By Mark Fullerton, CEO, OnTrak Software, Cincinnati, Ohio
For many years I have been watching the marketing efforts carried out by consumer package goods (CPG) companies. No matter how you look at it, CPG marketing is very big business–especially for food and beverage companies.
The problem, as I see it, is that these companies are investing in a type of marketing that is going the way of a dinosaur, especially if you are trying to convert a shopper into a buyer at the Point-Of-Sale (POS).
Easily googled sources today estimate the global economic impact of CPGs at more than $15 trillion annually. We can put this information into perhaps an even more impressive and breathtaking perspective: CPGs account for more than 20 percent of the world’s economic activity. And, Investopedia.com notes that CPG’s contribution to U.S. GDP now exceeds $2 trillion annually.
If you are of a certain age, perhaps younger than 25, you may be unaware of the way CPGs used to be marketed. Maybe we should state this again by saying you may not be aware of how CPGs used to be successfully marketed–You’ll see this theme again later, but in a different light. There are two wide-ranging eras that have shaped the way CPGs are marketed: Era #1, Post World War II through the mid 1990’s; and, Era #2,1995 through today.
Era #1 witnessed the birth of unprecedented consumer demand, unbridled economic optimism, and the rapid proliferation of CPGs. Also during this era, the retail landscape changed from many independent, typically small, retail outlets to fewer and fewer, typically larger retail chains – consolidation. During this era, we also saw the birth of a new medium, TV, to yet another birth: Cable-TV, which provided, for most Americans, TV viewing availability and eventually an explosion in the number of channels. In short, television extended its reach to the majority and fragmented its offerings almost simultaneously.
Era #2 where we now live, saw the widespread adoption of the Internet, mobile phones–now, almost pervasive communication – video on demand, practically unlimited channel choices, and social/mobile media. For many–latter-day Era #2 is all they’ve ever known.
During the nearly 70-year period these two eras represent, we’ve also seen a CPGs retail metamorphosis. During most of the first era, suppliers ruled and the newly minted medium, TV, aided and abetted suppliers’ dominance. Of course the lack of national retail chains throughout much of the first era also helped suppliers attain and retain control over consumers buying tendencies. As the first era changed, ever larger retailers began to wrench control from suppliers if for no other reasons than they had the clout via their newfound buying power to essentially dictate the terms of merchandizing and marketing.
As technology has again enabled and encouraged broad disruptive change in markets and marketing, we are, today, fully under the “control” of the second era which has seen yet another market shift from the retailer to the individual shopper, thanks in large measure to Internet capable cell phones in the hands of virtually every shopper. Please note the word “shopper”. Today, the target market is not necessarily the consumer– rather it is the shopper who wields the economic power now. The consumer and the shopper are not necessarily the same individual–and it is the shopper who makes the decision to buy at the Point-Of-Sale–sometimes called the moment of truth.
We have arrived at a point in the history of marketing where the importance of marketing to shoppers at the Point-Of-Sale (POS) is at its highest point ever
At the same time, this nearly 70- year transformation of America’s CPGs control and dominance from supplier, to retailer to shopper has happened, there has also been a similar transformation going on in the way CPGs are marketed. When we had only ABC, CBS and NBC with three to four hours total of prime time programming per night, TV advertising ruled, as just a few commercial placements would practically guarantee every TV audience member in America would see your message.
Of course the three-channel per market period didn’t last long. The combination of channel proliferation and retail consolidation and nationalization shifted the need and place to market and in the process began to sow the seeds of control in favor of individual shoppers.
Where we are today is at a place and time that clearly demonstrates successful CPG marketing. Sales results can be achieved via known and measurable approaches, yet still rely heavily on outdated strategies and tactics. It almost seems, at times, as if things are as they were during the fictional Mad Men era. It seems that much of the way CPGs are marketed today is the same as they used to be successfully marketed.
CPG TV advertisements continue to erode in their ability to influence sales. Indeed, due in no small measure to the proliferation of brands and products, spending billions on TV advertising for CPGs is a wasteful–i.e., unproductive– economic/marketing practice.
We have arrived at a point in the history of marketing where the importance of marketing to shoppers at the point-of-sale (POS) is at its highest point ever; yet CPG’s marketing executives report one of their greatest concerns is the lack of tools to track, measure and verify the impact, placement and ROI of their POS marketing initiatives. Nevertheless, marketers from all walks expect CPGs POS marketing will continue to increase– almost as if “We know POS works, so we’ll just keep spending more on it [and hope for the best?].”
Now is the time for CPG marketers, particularly in the largest section of the CPG marketplace – beverages, which account for nearly two-thirds of all CPGs–to rethink their POS marketing approach with the goal of understanding how much they’re spending, what they’re spending it on, where it’s being placed and what the correlation is between POS promotional materials and sales. Once they can manage the ordering process, production and measurement of their instore initiatives, they can begin to work toward deploying marketing campaigns with ever improving ROI and reducing or eliminating unproductive POS as well as moving away from or changing other, traditional forms of ineffective and expensive marketing.