SHOPPER MARKETING
SECTION ONE
SECTION TWO
SECTION THREE
Three Trends Changing the FMCG Ecosystem
The Fast-Moving Consumer Goods (FMCG) ecosystem is changing rapidly. This
is driven primarily by underlying changes in digital information delivery that is
simultaneously weakening brands, strengthening retailers and empowering the
shopper while creating an unprecedented tsunami of data. These changes affect all the industry participants: retailers, manufacturers and the diverse community of solution providers.
From this data, both manufacturers and retailers are learning more about their common shopper and understanding the importance of household-level customization of marketing efforts. This data in turn is enabling retailers to customize their store layouts and category assortments to the store level.
Perhaps most importantly, the improvements in instantaneous interactive communication enabled by the cell phone is empowering shoppers to meet their needs in an ever more personalized fashion. It is creating a new shopper paradigm characterized by cherry picking among retail formats to meet differing need states at different retailers more attuned to each shopper’s unique needs.
Here is a closer look at the three trends and their implications:
1. The Growing Power of the Retailer
The traditional weapons of FMCG mass marketing (TV and magazines) have lost effectiveness and especially efficiency thereby debilitating brand equity building. At the same time, retailers have consolidated and now dominate the “moment of truth” at the shelf aided by new tools such as loyalty cards. The balance of power has permanently shifted toward the retailer.
The power of retailers and their capability to attract huge “audiences” to their shelves at least once a week made their aisles an ever more important locus of brand marketing. FMCG marketers began shifting their budgets from conventional advertising vehicles to shopper marketing options. This shift reflected both the weakness of traditional brand building vehicles and the increasing importance of the retail store as ground zero for marketing dominance.
2. The Digitally Empowered Shopper
Today’s shopper can rapidly compare price and quality. This creates new shopping behaviors especially the cherry picking of formats to satisfy specific shopper need states.
Some shoppers began choosing specific retail formats for specific need states. Many consumers chose category killers like pet stores while others chose Walmart, Costco or CVS for specific needs and need states. In almost every case where shoppers chose these channels, the loser was the conventional grocery channel. The phenomenon of “leakage,” defined as a regular shopper of one channel going to another for a product available to her in her normal food channel, was becoming an epidemic. The most extreme and oft- cited example is new mothers buying their disposable diapers from Amazon while purchasing baby food at the neighborhood supermarket.
Everyone correctly believes the Internet and the smartphone have changed the shopping experience permanently. Now both manufacturers an d retailers are in a frenzied search for ways to leverage the new digital tools to intervene in the path to purchase in more creative and effective ways.
3. The Big Data Big Bang
Digitally driven shopping behavior creates billions of variegated data points. This tsunami of data comprises Big Data. Applying new predictive analytics to this expanding data universe enables marketers to better understand and influence shopper behavior.
The FMCG ecosystem is creating data an incredible rate. Every day more than 2.5 quintillion bits of new data are created AND stored. Examples abound regarding the incredible speed and amount of data being created. In the two weeks after the Hubble telescope began sending back pictures of deep space, astronomers learned more about the solar system that in the previous 200 years. As the data multiplies, so does the capability to analyze it using new predictive analytics software driven by more powerful computer hardware. But the picture is not all that easy to discern because the power lies in combining data sets that sometimes resist easy combination. Some data sets are structured like loyalty card data, while other data is unstructured like that from social media. Linking that data in meaningful ways can be daunting. Finding meaningful actionable insights can be next to impossible.
Developing analytical protocols producing actionable insights is the single largest challenge for marketers today and into the foreseeable future.
Actions to Consider
If you are a retailer:
- Immediately begin building a Big Data capability primarily by identifying a small test situation where you may explore your capability to combine data sets to create competitive advantage.
- Recognize the imperative to create customized stores by neighborhood by varying category space and assortment to optimize the shopping experience and total store profitability.
- Address the shopper leakage problem caused by shopper’s fulfilling specific need-state requirements at other formats. Recognize that internal organizational silos and inadequate processes frustrate your ability to build volume through superior need state marketing.
If you are a manufacturer:
- Understand how total store optimization will affect your company.
- Begin mastering multi-category need-state marketing by partnering with a retailer’s efforts.
- Ensure that your company is organized to exploit Big Data primarily by identifying what you wish you knew and then identifying combinations of data that can yield the answer.
- Recognize you must collaborate more effectively with retail trading partners and move up the category management maturity curve.
The Importance of Collaboration
The mastery of category management by retailers and manufacturers is clearly critical to thriving in the emerging FMCG ecosystem. But another lesson has also emerged: Neither trading partner can deliver superior results for its common shopper-customer without collaborating aggressively with the other. Both trading partners have multiple assets and capabilities to contribute to the value stream.
This article was adapted from the best practices white paper, “Three Trends Changing the FMCG Ecosystem,” by the Category Management Association (CMA). For more information: www.cpgcatnet.org.
