For many years, consumer packaged goods (CPG) marketers didn't have much need to be on the cutting edge of digital innovation. But this is no longer the case, as the CPG industry now leverages digital technology to its full capacity. In areas such as mobile commerce and mobile measurement, it’s even ahead of the curve. And we’re continuing to move in the right direction: eMarketer projects that US CPG digital ad spending will top $4 billion in 2014 -- proof that the package goods industry has recognized the competitive edge entering the digital age gives marketers.
Media professionals from ad networks, portals, exchanges, mobile publishers and agencies who represent CPG clients need to understand the following about CPG marketing in order to deliver the strongest results.
Purchase History is the Strongest Indicator of Purchase Intent
Using purchase data to segment audiences is the most efficient way to plan and buy CPG media. Before thinking about location technologies or creative approaches to advertising, it’s important to first know who already buys your product and who buys within the product category. Traditionally, such segmentation was done using age or gender demographics exclusively, but these demographics are inefficient, at best, not accounting for historical spending habits.
A successful campaign will be a combination of all factors, but must first classify someone as a current or potential buyer to be effective. For instance, no matter how compelling a milk ad might be, if the viewer of a milk ad is lactose intolerant, the ad will not lead to sales or even referral business. A recent study by Catalina found that demographic-based media plans under deliver to brands’ best consumers, with only 36 percent of ad exposures reaching the households that accounted for 98 percent of the brands sales.
Ad campaigns come at a price. It’s important to ensure that media is being served to a brands’ best audience. Equally important is ensuring that the reach and frequency of an ad campaign is calibrated properly. An NCS analysis of over 1,000 CPG campaigns revealed that the optimum digital frequency for a three month campaign is about one exposure per household per week.
Campaigns that control for frequency, keeping the weekly frequency at that ideal level of one per week, realize a return on ad spending that is nearly five times greater than those campaigns that have a weekly frequency cap of two times per week or more often. In conclusion, ad campaigns should strive to use the least amount of impressions necessary to drive the greatest number of reactions to the advertisement.
In-Store Sales are the Best Measure of Campaign Success
Traditional engagement metrics, such as the once hallowed “click-through rate,” are arcane and misleading, particularly for CPG brands. When was the last time you saw an ad for shaving cream and were inclined to click? A better indicator of a campaign’s success would tie advertising impressions directly to incremental in-store sales. While there are exceptions for newer brands or brands being brought back from recall, which may need a more creative ad campaign that educates consumers as to why they may need the new or recalled product, the greater value for most brands lies in understanding what type of consumer bought the product in the recent past and what competitive brand the share was shifted from.
Every CPG Campaign is Different
The majority of CPG campaigns are going to be loosely based on the following three goals:
- Defend and retain the brand’s loyal base.
- Expand category penetration by converting non-loyal category shoppers.
- Take share directly from competitive brands.
While working toward achieving these goals, it’s also preferable to not use any impressions on consumers who don’t shop in the brand’s category and who are unlikely to do so. These shoppers aren’t a relevant target for the brand.
Since every campaign will have a unique set of goals regardless of its theme or objective, key performance indicators (KPIs) for each campaign must be set accordingly. For example, if a well-known soap brand is advertising its category leading product with the goal of retaining its loyal base, a sales lift of two to three percent might be a solid success story.
For a less category dominant brand, the goal might be to increase penetration by capturing category buyers who do not have brand loyalty. For this smaller brand, a lift of two percent would likely be disappointing. Thus, it is very important for all parties involved in a campaign to understand the full context of the campaign’s goals when evaluating performance.
Niche Markets Lend Themselves to Larger Returns
The CPG industry tends to be laden with commodity products. This does not mean, however, that there aren’t some niche markets lurking within. Take the “pet” category for example. Pet owners are a very binary group -- either you have a pet or you do not, and a given consumer is likely to remain in either the “pet-owning” or “non-pet-owning” camp for a relatively long period of time.
Using purchase data to identify audiences of pet owners or other niche CPG categories yields a high return on ad spend (ROAS). For example, NCS has measured over 2,000 CPG campaigns and compiled the normative ROAS figures for several different types of CPG products. Pet campaigns were far and away the most successful in terms of driving ROAS, with the average campaign returning $5.29 for every dollar spent. Comparatively, the more commodity driven food category returned an average ROAS of $2.36. Other examples of niche markets within the CPG industry are baby products, seasonal items and OTC medications.
When working on a CPG media program, it’s critical to remember that historical purchase behavior always trumps location of ad delivery, dynamic creative elements or even context that would heighten receptivity to a new or trusted brand. Ad campaigns should also exercise restraint -- despite a rapidly growing and addressable Internet market -- so that the least amount of impressions drive the most incremental sales.
While creative fit, reach metrics and other measurements are beneficial, the ultimate proof of a positive return on ad spending will be derived from the ability to measure incremental sales activity using Key Performance Indicators. If the right indicators are set from the beginning, appropriately gauging what incremental sales might potentially occur, then it will be possible to use those KPIs to accurately evaluate the success of CPG media.