2016 was a challenging year for many in consumer packaged goods (CPG) companies. A tough economic environment, coupled with increasingly conservative spending habits, is forcing CPG brands to think more strategically to stay ahead. In the past few years we’ve also seen the rise of digital-only brands, competition that CPG has never faced before. We’ve compiled CPG Digital Challenges and Trends for this year.

According to Euromonitor, even as recently as 2013, online sales accounted for less than 1% of food sales and less than 3% of nonfood. With very little online competition, CPG seemed untouchable by digital trends and buzzwords. Those days now appear to be over. Consumer shopping habits and attitudes have evolved alongside the rapid pace of technology. The availability of digital technology, such as smartphones, online outlets, and social media, has created an opportunity for CPG brands to seize. In other words, the rules of the game have changed, and companies must learn how to play in digital spaces to win.

We’re barely into 2017, and it remains to be seen if consumers will continue their conservative shopping behaviors from previous years. The good news is that means there is ample opportunity for growth. In response to these challenges, some interesting trends in technological tools and process have emerged across the CPG sector. Research shows the key areas that companies should focus on in the coming years are: the use of “big data,” omni-channel optimization as part of a holistic digital strategy, innovation in eCommerce, and the Customer Experience.

  1. Big Data

CPGs are learning that “Big Data,” coupled with the right technology and processes, is the road map for success and continued brand loyalty. Advances in data collection and analytics have provided insights and information that were once impossible to capture. It makes sense to use data to inform company decision and strategy, but what does it mean within the context of digital marketing? How do a bunch of quantified searches and clicks help companies grow? The simple answer: Using this information to create refined, highly targeted messaging.

We see thousands of marketing messages a day; the ones that catch our attention actually relate to our lifestyle and needs (and there’s no way to know what those are unless you look at the data!). Focus on quality versus content – using data to send better (and fewer) marketing messages to customers. It should be said that having access to the data is simply not enough; marketers need to have the proficiency to use it advantageously. This requires that CPGs have the right people, in the right place, and using the right tools to utilize customer data in meaningful ways. Marketers need to understand why consumers have particular patterns of behaviors: What do they want, and what drives their choices? “Big Data” can provide insights to these answers, but it means virtually nothing if the information isn’t collected and assessed effectively.

  1. Innovation in eCommerce

Retailers have traditionally filled the gaps between CPG companies and their customers. Today we see CPGs bypassing retailers and selling directly to customers in innovative ways. The Internet has made it easy to research and compare – consumers can inform themselves on a product rather than relying on, say, the word of the traditional salesperson. In a 2014 Customer and Channel Management Survey, which polled more than 50 leading CPG companies, online commerce ranked as the second leading driver of change over the next five years—above other likely influences such as continued conservative consumer spending, the growth of private labels, and the use of big data.

CPG market research group IRi predicts that the Internet will account for approximately 50% of industry growth in the next five years. The reality is that customer shopping trips now begin online; they may not ever enter a retail location to fulfill their needs. With companies like Amazon increasing their “on demand” products and services every day, this trend is sure to continue. When customers do visit retail stores, they arrive with some idea of what they want to buy. CPGs have to set their brand apart when so many choices are quite literally at consumers’ fingertips.

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Customers are increasingly embracing web and mobile platforms for their sales and service interactions. They desire flexibility, immediacy, and 24/7 access; desires unfulfilled by traditional retail models. “Simplicity” should drive the designs of online shopping platforms. The path to purchase should be seamless, taking as few clicks as possible – customers don’t want to fumble through an overly complicated cart or billing process.  Platforms should also be “smart,” suggesting additional items based customer data as they browse and select. Marketing statistics show that mobile optimization is especially important for eCommerce success. It’s a fact that more people now access the Internet through Mobile, rather than fixed devices like a desktop computer. A lackluster or nonexistent eCommerce platform means that CPGs are missing out on a huge opportunity to engage with consumers.

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  1. Omni-channel Expansion and Optimization 

The path that consumers follow to purchase has drastically changed, and CPGs do not have a clear understanding of how they operate in the omni-channel retail world (IRi). HubSpot defines omni-channel as a “multichannel sales approach that provides the customer with an integrated shopping experience.” CPGs struggle most with leveraging diverse digital channels. Omni-channel optimization, at its best, means a seamless experience for the customer, no matter how they choose to engage with a brand.

This approach accounts for the various platforms and devices customers use to interact with the company. Channels include paid promotions, social media, content marketing, email, etc. It may help to think of a company as our solar system: Customers are the Sun, the center of everything; channels are represented as orbiting, reacting planets.

Effective CPGs use digital channels to help promote brand awareness and increase audience engagement. They should focus their efforts into meaningful interaction through social media, as this is one of the most visible ways to promote their brand and offers direct contact with customers. Success comes from CPG’s leveraging customer data and predictive analytics technology with optimized marketing strategies.

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  1. The Customer Experience – Okay… So what does it mean?

We live in the age of the “Empowered Consumer.” In the coming years, market trends predict that consumer goods manufacturers that have the most direct relationships with the end customer will be the most successful. Companies have to consider the customer journey to purchase from beginning to end. Shoppers want experience-oriented retail programs: they like to be in control of their shopping experience, as evidenced by their increase in research behaviors before purchase.

The effective use of  “Big Data” and omni-channel strategy directly impacts the customer’s experience with CPG brands. Positive experiences foster brand loyalty. Customization can be peppered into every step of the customer journey: the messaging they see, the ability to design their own products, the ability to purchase simply and immediately. “Smart” websites and mobile platforms react to customer interaction in real time, tailoring the experience to their specific desires and needs based on data. It’s important to remember is that every touch point in the customer journey is an opportunity for brands to engage in personal and meaningful ways.

Learn how ARKE helps leading CPG companies grow through strategic digital transformations: Click here to see our case studies!