Going straight to the source: Why CPG businesses must make first-party data their digital priority
๐๐ฎ๐ฌ๐ข๐ง๐๐ฌ๐ฌ๐๐ฌ ๐ฆ๐ฎ๐ฌ๐ญ ๐๐๐ฉ๐ฅ๐จ๐ฒ ๐ญ๐๐๐ก๐ง๐จ๐ฅ๐จ๐ ๐ฒ ๐๐ง๐ ๐๐ง๐ ๐๐ ๐๐ฆ๐๐ง๐ญ ๐ฌ๐ญ๐ซ๐๐ญ๐๐ ๐ข๐๐ฌ ๐ญ๐จ ๐๐จ๐ฅ๐ฅ๐๐๐ญ ๐๐ง๐ ๐๐ฎ๐ข๐ฅ๐ ๐ฆ๐จ๐ซ๐ ๐๐ข๐ซ๐ฌ๐ญ-๐ฉ๐๐ซ๐ญ๐ฒ ๐๐๐ญ๐, ๐ฐ๐ข๐ญ๐ก ๐๐ฆ๐๐ข๐ญ๐ข๐จ๐ฎ๐ฌ ๐๐ฎ๐๐ข๐๐ง๐๐-๐๐จ๐ง๐ง๐๐๐ญ๐ข๐จ๐ง ๐ญ๐๐ซ๐ ๐๐ญ๐ฌ. ๐ ๐ข๐ซ๐ฌ๐ญ-๐ฉ๐๐ซ๐ญ๐ฒ ๐๐๐ญ๐ ๐ง๐๐๐๐ฌ ๐ญ๐จ ๐๐จ๐ฏ๐๐ซ ๐ฆ๐จ๐ซ๐ ๐ญ๐ก๐๐ง ๐๐% ๐จ๐ ๐ ๐๐จ๐ฆ๐ฉ๐๐ง๐ฒโ๐ฌ ๐๐ฎ๐ฌ๐ญ๐จ๐ฆ๐๐ซ๐ฌ ๐ญ๐จ ๐ฌ๐ฎ๐๐๐๐ฌ๐ฌ๐๐ฎ๐ฅ๐ฅ๐ฒ ๐ก๐๐ฅ๐ฉ ๐ญ๐จ ๐ ๐ซ๐จ๐ฐ ๐ซ๐๐๐๐ก ๐๐ง๐ ๐ฌ๐ฎ๐ฌ๐ญ๐๐ข๐ง ๐ฌ๐๐ฅ๐๐ฌ.
First-party data is information a company collects directly from its customers. It was always a struggle for CPG companies to get hold of first-party data. However it is becoming even more crucial for them to grow their first-party data on their customers โ the people who actually buy their products. They have strategies in place but need to set much higher targets and strengthen the commercial impact of first-party data at least ten-fold over the next five years. Today, most companiesโ first-party data isnโt enough to protect them from the fragmenting marketplace.
Shoppers are increasingly buying groceries online, bringing opportunities to new marketplaces (e.g. JustEat, Amazon) and partners (e.g. Getir). This was turbo-charged by Covid. Pre-pandemic, e-commerce was growing at 9%; halfway through 2021 this figure stood at 37%. Grocery e-commerce penetration now stands at 11%, up from 3% pre-pandemic. Online sales are outpacing offline sales by double digits in countries like Holland, Spain, Italy, and the UK.
Fragmentation
But this opportunity could distract from the overarching headwind CPG brands are facing: the proliferation of channels and marketplaces, increased competition, and fragmentation of their customer base.
CPG businesses are simply unable to compete with e-commerce players, who themselves are struggling. E-commerce runs at an average 3.7% EBIT margin for established food retailers, with their e-commerce running at 0% margin at best. Stand-alone e-commerce for CPG businesses has no chance of becoming profitable without a significant shift away from price-based strategies.
The situation is the same in B2B CPG, where new entrants to the distributor (e.g. ankorstore) and wholesaler markets also fragment B2B models. This fragmentation means it is harder to attract and retain customers. No longer are the established market-makers kings (WalMart, Tesco, Carrefour, Albert Heijn). And no longer is courting these retailer/wholesaler relationships the primary sales objective. For now, CPG businesses need to go straight to the source and use technology to achieve the economies of scale that the retailers used to have.
Finding ROI
For many of the CPG businesses we work with, first-party data is only just becoming a key KPI. It has always been important, but conventional metrics such as share of voice and reach remained the key digital KPIs. We are glad to see this is changing. CPG businesses need to set ambitious targets on shopper first-party data โ engaged, GDPR compliant, and addressable first-party data. The target: by 2025 CPG businesses should have 50% of all their shoppers in their addressable database.
Many businesses have already invested in marketing tech. The goal now is to drive business outcomes through the (re)configuring of this technology to drive specific marketing outcomes. In plain language, this means delivering a business return on their investment. And this is an industry-wide challenge, to draw actionable insights from data lakes, and overhaul out-of-date engagement strategies to deliver active audiences rather than audience accumulators. The goal is to curate highly engaged audiences instead of just gathering data from one-time engagements.
One of our clients invested millions of euros in a track-and-trace system used in anti-counterfeiting operations. We were able to redeploy that technology as part of a loyalty strategy, and the brand is now enjoying engagement with more than 25% of its customers. After just a year, weโre well on the way to the 2025 target.
