV, spend will increase exponentially. Challenging and championing new and in many cases, inventive ways of measuring, are vital to gain understanding and new experiences from which we can better plan an increasingly digitised future.
3. Evolve the retail chain
Retailers largely own the sale and therefore the customer data, and in many categories, they compete with their own private-label products. So how does an FMCG company harness the promise of the digital economy to combat the privileged position of retailers? Getting closer to the sale and the customer is increasingly possible as the convenience economy gains momentum. Dollar Shave Club and Graze are a couple examples of how consumers are relishing the convenience of subscription-based e-commerce models. Imagine the subscription potential for low-consideration items of which we never want to run out - toilet paper, baby formula, condoms, etc. Not only do these models help control the margins, they also generate a wealth of first-party data, which can be used to optimize other parts of the portfolio by creating a pool of known customers. Having a valuable pool of data also helps drive a data driven culture inside an organisation; once brands are familiar with data and learn how to use it and what to expect from it, this can benefit wider teams such as those negotiating new distribution deals with new grocery platforms like Amazon to ensure that these new retailers share data instead of charging brands. This helps put FMCG brands on a ‘front foot’ relationship with the new retailers, who are the competition to the traditional retailers, thus altering the trade dynamics of the industry.
As we forge the best path for our brands in the digital world, it’s worth drawing insight from sources of wisdom, while dismissing the litany of pseudo-studies seemingly published daily. Such wisdom does not provide the step-by-step growth plan each brand requires (that’s up to us); but the lessons learned can give us the helping hand we need when setting out on our own digital transformation.
Originally published on LinkedIn.