New directions Consumer goods companies hone a cross-channel approach to consumer marketing A report from the Economist Intelligence Unit Sponsored by Oracle © Economist Intelligence Unit Limited 2012 1 New directions Consumer goods companies hone a cross-channel approach to consumer marketing Preface 2 Executive summary 3 About the survey 3 Introduction: shifting behaviours, shifting priorities 5 Nurturing engagement, loyalty and sales across multiple channels 7 The e-commerce opportunity 9 A cross-channel perspective: mixing the old with the new 11 Direct connections drive consumer insights 12 Conclusion: the road ahead 13 Appendix: survey results 15 Contents © Economist Intelligence Unit Limited 2012 New directions Consumer goods companies hone a cross-channel approach to consumer marketing 2 New directions: Consumer goods companies hone a cross-channel approach to consumer marketing explores the shifting behaviours—and priorities—of consumer goods companies towards their consumers. The Economist Intelligence Unit conducted the survey and analysis and wrote the report. The fi ndings and views expressed in this report do not necessarily refl ect the views of the sponsor. The author was Rob O’Regan. Gilda Stahl edited the report, and Mike Kenny was responsible for layout. We would like to thank all of the executives who participated in the survey and interviews for their valuable time and insight. February 2012 Preface © Economist Intelligence Unit Limited 2012 3 New directions Consumer goods companies hone a cross-channel approach to consumer marketing C onsumer goods (CG) manufacturers are aggressively exploring ways to integrate new channels such as social media and mobile into the marketing mix to attract and engage consumers. However, they are not ready to abandon traditional approaches to consumer marketing. CG marketers say they want to increase engagement with consumers and improve their direct-to-consumer initiatives—but are they really ready to do so? Perhaps CG companies looking to get closer to consumers ought to think more like retailers, which have made signifi cant investments in understanding consumer behaviour and sentiment across physical and digital environments. New directions: consumer goods companies hone a cross-channel approach to consumer marketing, an Economist Intelligence Unit report sponsored by Oracle, draws on a survey of 221 CG executives as well as in-depth interviews with corporate leaders in the CG industry to explore the changing face of consumer marketing. Key fi ndings in our research include the following: l Pushing traditional media through new media channels is not enough to reach today’s more plugged- in, product-savvy consumer. An increasingly complex, non-linear buying process requires a different approach—one that integrates multiple channels to put their brands wherever consumers are, in a way that encourages participation, not passive consumption of marketing messages. l CG companies are experimenting with new ways to establish and enhance direct, two-way relationships with their target consumers across multiple channels. Over the next 12 months, survey respondents plan to leverage social media for such activities as product promotion (73%), capturing consumer feedback (63%) and customer service (62%). In addition, social media participation is growing in importance as a tool to increase consumer loyalty. Nearly twice as many respondents say it Executive summary About the survey In October 2011 the Economist Intelligence Unit conducted a global survey of 221 consumer goods (CG) executives, sponsored by Oracle. Thirty-one percent of respondents hailed from the Asia-Pacifi c region, 27% from North America, 28% from Europe, 10% from the Middle East/Africa and 3% from Latin America. The respondent pool was senior: 40% were C-level executives, and the remainder were senior executives and managers. All respondents were from companies with over US$1bn in revenue. A mix of CG segments was represented, including food and beverage (53%), personal and household products (30%), non-durables (11%), tobacco (4%) and agribusiness (2%). © Economist Intelligence Unit Limited 2012 New directions Consumer goods companies hone a cross-channel approach to consumer marketing 4 will become a top priority in the next 12 months (up to 33%, from 17% today). Deeper relationships, CG marketers believe, will enhance brand loyalty and drive product sales, either directly (through digital commerce) or via traditional retail channels. l Vibrant online communities can serve as an entrée into e-commerce and other direct-to-consumer sales for CG manufacturers that have traditionally sold through third-party retail channels. Forty-one percent of respondents to the Economist Intelligence Unit survey say they expect to sell products directly to consumers over the next 12 months—up from the 24% who say they currently offer direct sales. l Survey respondents and other CG executives see their nascent e-commerce efforts as complementary to, not competing with, existing retail channels. Forty-one percent of respondents say they work with their retail partners on a variety of marketing, sales and service programmes. However, 23% of respondents say that while they collaborate with retail partners, they are also committed to expanding their competing direct-to-consumer strategies. l An increasingly complex relationship between CG manufacturers and their retail partners is just one example of the evolving nature of CG makers’ direct-to-consumer marketing efforts. As marketers experiment with new channels such as social media and mobile, they are discovering that traditional messaging won’t work in these new media. But they are not prepared to simply abandon the old in favour of the new. Instead, they are fi nding that a blend of digital media and traditional methods such as in-store marketing is the most effective way to establish two-way relationships with consumers. © Economist Intelligence Unit Limited 2012 5 New directions Consumer goods companies hone a cross-channel approach to consumer marketing C onsumers’ online activities continue to expand, but are marketers devising novel strategies to engage these consumers? In the US, Internet users average 32 hours a month online while Europeans spend an average of 24.3 hours online monthly, according to comScore, an Internet marketing research company. Increasingly, consumers’ Internet time is spent on social networks, which in the US account for one out of every six minutes spent online. Facebook alone reaches 73% of the total US Internet population each month, with visitors’ average time spent on the social network increasing from 4.6 hours to 6.3 hours per month over the past year. Mobile access to the Internet is on the rise as well. A survey conducted by the Pew Internet Project in July 2011 found that 87% of US smartphone users access the Internet and e-mail from their devices and 68% do so daily. One-quarter of these users said the smartphone is their preferred device for accessing the Internet. Introduction: shifting behaviours, shifting priorities Social networking (US) Share of total time spent online (%) Source: http://blog.comscore.com/2011/06/facebook_linkedin_twitter_tumblr.htm l 0 2 4 6 8 10 12 14 16 18 20 Jun-2008 Jul-2008 Aug-2008 Sep-2008 Oct-2008 Nov-2008 Dec-2008 Jan-2009 Feb-2009 Mar-2009 Apr-2009 May-2009 Jun-2009 Jul-2009 Aug-2009 Sep-2009 Oct-2009 Nov-2009 Dec-2009 Jan-2010 Feb-2010 Mar-2010 Apr-2010 May-2010 Jun-2010 Jul-2010 Aug-2010 Sep-2010 Oct-2010 Nov-2010 Dec-2010 Jan-2011 Feb-2011 Mar-2011 Apr-2011 May-2011 Jun-2011 Jul-2011 Aug-2011 Sep-2011 Oct-2011 Nov-2011 Dec-2011 © Economist Intelligence Unit Limited 2012 New directions Consumer goods companies hone a cross-channel approach to consumer marketing 6 As consumers spend more time online—frequently researching, discussing and even directly purchasing consumer goods ranging from household and personal-care items to apparel and consumer electronics—efforts by marketers to reach these consumers when and where they shop have lagged. In an Economist Intelligence Unit global survey of business professionals from CG companies, respondents cited three traditional marketing activities—in-store marketing (73%), co-marketing with retail partners (61%) and print/television ads (60%)—as most important for consumer engagement. Marketers appear ready to pick up the digital pace, however. Seventy-three percent of respondents say social media will be an important part of consumer engagement over the next year, second only to in- store marketing (74%). Digital marketing (66%) will rise to the third spot, ahead of print/TV advertising (59%). While these fi gures show that engagement priorities are shifting, marketers also understand the importance of integrating communications across all of these channels—not managing each independently—to deliver a more consistent and personalised buying experience to consumers. “Our go-to-market strategy is to win wherever people shop,” says Alex Tosolini, vice-president of global e-business at Procter & Gamble (P&G). “As more people move their shopping habits online, we want to be present when and where they want to make a purchase.” The goal for P&G and others is to establish and enhance direct, two-way relationships with their target consumers. Deeper relationships, CG marketers believe, will increase brand loyalty and drive product sales, either directly (through digital commerce) or via traditional retail channels. The opportunity is fi nally catching the attention of senior management: in the EIU survey, 74% of CEO-level respondents say social media is a priority for increasing loyalty over the next 12 months. “Our go-to-market strategy is to win wherever people shop. As more people move their shopping habits online, we want to be present when and where they want to make a purchase” Alex Tosolini, Vice-president of global e-business, Procter & Gamble © Economist Intelligence Unit Limited 2012 7 New directions Consumer goods companies hone a cross-channel approach to consumer marketing CG manufacturers have discovered that the most effective engagement activities involve a two- way exchange between the brand and its consumers. Fifty-nine percent of survey respondents say they use consumer marketing to increase interaction with their brands. Over the next 12 months, respondents plan to leverage social media for product promotion (74%), capturing consumer feedback (63%) and customer service (62%). In addition, social media participation will nearly double over the next 12 months (from 17% to 33%) as a top priority for marketers looking to increase consumer loyalty. There is a tangible reason for marketers’ increased emphasis on social media: test programmes show that nurturing engagement and loyalty through social media can have a direct impact on sales. P&G’s Secret deodorant brand, for example, has fostered a Facebook community with more than 1.3m fans. More than one-half of those members regularly engage with the fan page through activities such as posting, commenting or uploading their own videos. The page also features coupons, free samples and other promotions. Since launching its Facebook-driven “Fearless” campaign, the Secret brand has increased Nurturing engagement, loyalty and sales across multiple channels 1 Highest priority 2 3 4 5 Lowest priority Product promotions Print coupons Online coupons Loyalty programmes Online communities Social media participation Digital marketing In-store marketing Shopper marketing Rating/reviews/recommendations Please rank in order of priority the importance of the following methods for increasing customer loyalty over the next 12 months. Please rate on a scale of 1 to 5, where 1=Highest priority and 5=Lowest priority. (% respondents) Source: Economist Intelligence Unit survey, October 2011. 43 34 14 4 4 9 33 19 13 26 14 24 24 16 21 30 31 20 7 13 21 32 24 13 10 33 31 18 11 7 23 36 24 11 6 46 28 15 8 4 31 32 18 8 11 20 30 27 11 12 © Economist Intelligence Unit Limited 2012 New directions Consumer goods companies hone a cross-channel approach to consumer marketing 8 market share by 7%. “When you see this level of engagement, you know something is right,” says Mr Tosolini. Social media is not the only emerging channel P&G is using to connect directly with consumers. In November 2011 the company announced a partnership with a start-up called Mobeam to distribute digital coupons via mobile phones. The companies plan to begin testing the solution—which requires enhancements to existing handsets—in 2012. Diageo is another CG manufacturer that has also turned to social media—Facebook specifi cally—to enhance its consumer marketing efforts and drive retail beverage sales. The global spirits maker expanded its brands’ collective fan base from 3.5m to 12m in one year, and an in-house study conducted with Facebook and Nielsen on fi ve of Diageo’s US brands showed that increased Facebook activity resulted in a 20% increase in sales across those brands. “The rules of engagement are very different,” says Venky Balakrishnan, Diageo’s vice-president of marketing innovation. “Rather than just talk about it, our actions must refl ect what our brands stand for, and we have to give consumers the opportunity to participate and co-create with our brands in a responsible way.” “The rules of engagement are very different. Our actions must refl ect what our brands stand for, and we have to give consumers the opportunity to participate and co-create with our brands in a responsible way” Venky Balakrishnan, Vice- president of marketing innovation, Diageo © Economist Intelligence Unit Limited 2012 9 New directions Consumer goods companies hone a cross-channel approach to consumer marketing V ibrant online communities can also serve as an entrée into e-commerce for CG manufacturers that have traditionally sold through third-party retail channels. Forty-one percent of survey respondents say they expect to sell products directly to consumers over the next 12 months—up from the 24% who say they currently offer direct sales. The percentage is even higher in the Asia-Pacifi c region, with 48% of those respondents expecting to offer direct sales over the next 12 months. This is possibly a refl ection of Asian consumers’ increasing use of mobile phones for shopping and the expected adoption of mobile wallet services from Google, Nokia and others, which will expand the mobile commerce market. CG companies have good reason for wanting a piece of the e-commerce market. In the US, online revenues for the CG brands traditionally slowest to adopt e-commerce are expected to more than double (through online retail and direct channels) over the next three years, from US$12bn in 2010 to US$25bn by 2014, according to Nielsen. Survey respondents and other CG executives see their nascent e-commerce efforts as complimentary to, not competing with, existing retail channels. The goal, as P&G’s Mr Tosolini stated, is to be wherever the consumer is. To this end, 41% of respondents say they work with their retail partners on a variety of marketing, sales and service programmes. However, 23% of respondents say that while they collaborate with retail partners, they are also committed to expanding their competing direct-to-consumer strategies. Some CG companies are already fi nding success with e- commerce initiatives. For example, Solo Cup, a US$1.6bn provider of single-use/disposable products (e.g., paper cups and plates), launched a digital storefront (solocup.alice.com ) in partnership with alice.com in August 2011 that users can access from Solo’s corporate website as well as its Facebook page. “Linking the storefront into our website and Facebook page makes it easier and more accessible for consumers to buy Solo products while they are already engaging with the brand online,” says Chris Klem, the company’s director of consumer marketing. Solo Cup’s online storefront also allows the company to The e-commerce opportunity US online CPG sales (US$ bn) Source: http://blog.nielsen.com/nielsenwire/consumer/ five-things-to-know-about-online-grocery-shopping/ 5 2006 2008 2010 2012 2014 8 12 17 25 [...]... New directions Consumer goods companies hone a cross-channel approach to consumer marketing A cross-channel perspective: mixing the old with the new An innovative blend of social media engagement and in-store marketing including options to purchase online, in a retail store, or even through a mobile device— are proving to be a valuable combination for attracting and retaining customers 11 S ocial media... in-store marketing including options to purchase online, in a retail store, or even through mobile devices—are proving to be a valuable combination for attracting and retaining customers This approach requires CG manufacturers to look at the consumer landscape in a far different way than they have traditionally—and adjust their marketing programmes accordingly US-based Kraft Foods, for example, has leveraged... repository (DSR)? (% respondents) (% respondents) United States of America 22 We are exploring integration of social media data with our retail and consumer demand signals (eg data stored in our DSR) India 31 17 Our strategy is to manage social media data separate from retail and consumer demand signals United Kingdom 7 20 United Arab Emirates We bring social media data into our demand signal repository... repository (DSR) 6 13 Canada We don’t have a demand signal management strategy 5 36 Australia, Italy 3 China, Turkey, Belgium, Denmark, Germany 2 Brazil, Hong Kong, Indonesia, Poland, Singapore, Spain, Switzerland, Austria, Czech Republic, France, Malaysia, Netherlands, Pakistan, South Africa, Sri Lanka 1 In which region are you personally based? (% respondents) Asia-Pacific 31 North America 27 Western Europe.. .New directions Consumer goods companies hone a cross-channel approach to consumer marketing How do you view your relationship with retailers as it relates to consumer engagement? (% respondents) We work together to serve consumers through a variety of marketing, sales and service programmes 41 We continue to work with retail partners but we are also committed to expanding our competing direct -to -consumer. .. technologies used to capture, store and analyse consumer data The goal for many of these companies is fine-tuning their methods for leveraging the data they are collecting The good news is that CG marketers do not have to strain their budgets to figure out the best approaches, because digital media enable them to test and learn quickly with minimal investment “With social media, you can test, learn and expand quickly... Purchase data 61 41 Lifestyle data We continue to work with retail partners but we are also committed to expanding our competing direct -to -consumer strategies 38 23 Consumer demand data We share consumer data and insights to enable better planning, though we act on those insights separately 33 Market data 22 33 We battle for shelf space with other brands Demographic data 9 31 We compete with retailers’... Middle East and Africa 10 Latin America 3 Eastern Europe 3 18 © Economist Intelligence Unit Limited 2012 Appendix Survey results New directions Consumer goods companies hone a cross-channel approach to consumer marketing Which industry segment do you belong to? What are your main functional roles? Choose up to three (% respondents) (% respondents) Food and Beverage 53 Marketing and sales Personal and Household... social media sites) We have no plans to ever market or sell directly to consumers 5 21 Through third-party, direct -to -consumer sites (eg, Alice.com, Amazon) 10 Other 5 15 © Economist Intelligence Unit Limited 2012 Appendix Survey results New directions Consumer goods companies hone a cross-channel approach to consumer marketing How have you used social media to engage with consumers over the past 12... leveraged the power of consumer engagement across multiple channels to increase sales of its Philadelphia Cream Cheese brand In 2009, Kraft launched Real Women of Philadelphia, an online community of Philadelphia users, and introduced a series of videos designed to © Economist Intelligence Unit Limited 2012 New directions Consumer goods companies hone a cross-channel approach to consumer marketing help reposition . 2012 New directions Consumer goods companies hone a cross-channel approach to consumer marketing 2 New directions: Consumer goods companies hone a cross-channel. as social media and mobile into the marketing mix to attract and engage consumers. However, they are not ready to abandon traditional approaches to consumer