Why consumer brands must adapt to direct-to-consumer sales strategies
Consumer goods brands have always held sway over consumers thanks to their history of creating broad market segments and understanding their customer demographics, psychographic attributes and behaviour. Think of names like Coca-cola, Kellogg’s, L’Oréal, and Nike. For decades they have attracted customers by providing them with a range of outstanding products, showcased in physical stores.
However, the world is changing. A study by McKinsey & Company found that online commerce is likely to be among the leading drivers of change in the next five years. The same report suggests that online sales will account for anywhere from 10 to 30% of total industry sales growth in the next five years. Traditionally store-based consumer goods will now need to adapt to incorporate online direct-to-consumer (D2C) sales strategies to retain their edge.
In the online D2C sales environment, your customer is more than just a demographic. Every person browsing your website is an individual, and brands need to be prepared to recognise and respond to this. This means taking personalisation and localisation to new levels, which is strikingly different to the mass-market expertise that Consumer Packaged Goods (CPG) companies have polished over recent decades.
Tailoring experiences for this market segment of “one” can be challenging, but the promised results are difficult to ignore. Nike, keen on developing a D2C strategy, says its D2C efforts were responsible for USD 6.6 billion in sales in 2015. The company expects that number to be US$16 bn by 2020.. Mondelez, owner of popular brands including Oreo, Milka and Trident, and another leading figure in this environment, is expecting to grow online sales 10-fold by 2020. They are not alone - many other big consumer brands are already working on their own D2C strategies.
With such promising results, how can brands begin to understand each customer as an individual? It is more than just knowing a name, age and an email address; that is pretty thin data on which to build a D2C strategy. Brands now also need to understand individual customer’s preferences, buying habits, individual quirks and more to achieve unique promotional campaigns that embody D2C success.
So far, great. But how does a CPG company go about acquiring such in-depth data on customers?
Some of this critical data is held by innumerable retail partners. For example, the local supermarket knows that my uncle buys a carton of almond milk each week and he, usually, also buys a box of coconut milk. The store also knows his typical monthly budget for groceries, his preferred brands, SKUs, the time of day when he prefers to shop, the coupons he uses, payment preferences, and even perhaps the exact sections of the store he visits.
A brand who has access to this information could then work out that my uncle is lactose intolerant, so milk brands could stop wasting their time and money bombarding him with Buy-2-Get-1-Free promotions. However brands specialising in both almond milk and coconut milk could be looking at an ideal new customer. It is a win-win; brands can secure customer loyalty and boost sales, while customers get the sense that their brands understand them as well as an easier shopping experience.
The days when a data scientist and traditional business intelligence systems were enough to fully understand your customer are long gone
As customers go digital, there is also a vast trail of rich data - structured and unstructured - which they leave behind. Facebook, Instagram, Twitter, blogs, online surveys, comments on websites, can all be added to partner data to achieve a remarkably thorough insight into ever customer as an individual. All we need do is tap into it. This means making the most of all the channels that a brand has access to, and drawing the data together to paint the fullest picture possible. A successful omnichannel strategy should be no stranger to consumer brands, and is integral to feeding in to data-driven online D2C sales and marketing.
Every day, over a quintillion bytes of data is generated worldwide. This is a huge volume to sift through to find the relevant information, which may then be in differing formats and impossibly to manually compare or manage. This is where data discovery platform software comes in, integrating large volumes of data that it then uses a combination of algorithms, models, accelerators and analytics to generate pertinent insights and create successful customized interventions for segments of one.
The days when a data scientist and traditional business intelligence systems were enough to fully understand your customer are long gone. Research from Tableau indicated that 24% of UK retailers were not using data effectively enough to optimise sales ahead of Black Friday in 2014. While we have seen some progress since then, D2C strategies of CPG companies still need to match the rate of change of their customers.
Now, in 2016, businesses need to take the proactive step of embracing big data to drive insights – data which is simply too vast in scope for data scientists alone - and use it to target the market of one. For consumer brands this is essential for driving up online sales and reaching the increasing number of digital-first consumers who expect personalised service, both in store and online.
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Ashwin heads the Consumer Package Goods (CPG) vertical at Wipro and is responsible for P&L, Delivery, Sales, Solutions, and New Markets. CPG includes the Food, Beverage, Retail Apparel & Footwear, Home and Personal Care, Agriculture, and Tobacco industries across all service lines in Wipro.
He has extensive experience in Strategy...