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Forrester: CPG Consumer Engagement in a Digital World

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Forrester: CPG Consumer Engagement in a Digital World

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Accenture commissioned Forrester Consulting to evaluate the opportunity for CPG marketing leaders to market and sell directly to consumers.

For more information view us on www.accenture.com/ConsumerGoods

Accenture commissioned Forrester Consulting to evaluate the opportunity for CPG marketing leaders to market and sell directly to consumers.

For more information view us on www.accenture.com/ConsumerGoods

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Forrester: CPG Consumer Engagement in a Digital World

  1. 1. A Forrester Consulting Thought Leadership Paper Commissioned By Accenture September 2014 CPG Marketers Plan To Seize The Digital Disruption Opportunity A Guide To CPG Consumer Engagement In A Digital World
  2. 2. Table Of Contents Executive Summary ....................................................................................... 1 Digital Capabilities Disrupt CPG Marketing ................................................. 2 CPG Marketing Has Started Its Digital Transformation With Increased Use Of Online Channels ............................................................... 3 CPG Marketing Identifies Barriers To Overcome To Achieve Digital Transformation Benefits ................................................................................ 4 CPG Marketing Leaders Anticipate Huge Digital Transformation Benefits ........................................................................................................... 6 Accelerate Your Analog To Digital Transformation ..................................... 8 Appendix A: Methodology ............................................................................. 9 Appendix B: Demographics .......................................................................... 9 Appendix C: Endnotes ................................................................................. 11 ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester’s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. © 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com. [1-MXXYP8]
  3. 3. 1 Executive Summary Global consumer packaged goods (CPG) firms face a world in which their accumulated brand value is threatened by the relative decline of the importance of mature markets serviced by “modern trade.” These firms are faced with relative decline in Europe and American markets, pressure to accelerate new product introductions (NPIs), and competitors’ exploitation of direct-to-consumer marketing and fulfillment. CPG brands need to transform from the analog marketing and sales model that served them so well in developing and consolidating modern trade to a new combination of direct marketing, digitally enabled product innovation, and multichannel selling. Direct-to-consumer initiatives will help them improve margins and loyalty, accelerate NPI, fully service the vast developing market opportunity, and more effectively win and serve a new wave of digital consumers in developed markets. In May 2014, Accenture commissioned Forrester Consulting to evaluate the opportunity for CPG marketing leaders to market and sell directly to consumers. Forrester developed a quantitative survey to test the assertion that brands cannot deliver a relevant, effective consumer experience without also leveraging digital channels. They will have to engage consumers in a dialogue, serve up customized content and offers, and blur the distinction between marketing, sales, service, supply chain, and R&D in order to become consistently relevant and earn consumer loyalty. Results from in-depth surveys with 35 CPG marketing leaders at the C-level or VP level, and with 95 at the brand manager level, show that marketers are keenly aware of the threats and opportunities offered by digital transformation. While they have begun their transformation and anticipate accelerated innovation, along with increases in both consumer lifetime value and average order value (AOV), they perceive local cultural, legislation, and logistical barriers to the digital transformation of consumer engagement. KEY FINDINGS Forrester’s study yielded four key findings: › CPG marketing professionals anticipate significant investment in digital marketing, multichannel integration, and digitally enabled innovation to target global consumer market segments, increasing consumer lifetime value and the number of “blockbuster” products. › CPG marketing professionals expect proportionately more growth in sales through their own digital channels than through those of eRetailers. › CPG marketing professionals believe that digital transformation faces challenges from local legislation and from limited digital support for new product introduction. › Marketing and sales do not agree about impediments to direct-to-consumer selling. Marketing does not see the lack of internal integration across key functions or departments as an issue in the same way that sales does. Digital engagement complements the traditional sales channel, media, and trade spend, enabling firms to market directly to consumers, engaging them in their chosen channels, shortening the time and path to purchase, and simplifying fulfillment and consumer service.
  4. 4. 2 Digital Capabilities Disrupt CPG Marketing Data from the study showed that C-level marketing leaders and CPG brand managers are acutely aware of changes in the commercial environment that present both opportunities and challenges related to digital transformation. We asked them about the factors that favor adoption of digital channels for increased consumer engagement and loyalty: › Accelerated new product introduction. CPGs participating in our study had a median of 90 product lines that are currently being brought to market, and more than half said that more than 10% of these were introduced in the past year. Two-thirds of our survey respondents, 66%, expect the rate of new product introduction to accelerate significantly. › Anticipated restructuring of marketing to global market segment focus. As savvy marketers, our respondents recognize that the relative importance of country/regional segmentation will decline in the face of new consumers from developing markets swelling the ranks of digitally addressable global market segments with (some) common behaviors, values, and brand attitudes (see Figure 1). › Anticipated changes in channel mix. Respondents recognize that the vast bulk of sales today are still through retailers and distributors (see Figure 2). They anticipate the continued importance of trade spend, estimating that it accounts for more than 27% of promotional funds now, with two-thirds expecting a significant increase in the next five years across all channels. Particularly, they expect to increase their trade spend through digital channels, as they expect proportionately more growth in sales through their own digital channels than through those of eRetailers. Seventy-five percentage of CPG marketers believe that eRetailers sales account for 6% or more of revenue today, with 85% of CPG marketers expecting eRetailers sales to account for 6% or more revenue in the next 5 years. While 60% of CPG marketers believe that sales from their own digital channels account for 6% or more of revenue today, with 86% expecting sales from their own digital channels to account for 6% or more revenue in the next 5 years. FIGURE 1 CPG Marketing Anticipates A Shift To Global Market Segments “Please indicate how your firm is organized to market to consumers.” “How do you expect your marketing organization to change in the next five years?” 14% 29% 17% 9% 3% 23% Major account Country Region Global market segment Matrix Some categories are organized regionally and some globally Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014 29% 11% 9% 43% 0% 9% Marketing will be organized by major account Marketing will be organized by country Marketing will be organized by region Marketing will be organized by global market segment Marketing will be organized by matrix Marketing will organize some categories regionally and some globally
  5. 5. 3 FIGURE 2 Marketing Leaders Expect Most Sales In Traditional Channels Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014 CPG Marketing Has Started Its Digital Transformation With Increased Use Of Online Channels Our survey respondents agreed that adopting digital direct-to- consumer marketing and sales offered attractive advantages. They have already started to invest more in digital marketing, selling directly through digital channels and measuring the impact of early direct-to-consumer digital initiatives. Brand managers and heads of marketing told us that: › More and more marketing spend will be committed to digital channels. Surveyed marketers reported that 28% of marketing spend is now devoted to digital channels and media. None of the respondents in our survey expected to decrease the digital share of marketing funds, and 66% expected to significantly increase investment in digital marketing. › Most brand managers sell through digital channels. Forty-three percent of brand managers declared that between 6% and 10% of global revenues are attributed to their brand, with 37% claiming 11% to 50% of their brand’s revenue is through digital channels (both their own online channel and through eRetailers). Furthermore, brand managers, in contrast to marketing leaders, believe that in five years’ time revenues from their own eCommerce or eRetailers will exceed revenues from sales in stores. › Heads of marketing anticipate an increase in sales through both their own online channel and eRetailers. Of heads of marketing surveyed, 46% have 11% or more of sales through eRetailers and 54% expect these digital partners to account for 11% or more of revenue in five years’ time. While only 37% claim that 11% or more of their revenues are from their own digital channels today, 49% expect that 11% or more of their revenues will be from their own digital channels in five years’ time. › Personal social networks are the most adopted and actionable social medium. Most heads of marketing (83%) claimed to use personal social networks and corporate blogs as marketing tools (see Figure 3), with microblogging sites as a close second. Twenty-five of the 29 firms that use Facebook think that it is the most actionable social media insight, with a further 21 firms that use corporate blogs finding them to generate actionable insight. “What proportion of your global gross revenue is through brick-and-mortar retailer websites or eRetailers’ Internet channels? “What proportion of your global gross revenue is through brick-and-mortar retailers or distributors?” 3% 0% 23% 29% 46% 3% 0% 11% 31% 54% None Less than 1% 2% to 5% 6% to 10% 11% or more 3% 3% 14% 26% 54% 3% 0% 3% 26% 69% None Less than 1% 2% to 5% 6% to 10% 11% or more Today Next five years Today Next five years
  6. 6. 4 “Which of the following social assets are currently in use anywhere in your organization for marketing/ consumer engagement?” Personal social networks 83% Corporate blog 83% Microblog 80% Public community 29% Listening platform 20% Ratings/reviews 17% Private community 14% Ideation site 14% “For each of the following social assets you use, how actionable are the insights from each social asset?” (Respondents who answered “extremely actionable”) Personal social networks (N = 29) 86% Microblog (N = 28) 79% Corporate blog (N = 29) 72% › Consumers in traditional channels promise highest lifetime value. Brand managers offered estimates of the lifetime value of consumers buying through the brand’s own online channel, through online partners, or through the best performing conventional channel such as a broker or retailer. As expected, given the heavy emphasis on trade funds, brand managers believe that consumers shopping through traditional retail promise higher lifetime value. The lifetime value of consumers in CPG firms’ own digital channels is the next most important and higher than consumers in eRetailers’ channels (see Figure 4). “What is the estimated lifetime value of a consumer by channel?” $5,690.26 $4,841.25 $4,052.41 $7,495.61 Own online channel Partner online channel Own mobile channel Best performingretail distributor/broker channel CPG Marketing Identifies Barriers To Overcome To Achieve Digital Transformation Benefits Marketing executives and brand managers are acutely aware of the threats and opportunities of digital disruption for their brands and markets and have started to shift their focus to digital channels, digital media, and direct-to-consumer selling. They anticipate further benefits from further investment but also perceive barriers to overcome. Our survey respondents identified barriers to digital transformation in terms of: › Limited adoption of digital technologies in new product introduction. Surveyed marketers reported a mixed level of digital technology adoption, with 91% using virtual designs during the “ideation” phase of new product introduction but only 23% sharing digital product images online with retail distribution partners (see Figure 5). FIGURE 3 Personal Social Networks Are The Most Adopted, Most Actionable Social Medium Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014 FIGURE 4 CPG eCommerce Platforms Offer Greater Consumer Lifetime Value Than eRetailers Base: 95 brand manager marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014
  7. 7. 5 “How much of the ideation-to-launch process is digitized today?” We use virtual product design during ideation to mock up products 91% We simulate physical characteristics 51% We bring consumers into virtual stores to look at virtual products on virtual shelves 49% We digitally assist the package prototyping process 46% We digitally assist recipe and formulation trials 37% We share digital images with retail partners online 23% › Local cultural, legislation, and logistical challenges. Of our respondents, 94% agreed or strongly agreed that local culture presents a challenge to CPG brands selling directly to consumers through online channels (see Figure 6). Ninety-one percent agreed or strongly agreed that local privacy and consumer promotion legislation challenges the adoption of digital direct-to-consumer initiatives. “What do you see as the main obstacles to digital transformation of direct-to-consumer engagement, digital consumer sales, and directly facilitating a purchase in one to two clicks?” 60% 57% 57% 57% 34% 34% 31% 29% Strongly agree Agree Cultural attitude to online purchasing makes selling directly through digital channels challenging Local privacy and direct-to-consumer promotion legislation makes selling directly to consumers through digital channels challenging Logistical challenges to selling directly to consumers through digital channels Restrictions around selling online in certain markets is an obstacle to selling directly to consumers through digital channels › Path-to-purchase contextual challenges. Our survey respondents strongly agreed that their internal organizations’ sales, marketing, and consumer service functions are highly integrated with common goals and well-aligned measures of performance (see Figure 7). However, in a parallel survey of account managers and VPs of sales, Forrester found that sales leaders believe more strongly than marketing leaders that responding to the threats and opportunities of digital disruption requires greater organizational integration across functions.1 › Less than half (49%) of CPG marketing leaders strongly agreed that content and offers are sensitive to a consumer’s current social context. In order to meet consumers’ expectations and rise above the competition, brands need to orchestrate consumer intelligence, custom content, and multichannel touchpoints to deliver the shortest, simplest, and most compelling path to purchase. FIGURE 5 Limited Digitization Of Current NPI Processes Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014 FIGURE 6 Local Cultural, Legislation, And Logistical Challenges Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014
  8. 8. 6 “How well integrated are your consumer experiences today?” (Respondents who answered “strongly agree”) Our internal organization is highly integrated across marketing, sales, and consumer service 66% Our products encourage or require digital interactions 63% We collect and analyze consumer behavior across channels to inform our digital relationship 63% We provide a consistent consumer experience across multiple touchpoints/channels 57% We provide a personalized consumer experience 57% Our digital relationship is sensitive to physical context 51% Our digital relationship is sensitive to social context 49% CPG Marketing Leaders Anticipate Huge Digital Transformation Benefits Our respondents showed acute awareness of digital disruption in CPG markets. They described their aspirations to undertake wholesale transformation of the processes that they use to bring to market and sell their products and services and described in detail the barriers they must overcome. They told us that they expect to reap the benefits of digital transformation to: › Accelerate innovation. A significant majority (89%) of heads of marketing strongly agreed that digital direct-to-consumer engagement, enabling brands to directly facilitate purchases and introduce/retire product lines more quickly, would increase the rate of innovation (see Figure 8). › Boost consumer lifetime value. Most CPG heads of marketing (77%) believe that digital transformation will boost consumer lifetime value. › Lift average order value. Almost three-quarters of heads of marketing (74%) believe that direct-to-consumer initiatives will increase average order value, using digital channels to upsell consumers with whom the brand develops a relationship. “How strongly would you agree or disagree with each of the following statements? If my organization could directly facilitate a purchase with consumers and introduce/retire products more quickly, it would . . . ” (Respondents who answered “strongly agree”) 89% 77% 74% 71% Improve rate of innovation Increase consumer lifetime value Increase average order value Increase consumer brand engagement › Increase wallet share. Most CPG heads of marketing (77%) believe that digital transformation will offer the opportunity to engage consumers in a mutually productive dialogue, enabling brands to cross-sell and meet additional needs of consumers they already serve (see Figure 9). They believe the transition from analog marketing and sales to direct-to-consumer digital channels will deliver the degree of consumer intimacy required to deliver consistently relevant experiences across channels, increasing margin and loyalty. › Deliver more blockbuster new products. Almost three-quarters (74%) of CPG heads of marketing expect to use digital store simulations to test new product impact on consumers (see Figure 10). More than two-thirds (69%) expect to accelerate new packaging development with FIGURE 7 The Integration Challenge Is External (Context) Not Internal (Organization) Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014 FIGURE 8 Digital Transformation Offers Revenue And Margin Growth Base: 35 marketing decision-makers at global CPG organizations Note: Please note that the remaining percentage of respondents disagreed with the statements above. Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014
  9. 9. 7 digital technologies, reducing innovation risk and increasing the likelihood of successful new product introductions. FIGURE 9 Digital Transformation Offers Accelerated Innovation, Increased Share Of Wallet “To what extent do you agree with the following statements regarding the main benefits to your firm of increasing the proportion of sales through a digital channel?” (Respondents who answered “strongly agree”) 77% 71% 66% 66% 66% Increasing sales through digital channels will increase wallet share Digital engagement will increase the rate of innovation Selling to consumers through digital channels will attract consumers from other brands Selling through digital channels will increase the rate of new consumer acquisition Shifting some sales to digital channels will increase revenue and margin and reduce selling and operating expenses Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014 FIGURE 10 Digital Will Deliver Blockbusters “To what extent do you agree with the following statements about how much of the ideation-to-launch process will be ‘digitized’ in five years’ time?” (Respondents who answered “strongly agree”) We will bring consumers into virtual stores to look at virtual products on virtual shelves 74% We will digitally assist the package prototyping process 69% 63% We share digital images with retail partners online We will use virtual product design during ideation to mock up products 60% We will digitally assist recipe and formulation trials 57% We will simulate physical characteristics 49% Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014
  10. 10. 8 Accelerate Your Analog To Digital Transformation Forrester’s survey of marketing executives in CPG enterprises showed that marketing leaders sense that market drivers — such as globalization, consumer demand for customization, emerging market growth, and anytime/anywhere shopping — are prompting a shift from the importance of managing modern trade and selling through traditional retail chains toward more digital consumer engagement and selling. In order to increase consumer relevance and loyalty, CPG marketing leaders should evolve from analog marketing and sales to digital consumer engagement by: › Shortening the path to purchase. Consumer brands need to re-engineer processes to minimize the jump from browsing, enabling buying in one to two clicks. Perhaps start by helping them buy online or on a mobile device and collect in-store, or use online eCoupons to drive consumers to stores. Or drive consumer engagement that encourages the right channels for each interaction — for example, web, chat, and email for consumer care services, rather than using a call center. Increasingly, brand managers will participate in forums and social media to engage in a dialogue and help consumers solve their own problems and find new applications for brands. › Stepping up to consumers’ personalization expectations. Consumers expect the brands with which they do business to provide a consumer’s own device with contextually relevant content, based on the consumer’s (mobile) location, most recent interactions, and sentiments. Marketing leaders need to capitalize on opportunities to engage in personalized, context-aware interactions in real time before their audiences lose interest and tune them out. In particular, firms should take account of insights from consumer behavior across channels and across business functions like consumer service, NPI, and in-store merchandizing. › Adapting marketing, sales, and fulfillment channels to align with consumer behavior. Consumers demand the ability to shop at any time in any place using a device of their choice. Consumers are becoming increasingly impatient and value near instantaneous fulfillment. They expect consistent pricing across channels and a choice of delivery options, including prompt home delivery or a choice of pickup location. This is challenging CPG manufacturers that have fragmented channel-specific organizations, metrics, and application portfolios. › Building support for direct-to-consumer marketing and selling throughout the wider enterprise. The business case for direct-to-consumer marketing and selling investments rests on increasing revenues and margins. Recruit enthusiastic sponsors including brand managers and account directors who have revenue and margin targets and are responsible for achieving the business case. Direct-to-consumer marketing and selling rely on the vital collaboration of all the partners in the value chain — retailers, distributors, and logistics specialists — but will also expose enterprise data and place incremental pressure on the IT infrastructure, so early recruitment of senior IT leadership is essential to a successful outcome.
  11. 11. 9 Appendix A: Methodology In this study, Forrester surveyed a total of 35 heads of marketing at VP or CMO level and 95 brand managers with responsibility for marketing and digital marketing strategy in CPG firms around the world. Our survey respondents were drawn mostly from firms with headquarters predominately in the US and the UK, as well as the firms in China, Germany, Canada, Australia, and Malaysia, with most of them operating in between five and nine countries. The study began in April 2014 and was completed in May 2014. Appendix B: Demographics FIGURE 11 Survey Demographics — Marketing Leaders “Where are the headquarters of your company located?” 43% 34% 23% US UK China “In how many countries do you currently operate?” 40% 37% 23% Between five and nine countries Between 10 and 19 countries 20 countries or more “For the past financial year, which of the following most closely describes your company’s Base: 35 marketing decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014 total annual revenue?” 23% 40% 37% $5 billion to $19 billion $20 billion to $49 billion $50 billion or more
  12. 12. 10 FIGURE 12 Survey Demographics — Brand Managers “Where are the headquarters of your company located?” “For the past financial year, which of the following most closely describes your company’s total annual revenue?” 58% 18% 13% 5% 4% 1% 1% US UK China Australia Germany Malaysia Canada “In how many countries do you currently operate in?” Between five and nine countries 48% Between 10 and 19 countries 24% 20 countries or more 27% $4.9 billion or less 17% $5 billion to $19 billion 33% $20 billion to $49 billion 18% $50 billion or more 33% Base: 95 brand manager decision-makers at global CPG organizations Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014
  13. 13. 11 Appendix C: Endnotes 1 Forrester surveyed 56 heads of sales at VP or CSO level and 75 account directors with responsibility for sales strategy and execution in global CPG manufacturers around the world. Our survey respondents were from firms with headquarters in the US, the UK, Canada, China, and Germany, with most of them operating in between five and nine countries. The study began in April 2014 and was completed in May 2014.

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