Get closer to the customer. When you have no relationship with him
The challenge for the CPGs
Unlike retailers, the primary business of CPG companies is to produce goods for mass use.
They do not sell directly to consumers and do not have points of sale. If they do, it is as a side business.
CPG has its distribution divided into two.
The way they carry their goods to market distinguishes between traditional and modern channel.
They are small corner shops or mom-and-pops stores that are supplied directly by the CPG using an extensive and effective supply chain.
In Latin America, this segment accounts for over 60% of sales on average, while on the developed countries is much less than that.
Lately competition has been increasing for this channel by the large retail chains through new, smaller store formats aimed at proximity, that is at short distance from the shopper and smaller assortments than large stores but adequate to restock daily family needs.
Are supermarkets in large commercial chains, larger formats and extensive range of products or specialized in specific categories such as home decoration, spare parts, stationery.
They account for the remaining 40% of sales for CPGs.
The distinction between the two channels is:
- The cost to serve small establishments, it is much more expensive because of the number of stores and the small amount of products each one buys.
- Not enough information available about the deals that make sellers with each independentIt is difficult to follow them up and take control.
- It is not possible to have an accurate promotional planning;it is limited due to discretionary decisions from sellers who have direct relationship with the customers.
- The operating cost is not so high because the contact points are reduced, it has to supply directly to stores or distribution centers through a systematic process.
- The amount of product each chain buys is much higher.
- There is much more transparency of the deals and negotiations made between retailer and CPG.
- It is possible to have an effective and targeted promotional planning according to each commercial chain, as they share data and plan together.
Trade marketing are strategies to boost sales of products through the channel.
They are not made directly to consumers because the selling point is the retailer and is not exclusive to one brand. You have to share space with other suppliers and the retailer’s own brands.
Specific actions per channel are also made because they are different and seek to encourage various sectors of consumers besides, the scope that these activities may have, and their performance limitations due to physical space and the number of points of sale could be a restriction.
Usually encouraged with the placement of branded CPG fridges, paint for the facade of the shop with the supplier’s image, additional displays, furniture, promotions, promotional material at the point of sale (PoP), etc. This material is paid by the supplier and looks for its products or brand to have a privileged position in the store and thus higher sales.
The brand positioning is driven by promoters on the sales floor, additional exhibitors, loudspeakers, promotions, promotional material store (PoP), among others. The goal is to gain more visibility for their products within the set of products the retailer sells and through this, increase sales.
Promotions are funded by the CPG and care should be taken to ensure that there is no cannibalization of other brands. Seeking to balance the benefit for the retailer and the CPG.
Effectiveness of Marketing in the Retailer
In the traditional channel it is very difficult to measure the impact of marketing activities because they do not have accurate sales numbers in detail, those are taken by seller only, as each decides how you use their promotional budget.
In the modern channel information is shared with the retailer and has more current information about sales but has to work to get real results. The CPG has data about what have sold to the retailer, that’s sell-in, but does not have own data in sell-out, to the shopper, these are provided by the retailer. The metric obtained by the CPG is selling is the sell-thru. This reflects the sales performance of the channel.
Sales data in the modern channel are systematized and way more standardized than in the traditional channel. Thus making for a better input for decision making.
Create a relationship with the end customer
Today the trend is that CPGs too would like to know the shoppers, know your needs, tastes and personal characteristics to offer them better products.
By the nature of the goods they offer, of repeated and mass consumption, that are used in the short term and do not represent a significant outlay but one that is constant.
The challenge for them is that they have never had any direct relationship with consumers, it has always been through the retailer or channel.
Strategies to approach the consumer
Search customer contact beyond advertising campaigns in which great artists are hired at very high costs that often result in a major campaign. The brand is positioned very well, but there is really no sales increase or a rapprochement with the consumer is achieved.
On the other hand, information of the loyalty programs is held by the retailer and won’t not share it with the CPG, because those are the retailer’s customers.
The approach with the consumer should translate into contact data to generate follow-up campaigns in a more personalized way.
The goal of creating a relationship should be taken into account, this is not something that is achieved in the short term, with an excellent campaign. It is a process that takes time and coordinated marketing efforts, to provide continuity and monitor activities, ensuring that current and potential consumers get engaged with the brand.
It is important to consider the opportunity now that the trend begins, soon all suppliers will seek to have data of their customers, know them more deeply and so lead to greater efforts to obtain its data. Consumers are and will be increasingly reluctant to provide it to them.
Create a relationship with consumers is a goal of medium to long term, we must first build trust by offering them value in return for their data and, above all a personalized experience. Show worthwhile to provide their data.
It is not only about saturating them with promotional messages or invitations to events, is truly learn what they need and seek to then become relevant.