A recent article in the WSJ stated that commodity price increases are taking a toll on CPG margins and profit. Prices have gone up so fast that brands are left with the decision of either passing the costs on to the consumer (“No, Mr. Bernanke, we don’t see inflationary pressure here either.” Read: Sarcasm) or finding ways to cut internal costs to keep prices stable. Brands are already running extremely lean from the past recession, and consumers are much more value-focused than they’ve been in a while. Most in the industry recognize that consumers have “permanently” changed their minds when it comes to value. (Witness the Groupon for $35 for $50 worth of products from the P&G estore.)
Given that brands already face an incredible amount of pressure from white-label brands, what is a CPG brand manager to do?
To solve for this, some of the most forward-thinking CPG brands in the industry are getting as close to the customer purchase as possible. What does this mean? They’re shifting their advertising budgets to a point deep within the purchase funnel where they can get a better return on their investment. This enables a few things, 1) reduction in spend on inflated TV/radio/print campaigns, thereby easing the pain of commodity prices, and 2) the capture of valuable insights that are not available in other media. The closer you are to your customer, the more likely you are to have a dialogue with them that will inform your product roadmap.
Successful brand marketers have also realized that it’s no longer the case that ONLY high-consideration products are being researched online. The economic environment has forced consumers into researching their entire trip (online) before heading to the store. This means that large electronics brands aren’t the only ones that can influence consumers before they head to their local superstore. We’ve actually seen incredible Shopping Media results from food and beverage and CPG brands across the board. A recent WSJ article further highlights this shift in consumer behavior, stating that “some 62% of shoppers say they search for deals online for at least half of their shopping trips, according to a survey by consulting firm Booz & Co. and trade group Grocery Manufacturers Association.”
The consumer is still open for influence: while they research products for purchase—whether online or offline. The key for CPG brand marketers is to make the shift with their consumers, smartly spending their ad dollars deep in the purchase funnel.