5 Steps CPGs Should Take When Considering Direct-To-Consumer (D2C)

 

The move to direct-to-consumer (D2C) sales by Consumer Packaged Goods (CPG) companies is already a recognizable trend but it’s widely acknowledged that the global pandemic has accelerated its adoption. CPG companies are looking to get connected with their clients more directly than ever before, but how can they do this? What should they be thinking about as they move through today’s challenges and into a different future?


 

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5 ways CPGs can enable Direct-to-Consumer

 


Here are 5 steps that CPG companies should take in terms of “What” to do and some resources to help them with the “How.”

 

1. Learn from industries that have already had to digitally transform the customer experience

It’s no secret that the big players in the media and entertainment industry have had to turn their business models on their head in order to survive. Imagine trying to explain to your teenager that Netflix’s original proposition was mailing out DVDs in an envelope? A MESA article (Media and Entertainment Services Alliance) about the impact of COVID-19 on consumer viewing habits remarks that around this time last year the industry was already making huge use of data and analytics in order to target viewers with the right content at the right time. Huge spikes in recent demand as consumers fill time they have on their hands have also provided large amounts of additional viewing data. Keith Le Goy, President of Distribution and Networks at Sony Pictures Television, says the challenge media companies now face is how to capitalize on new viewing habits when we come out of this crisis. He sees it as “a tremendous opportunity.”

The What: Personalization – Data and the analysis of it gives CPGs the opportunity to personalize customer experiences more accurately, as well as target consumers with the right advertising.

 

2. Accept that you are only as good as your weakest link

Over the last two months, the whole world seems to have taken “let them eat cake” as their motto. A horde of happy bakers confined in their homes have whisked, sifted and kneaded their way through their days. And then the flour ran out. Except, of course, it didn’t run out. It just couldn’t get to the supermarkets.

It’s a supply chain issue which Alex Waugh, Director General of NABIM comments on in this BBC article. The fact is that in “normal” times only around 4% of UK flour is sold through shops and supermarkets. The majority is produced in bulk and delivered in tankers or bags of more than 16kg to bakeries or other food manufacturers.

In order for retailers to sell flour to consumers, the bags are generally 500g or 1kg in size. There is no provision in the current supply chain to transport, stock (or even have staff carry) 16kg bags of flour in supermarkets.

The What: Understand Customers in relation to Product, Location, Event – There can be a huge demand for a product but, unlike the media industry, if a CPG has physical goods, they have to package them up and get them out the door and on to the stores' shelves efficiently as well. To do that, they need to understand and relate many different data types together. For example: where potential clients are; what they will want to buy; what logistical capability exists to serve them and what is likely to motivate them to purchase. If CPGs want to adopt a D2C approach, they first need to think through the whole supply chain and strengthen any potential points of failure.

 

3. Think collaboratively

For enormous organizations such as PepsiCo (Pantryshop.com and Snacks.com) and Heinz (Heinztohome.com) who have recently launched D2C websites, it’s easy to offer consumers a wide choice as they have large product portfolios. For smaller organizations or those with a smaller offering, it can be more difficult to provide enough options to hold consumer attention and build loyalty.

For many, this has driven them to rethink their strategy and team up with complementary – even competitive – offers in order to provide a compelling proposition. For example, many smaller producers who supply restaurants and the retail trade were facing certain ruin due to the extreme hard stop caused by lockdown. They have had to completely re-think their routes to market.  One example is Neal’s Yard Dairy who started a “Save British Cheese” box offering. This included mailing out three cheeses from different producers and according to this Marketplace article they expected to sell around 2,500 of the boxes in a week. They sold out in four hours.

The What: Third-Party Data Sources - CPG organizations can implement a number of different collaborative models if they use the data they have and complement it with additional third-party data on customer likes and preferences, or on market trends. Social media listening is another option if CPGs have the capability to collect and analyze such data in relation to their clients and prospects.

 

4. Be sensitive to how your prospects and clients are feeling

This New Food Magazine article comments on the tendency to seek comfort from familiar things at difficult times. One key area of comfort, as noted by a GlobalData survey, is a retreat to brands that are ‘familiar.’ The survey found that 49% of UK consumers and 61% of US consumers are currently buying from their favorite brands during the lockdown.

Heritage brands and those with a long-standing presence in consumers’ minds will benefit from the trust they have built with their fans. On the other hand, brands and products that consumers are less familiar with will feel the short-term impact of consumers retreating to tradition and comfort,” comments Aaron Bryson, Consumer Analyst at GlobalData.

The What: Trust and Loyalty - The customer experience that these organizations have created is one where customers know what they are going to get; they trust in the brand and they continue to reward that trust with their loyalty. The companies themselves use all of the available customer data including transactions, interactions and third-party data sources to ensure they create meaningful, reliable experiences and offers that resonate with their customers.

 

5. Know and trust your data

Current times have caused all organizations to take a step back and reconsider their strategy, and many will have had to decide whether to exercise caution or plough ahead with their marketing strategies. For those in a position where they have reliable data, the decision will have been a much easier one and the results seem to speak for themselves.  A Digital Commerce 360 article reveals that data indicates that those fashion brands who pivoted to e-commerce and D2C sales models and invested more in marketing instead of contracting spend have seen huge increases in sales.  Nick Stoltz, COO of Measured recommends this:

“Take the opportunity to grow your online sales channel and digitally transform your business; the longer you wait for a return to normalcy, the more likely you will be to wake up in six months with multiple underperforming sales channels…. Those that don’t evolve will quickly face an existential crisis. Meanwhile, agile direct-to-consumer brands are happy to fill the void.”

The What: Become truly customer-centric – If CPG brands focus on putting their data to work, they can create the types of experiences that will keep their customers coming back for more. Investment in solutions that will help them to do this will signal an investment across their business. Kristen Groh, Group VP, Publicis Sapient is quoted in this Retail Customer Experience article as saying: CPG companies who have control over their buying experience through their direct-to-consumer channels can implement predictive, dynamic pricing to optimize in surge moments and deliver value when consumers need it most. Now is the time for the consumer goods companies to quickly seize the opportunity to become truly consumer-centric and build a scalable total commerce presence.

The How:
Yaniv Sarik, CEO, Mohawk Group Holdings explains how to go about doing these things in this Retail Customer Experience article where he includes these four key hints and tips:

  1. Have a broad-based, omnichannel approach
  2. D2C companies should think about centralized supply chain and fulfillment structures
  3. Use SaaS solutions to minimize partner disruptions
  4. Embrace and invest in advanced data analytics, machine learning and automation

“These capabilities will remain advantageous for the next crisis and retailers must afford themselves the kind of flexibility they offer moving forward.”


Next Steps – On-Demand Webinar: “Getting Ready for the "New Normal" with Connected Customer 360 for CPG”

For additional information and help on how to put in place a responsive data strategy that will enable your business to connect up all the data you have on your customers, and help you make the move to D2C, view our on-demand webinar: “Getting Ready for the “New Normal” with Connected Customer 360 for CPG.”


 

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