Goodbye brand management, hello cohort management
According to a new report from Forrester Research and Information Resources (IRI), the net will reshape old brand management practices and create a new marketing approach called cohort management, which is focused on consumer relationship management using shared behavioral data from traditional retailers and e-retailers.
“The days of reaching large audiences with generic messages and promotions will give way to a new era in which individuals will be targeted and measured based on their behavior,” said Robert Rubin, director of Netquity at Forrester Research. “To compete, consumer packaged goods (CPG) manufacturers will abandon brand and category management and discover new marketing efficiencies as they learn to use Internet technology to focus on cohorts of consumers.”
“For this report, Netquity interviewed 50 senior executives from 44 CPG manufacturers and analyzed the offline purchase behavior of 10,000 randomly selected households from our shoppers’ hotline consumer panel,” said Daniel Sherr, director of Netquity at IRI.
While the interviews found that brand managers continue to emphasize demographics in placing online media, the offline purchase data proves that past purchases are better indicators of future intentions than are demographics.
“In the next five years, access and use of consumer purchase history from traditional and online retailers will be the catalyst that drives CPG manufacturers to shift from brand management to cohort management,” continued Sherr.
Behavior-based marketing will increase the marketing efficiency of CPG manufacturers by reducing the number of consumers they need to reach and maximizing the time they have with each consumer. Marketers will target individuals with acquisition or retention ads and promotions that will generate the highest possible return rates.
A new breed of marketing professional will emerge as CPG manufacturers begin to identify and segment consumers into cohorts – groups of individuals that share similar needs, abilities to purchase, and attitudes. Cohort managers will possess the analytical capabilities and skills to master behavior-based marketing.
“Cohort managers operating across brands will decide which ads and promotions to present to consumers based on continuous consumer information. Brand managers will focus on detailed operational issues like inventory and product formulation,” continued Robert Rubin, of Forrester Research.
The same technological capabilities that will enable cohort managers to market to consumers based on their past behavior will also enable them to measure consumer return on investment (ROI) – measuring the value of marketing dollars invested and the money each consumer spends as a result.
“The real value of each brand to CPG manufacturers will become evident once they’re able to identify and measure their most profitable consumers across all their brands,” said Rubin. “The ability to link specific marketing activities to product purchases at an individual level will form the basis of lifetime value analysis and will enhance today’s analysis based on raw sales volume metrics.”
CPG manufacturers that decide to wait until the technological capabilities have arrived before changing their approach to marketing will find themselves gobbled up by those who are more adept. The move toward cohort management will evolve over the next five years, and the outcome will be a better understanding of consumer behavior and the development of in-house skills and tools needed to act on this knowledge.
“CRM will become mission-critical,” added Rubin. “By 2005, CPG manufacturers will need to build cohort teams to establish direct relationships with those consumers whose behavior is best-suited to their product mix.”
Netquity provides CPG marketers with research reports and data that analyze the Internet trends that affect brand marketing. Netquity combines Forrester’s Internet capabilities with IRI’s ability to provide business information and insights based on electronic point-of-sale purchase data and household behavior panels in the $1 trillion worldwide CPG industry. Forrester and IRI are working jointly to offer Netquity to leading CPG companies.