Challenges faced by CPG Marketers and the road ahead !!

As the retailers are gaining more control of the customer because of their closeness to the them in the value chain, it is becoming more and more difficult for CPG marketers to woo the retrenching customer spend on their brands. 

In this article, we would identify the major challenges faced by the CPG companies and the improvement areas to gain the diminishing trust. In coming blogs, i will discuss more on the solutions to overcome these challenges which are discussed here.  

Challenge 1: Consolidation in the retail industry

Only few of the big retailers are now driving the retail market as they grow bigger in size, either through organic or inorganic expansion. But the main agent to this growth has been due to consolidation happening in retail industry.

As retailers grow in size, they pose a bigger challenge & threat to the consumer packaged goods companies, which are primarily the suppliers to these retailers who actually own the customer. Thus, retailers enjoy more bargaining power and could put increasingly more pricing pressure on already constrained CPG suppliers.

Obviously, the balance of power is more skewed towards the Retailers when it comes to customer relations. CPG industry needs to acknowledge this and should work towards building closer relationships directly with the customers. This could be achieved with innovation in branding, point of sales interaction, niche products etc.

Challenge 2: Varied retail formats

The retailers are experimenting with different retail formats so as to appeal to different customer segments and grab their share of wallet. The CPG suppliers need to understand this phenomenon and consider this fact while designing their marketing strategies so that right brands are placed at the right formats and also the branding communication is relevant to the business objective.

Challenge 3: Emergence of Private labels / Discount labels

In a recent study, it has been observed that in recessionary era customers prefer private labels / discount labels over their branded counterparts. Retailers are also pushing these labels as they offer better margins, merchandise differentiation and direct control of entire supply chain. The branded CPG products are under profound pressure on margins, shelf space and customer’s share of mind.

Challenge 4: Offering value to customer

The retailers have commoditized the products under the price war. Now, Customer is well trained to just look for value in lower pricing. CPG marketers need to overcome this challenge by redefining the value for the customers by being closer to them by offering better products and branding innovation.

Challenge 5: Capturing the consumer surplus

The rising income levels in the emerging markets and already richer developed world, consumers have more income surplus than ever. CPG Marketers need to capture this by delivering differentiated products to this segment. As they are already purchasing across normal product categories, for which huge number of suppliers are competing and the demand for these products from this specific segment has already saturated. A differentiated product offering could be a good bet to capture the customer surplus. A good example of such product offering is health drink or organic food.

Challenge 6: Understanding consumer behavior

It has always been a big challenge for the CPG companies to understand the clear motive of the consumer who could buy a certain product. CPG companies spend millions to research on this. They have been quite successful in their approach so far but with increasing competition, newly emerging channels and rapidly changing customer behavior with access to information than never before are pushing CPG companies to explore better ways to understand the customer.

The companies are now betting on ethnographic studies to understand consumer behavior and to win, they need to implement the learning in product innovation, branding and marketing.

Challenge 7: Tradition marketing is not relevant

The traditional mass marketing is not at all relevant to engage customers as they always have option to avoid the advertisements. Moreover, there is a clutter of media channels with emergence of satellite and cable TV. With the emergence of new medium like internet and mobile, marketing landscape is changing from mass marketing to one - to – one marketing. The new tech savvy consumer would like to be engaged with the brand on different platforms through social media, mobile, TV and rich media campaigns. The CPG marketers need to frame their strategy with consideration of these new emerging channels and maintain consistency of message across the channels.

CPG Marketing Transformation: An approach

Most of the challenges faced by the CPG industry could be addressed with the implementation of right marketing tools and technologies aligned with the strategy.The CPG marketing transformation need to address a few key areas listed here in order to be effective and face the industry challenges.

CPG companies need to focus on these areas to overcome the above discussed challenges, we would explore further on these solution areas in next few blogs. 

Promotions at Farmville

 While working on the "Integrated Marketing Communication" assignment, as part of my MBA course curriculum, we as a group were designing a campaign to support the cause of stopping Child Labour.

The objective was to connect with as many as people in the Asian region so as to create awareness and then building a team of volunteers through this campaign. Just thinking on the new creative ideas, it struck to me, Why should not I shall use social media as it would be more relevant in the age of digital revolution. 

The idea could be propagated by online presence through website or blog but then the task would be enormous so as to promote this website /blog. Leveraging on the effective social media platforms like twitter and facebook could be an effective medium and thus the brainstorming started on how to do that so as to promote a cause among like minded people.

Why not using a platform which has millions of fan following ? It seemed to us that for promoting a humanitarian cause we just need to connect to the people on such a platform and then a word of mouth publicity could easily create the buzz. Our search for such a platform stopped at the farmville, the popular virtual farmers community on facebook.

We suggested of creating a signpost with desired message against 'child labour' and web link to the organisation's website for engaging & connecting with the volunteers. Any one who supports the cause could buy this Signpost from the market place in farmville and this signpost could then be posted on the person's farm and every visitor to the farm could see the messsage. Many of the millions of registered users on the farmville could signup for the cause. The only thing is that to practically implement this idea, we need to discuss the possibilities with the farmville team. 

We designed a signpost for our presentation, please see the photo below:

Not only for this humanitarian cause, the farmville could be used to promote many agricultural labels / brands with an applicable fee to be decided by the farmville team.

Social media is going to be an effective and popular medium which many organisations would love to explore as the costs of promotions are minimal as compared to the traditional media. Lets explore and enjoy this digital landscape of the marketing where new rules of marketing are written everyday.

Internet as distribution channel

Recently i read an article by Mckinsey which discusses growing importance and need of the multi channel formats for the retailers. The most important of these channels is to use Internet as distribution channel. It has been found out that retailers which used multi-channels have recovered faster from the 2001 recession as compared to the ones using traditional retail channels and online channel has been the most effective channel format that has been used by these retailers.

It is of great amazement that while the overall retail sales have been decreasing in US through the current economic crisis, the online sales have been increasing. Consumers are either searching for product information on internet or directly purchasing online, the trend is continuously moving upward. Mckinsey researchers highlights that by 2011, internet will play a role in around 45% of retail sales in US. So, no retailer can undermine the importance of internet as distribution channel.

The multi channel strategy is going to be the key driver in the years to come for retailers and Internet distribution channel development & its marketing would be a significant part of this retail strategy. The key fundamentals to be focused while designing an internet channel are:

1. The internet channel's product assortment need not to be same as in store. It could be just an information channel for the retailer's products & services as utilized by IKEA. The IKEA online channel supports the store by helping the consumers to know about their products and plan their purchase with real time inventory updates and product location in store.

2. The innovative ways to integrate the internet channel and the other offline retail formats will be an added advantage. Online web kiosks could be installed in stores to order the out of inventory products.

3. Online marketing tools with proper emphasis on social media should be used to propagate the retailers online store through interactive web 2.0 enabled communities so as to engage the customer. A subtle offline campaign could be of great help to increase the awareness of such initiative.

The Mckinsey article can be read at -

https://www.mckinseyquarterly.com/Retail_Consumer_Goods/Strategy_Analysis/The_promise_of_multichannel_retailing_2448?gp=1

Social Media Marketing

Social media marketing is the new buzz around. Everyone is talking about it but not everyone is sure of the efficacy of this medium. There are quite a few recent happenings that highlights the effectiveness of social media and further clarifies that its a must for every marketer to indulge into it in the new digital age where web is getting more and more sophisticated, new networking tools are emerging and consumers are communicating using these tools.

When noted columnist, Jeff Jarvis was not happy with the Dell computer he bought, he wrote a blog and the groundswell thus created lead to the image destruction for Dell brand. The same groundswell generated during recent US election during Obama campaign helped him in his victorious journey.

Corporates are also effectively utilizing the social media campaigns to generate leads and then prospects into customers. TIBCO Software's "Greg the architect" campaign on youtube has been a recent hit. The video can be watched on the site - http://www.gregthearchitect.com/episode_off_the_grid.html

The Blendtec mixer grinders  - "Will it Blend ?" video campaign has been another huge success with around 4 million hits. The Blendtec sales have thus plummeted even though its priced at a premium as compared to a normal mixer grinder and the advertisements costs of this social media marketing has been negligible. 

Moreover, its no wonder if the Farmville game on facebook which has gained a lot of popularity recently, could be used by some companies to promote their brand.

The point to be noted is that why some campaigns generates the buzz while other fails ? When we closely examine the different campaigns, it could be easily understood that there are certain factors which should be there in a social media campaign for it to be successful:

1. Quality & Originality of content

2. Activity on campaign platform (some action should go on regularly) 

3. Initial networking to promote the campaign

Social media is not just to have presence on facebook and twitter but its a marketing strategy which encompasses utilization of all the web tools with a focused approach. I will discuss on these strategies in next blog.

Internet marketing effectiveness: Tools & Techniques

Internet technology and Marketing 

With the advent of Web 2.0, Customer engagement with the help of internet based platform has become pertinent. Earlier with web 1.0, the customer engagement was not interactive enough to make an impact. Now with better graphics, usability, flexibility, inter operability and speed, web 2.0 features has drastically improving and breakthrough achievements are being made in the field of the internet technology. Marketers & technologists, who were earlier very skeptical of using the power of internet to market their products and services, are being more assertive in their approach to focus on internet marketing as an important part of their marketing plan.

Use of Internet marketing tools and techniques in marketing the products is quite a new concept and there are lot of challenges that this field is also facing as most of other technologies face while evolving.

No one is undermining the impact of internet marketing technologies in marketing field, but marketers are not sure on which tools and technique to focus on to get the maximum ROI on the internet marketing investments. The structured approach in internet marketing is still evolving. 

What do researcher's point out ?

A recent research in Singapore & Malaysia, by Chai Lee clears that there is strong positive correlation among the three factors of Internet and Information technology, Web site development and Internet marketing. The study also concluded that Web site development has a statistically significant positive impact on the Internet marketing in Malaysia and Singapore.

In another research, On the basis of an analysis of survey data from 381 manufacturing firms involved in exporting, the authors V. Kanti Prasad, K. Ramamurthy and G.M. Naidu, find that firms' integration ofInternet technology into marketing activities generally leverages the influence of market orientation on the firms' marketing competencies (compared with competitors), which in turn have a positive impact on their export performance.   

It has also been found out in IPA Bellwether survey in USA that the 76% growth has continued to outpace all other forms of advertising and marketing for industry professionals. In 2004, Internet marketing accounts for approximately 3% of total marketing expenditure and around 18 % companies revised their Internet marketing budgets upwards well ahead of any other media or marketing activity covered. 

This has been confirmed by an Outsell Inc. Survey which states that “spending on online advertising is en croaching on budgets allocated to traditional forms of advertising.”  EMarketer predicts that the share of total US media/marketing spending which will go to the Internet in 2008 will be 9.3% or $27.5 billion compared with 6% or $16.9 billion in 2006. In comparison, print spending is anticipated to grow just 3.3% and TV/radio 2.4%, as per the Outsell Inc.

Forrester Research’s “Forrester Wave: Interactive Marketing Agencies” report also supports the “new media” marketing trend: “Increasingly marketers are realizing that (offline and online) has to be integrated.”

The famous 4P model of Marketing which includes Price, Product, Promotion and Place as the foundation of any marketing plan, now needs to be updated with the emergence of internet to include the fifth P, Platform (Internet platform) suggesting for another basic element of marketing.

The “P” most affected by the Internet technology is the “promotion” because here a wide range of Internet marketing tools and techniques have emerged. The digital marketing  include e-mail marketing, Banner advertising, cost per click campaigns, video marketing, affiliate marketing, Web analytics, paid inclusion, link building, Blogging, viral marketing, Web press releases, search engine marketing and search engine optimization (SEO) as the major marketing tools and techniques, few of which will be discussed in the next section.

Moreover, search engines have become an increasingly vital part of the overall experience of the American Internet users. The most recent findings of the Pew Internet and America life tracking surveys highlights that about 60 million American adults are using search en gines on a typical day.

Therefore, today’s marketer needs to understand the purpose and effect of their company’s website. A marketing plan should not only focus on print, radio and TV, but also include Interactive with digital media. The plan should be embedded with techniques to attract a potential client to the company website and should result into the consumer behaviour as desired by the company. Thus, the variables affecting the potential customer’s online entry point and exit point on the website must be ana lyzed and should result in more customer focused internet marketing plan.

Internet marketing tools and techniques

The above discussion on the internet technology as a marketing tool leaves no scope to ignore the usage of internet in a company’s marketing plan. More and more companies are realising this and incorporating the internet tools to enhance the consumer experience.

The recent engagement of Pepsi with the Twitter (a famous social networking platform) to engage customers is a step forward in this direction. Even USA President Barrack Obama’s campaign used internet extensively. Mr. Obama’s campaign took advantage of YouTube for free advertising.

“The campaign’s official stuff they created for YouTube was watched for 14.5 million hours,” Mr. Trippi said. “To buy 14.5 million hours on broadcast TV is $47 million.”

By using interactive Web 2.0 tools, Mr. Obama’s campaign changed the way politicians organized supporters, advertised to voters, defended against attacks from opposition and communicate with constituents. 

The internet marketing campaigns uses various tools and techniques, the major ones are discussed here:

1. Website Development & Search Engine Optimization (SEO)

Website development is the first basic step to be on the Internet platform. As most users which refers to any website, refer through the search engines. So, the key to enhanced  visibility is Search engine optimization i.e. SEO. SEO is the process of creating elements within the website so that it could be found through non paid searches. Usage of Metadata, keyword rich text and fresh content are the way to do this.

Search engines such as Google and Yahoo index billions of web pages and rank them according to complex algorithms that assess a page’s accessibility, its relevance based on specific search terms or keywords, and importance indicated by the number of sites that link to it.

SEO experts use different techniques to achieve this, few are mentioned below:

•  Creating  the website using “search engine friendly” coding techniques that reduces  the use of Flash and frames
• Using appropriate key words in the content to focus on target group.
• Incorporating keyword-rich content into a website’s domain name, meta tags,title tags, alt tags, headings and the overall content of web pages and ensuring that content is updated regularly.
• Registering the website address with search engines
• Developing a linking strategy with other websites (to and from) to grow quality of inbound links referring to the site

Here is the list of the most popular search engines and directories with which a company’s website should be registered on; Google –www.google.com,  Yahoo – www.yahoo.ca or www.yahoo.com,  MSN – www.msn.com,   Tacoma – www.teoma.com,  Overture – www.overture.com,  Open Directory – http://dmoz.org, AltaVista – www.altavista.com, Income – www.inktomi.com

As a good SEO strategy, inbound links should be enhanced through the placement of text-based links. While linking to a particular website, one should be ready to offer the link to other party as well as it is always a reciprocal strategy. More details regarding the linking strategies can be referred from www.searchenginewatch.com.

2. Online Advertising Models

Various types of advertisements can be used on the third party websites as well the search engines.

• Graphical banner ads, pop-ups and text based advertisements are online ads that are normally placed on third-party websites which links back to the website. These ads can are mainly setup for a fee, which uses different revenue models – pay-per-click, pay per- lead, pay-per-sale – or these ads can be placed as part of the  reciprocal ad exchange. 

• Paid advertising in search engines. Few search engines provides definite listing of a website for a fee. To understand the revenue model, let’s take example of Google which has a paid solution called Adwords which uses Pay per click model. Google allows advertisers to bid for “sponsored links” which are the paid listings on the top and the right side of Google's search results page. This technique is a quick, cost-effective way to get a website into search engines, without the long delay times associated with the “natural” ranking methods.

3. Publishing on Third-Party Websites. 

Editorial article writing is also a cost effective way to augment the online presence. As in offline media, writing the editorials/articles boosts the credibility of the person associated and project one as an expert in a field. In online media also, writing articles for the e-magzines, e-newsletters boosts the confidence of the potential customer to use the website services. Important thing to be noted is that articles should end with a short note on the services offered, experience and obviously a link referring to the website in question.

4. Email Marketing

Email marketing can consist of direct e-mailers and sales letters, personalized auto-responders, and/or email newsletters. This is a cost effective technique which can reach to the wider audiences but the challenge is that most of these mails falls under the category of spams and people don’t pay much attention to it. So, the idea is to use the technique when a sales discount is offered (which attracts customer) and the designing of the e-mailers should be catchy.

Self-Publishing Using Low-Cost Internet Tools

This is a type of email marketing technique which is more sophisticated. Self publishing tools are available to the small business organisations which offer services at a particular service charge for 1000 e-mailers.

These are entirely online solutions, designed for small business owners with very little

technical knowledge. They offer a database, where email addresses can be stored, a selection of HTML templates for email messages can be made, testing functions, and other services such as customized auto-responders with unsubscribe option.

The popular self publishing solution providers are listed below:

•         Constant Contact – www.constantcontact.com

•         MyMailOut.com – www.mymailout.com

•         Topica – www.topica.com

•         Microsoft – www.microsoft.com/smallbusiness

Ensuring High Delivery Rates

To ensure high delivery rates for the emails that have been sent, the key is that one should have permission to send the email. Otherwise, the emails can get stuck with the spam filters.

It has been often seen that HTML emails are more likely to get caught in these filters as compared to text emails. Hence a plain text email with a link to the online message is the most effective way to not get caught in spam filters. Email messages can be checked for their spam riskiness using the SpamCheck (http://spamcheck.sitesell.com) which checks an  email’s subject lines and body copy for filter triggers. More details on email marketing can be referred from www.emailsherpa.com.

5.      Social Media marketing

Social media marketing is a concept that is evolving and its effectiveness is now being understood by the marketers. Its a way to promote the products and services on the net using social networking sites like Facebook, Twitter and Orkut etc. 

When people collaborate on such networks with their friends, products and services can be promoted on these platforms and the initial thrust provided by the marketers then can flourish into a phenomenon through word of mouth publicity among peers.

Many of the top corporates have thus registered their pressence on such social networking websites. Not only businesses, political parties have also been successful in leveraging this tool of new age marketing, Recent win of Obama is a case to prove this fact, which i have discussed earlier in this blog.

Twitter (Twiiter.com) is also a unique concept which has reinvented the social marketing wheel. The one liner messages shared among the peers and a group people can be analysed to understand the consumer behavior, which is important for any marketer.

6. Business Blogs

Blogs are the creative online journals, which can be used as an important part of the marketing strategy. Blogs provide an inherent marketing focus as they connect with the readers easily and forms a very good channel of communication, with absolutely very low or minimal costs. The most common websites which offer blogging features are: 

       • www.blogger.com

       • www.bloglines.com

       • www.spaces.msn.com

7. Podcasts

Podcasts is a unique concept of sharing the digital media files on the internet and thus making it available to the people who are interested. A podcatcher software (available for free, e.g. iTunes, Zune, Winamp) is required to receive the podcasts released by a publisher. 

So, if someone visits a website and finds a lot of interesting podcasts audio/video files available and is interested in the future releases. One has to simply subscribe to that website and the podcatcher will automatically checks out for the any new release to the feeds one has subscribed. As soon as the new media file is released, podcatcher stores it on the personal computer of the subscriber.

The major advantage of this tool is that a person does not have to be present physically at the time of broadcast to watch or listen to that particular media file. This tool is of immense help to the marketers in this digital fast moving world where they can catch their audience easily and effectively.

8. Affiliate/Referral marketing

Affiliate marketing, also known as referral programs or partnership programs, involves the use of other partner websites for propagating a product or service for a payment for each sale, lead, action, or visitor. 

Amazon.com has successfully used affiliate model to sell books online, to create brand awareness and generating volume traffic on its site.

Costs involved in the internet marketing strategies 

The costs involved for internet marketing depends on the industry focused and the techniques used but for sure, the cost involved are very much less as compared with the traditional marketing techniques.

The internet marketing strategies can be outsourced to the specialist firms which bids projects on T&M and fixed rate basis. The average T&M rates in USA market are 25 to 30 $/hour. While designing the internet marketing plan, cost for the maintenance of the website and regular update should be included.

Role of offline marketing in driving traffic online 

The offline marketing performs a very critical role in driving online. An effective offline campaign can be capitalised further with the help of proper use of online marketing strategies. Thus, offline marketing material should always contain website address and links, whether it is business card, brochure, published articles, print advertisements, sandwich boards or vehicles. 

The proper integration of the offline marketing strategies with the online promotion techniques can help creating value for the customer and brand loyalty can be further increased as well as new customer acquisitions are possible.

Conclusion of the discussion

• Internet marketing is the future and there is a huge scope & opportunities for the internet marketing.
• Internet marketing is really effective and online tools and techniques, if properly used, can lead to the easy customer acquisition, enhanced customer relationship management and brand loyalty.
• Various forms of internet marketing strategies are used, of which major ones are – Email marketing, Search engine optimization, social media marketing, Search engine marketing, Blogs and affiliate marketing.
• Internet marketing is cost effective as compared to the traditional marketing techniques and can reach to far wider audiences.
• Internet marketing should be a necessary part of the overall marketing plan of a company. If supported by an effective offline marketing communication, results can be seen much faster and ROI would be excellent.

References:

1.        Correlation between Internet and ICT, Web Site Development, and Internet Marketing: Perception of Marketers in Malaysia and Singapore, By chai lee, Journal of Internet Banking & Commerce, Aug 2007

2.        The influence of Internet-Marketing Integration on Marketing Competencies and Export Performance, by  V. Kanti Prasad,  K. Ramamurthy, G. M. Naidu, Journal of International Marketing; 2001, Vol. 9

3.        Internet marketing continues to grow faster than any other form,  Yinka Adegoke, New Media Age; 10/21/2004

4.        Internet marketing, the Business link, www.CanadaBusiness.ca/alberta

5.        Ashay White_Paper_The Emergence of Internet Marketing

Future of the internet

The Internet is a world wide web of interconnected computer networks which comprises of millions of privately and publicly owned, academic, business, and government owned networks which have local to global scope. These networks are linked by copper wires, fiber-optic cables, wireless connections, and other technologies.

Commercialization of the internet network started in the mid 1990s, and countless applications in virtually every aspect of modern human life have evolved since then. As internet is touching every aspect of the human life, we are more interested in the future of internet. What would be the role of internet in the future world, let’s say after 10 years i.e. 2020.

Recently a survey was conducted by the PEW internet and American life project to predict the implications of the internet on society in coming times and how internet will be evolved? The survey focused on the responses from the key personnel in internet industry, analysts and technocrats.