CPG advertising is extremely competitive and is going through significant changes due to shifts in consumer media habits, the continued growth of e-commerce, the emergence of new start-up CPG direct-to-consumer brands, and overall innovations in the data-driven media and marketing landscape. Keeping up with the latest trends is critical to effective and efficient CPG marketing.
What is CPG advertising?
What does CPG mean in marketing? CPG simply refers to Consumer Packaged Goods, which is a classification of products that consumers buy with frequency. Most products that can be purchased in a grocery store or a pharmacy are classified this way and “CPG advertising,” or consumer packaged goods advertising, simply refers to the advertising of these products to consumers.
What comes under CPG?
Most grocery products, such such as foods, beverages, alcohol, cleaning supplies and off-the-shelf health and beauty supplies are classified as CPG. There are thousands of products in this group and a massive amount of money is spent advertising these products every year.
Why is CPG advertising important?
When thinking about CPG advertisements, marketing strategies and objectives being pursued are important to keep in mind. Driving repeat purchasing is critical to CPG advertising. When a product is already well established in the market, product revenue increases are largely driven by growth in purchase volume and an increase in purchase frequency. New customer acquisition can also be critical, especially in a very competitive category where the success of one product comes at the expense of a competitor.
Advertising is the key method by which marketers are able to affect these changes. CPG purchases have, traditionally, largely occurred in third party stores or online retailers, where the marketer has had to have either influenced the consumer prior to them entering the store via CPG marketing or having developed product loyalty, or by advertising to them within the store at the point-of-sale.
Building brand awareness and impacting the consumer’s consideration of the product have always been critical goals to CPG marketers.
What are the current CPG advertising industry trends?
Technology is driving significant changes across all industries, and the CPG industry is no different. Convergence of offline and online is a major theme in the industry, with consumers shifting to online commerce to digital coupons, the continued growth of large omnichannel retailers, retail advertising thriving, and the ease with which new consumer brands can build businesses.
Online retail has continued to have a significant impact on the business of traditional offline retailers, and Amazon’s acquisition of Whole Foods increased the threat to traditional grocers, but also to CPG marketers. More market power for Amazon’s proprietary CPG products creates risks for those marketing CPG products of all types.
Given Amazon’s access to customer data through online and loyalty programs, it is in a stronger position than traditionally data-poor CPG marketers.
Partially in response, companies like Swiftly Systems and others are disrupting the grocery business and, in the case of Swiftly, are providing data driven media solutions to help CPG marketers drive increased sales and ROAS and tools to help grocers compete with large online retailers like Amazon.
On the flip side, e-commerce has given CPG advertisers new methods to influence consumers at the point of purchase. The ability to deliver ads to consumers in digital storefronts, as they make buying decisions, enables CPG advertisers to focus their efforts a bit further down the consumer purchase funnel than much of their advertising has permitted in the past.
The direct-to-consumer (“DTC”) trend has not missed the CPG industry and upstart companies, such as nuun and Magic Spoon, are creating additional competition for traditional CPG marketers. The ease with which new companies can build commerce solutions and execute direct-to-consumer customer acquisition has brought greater competition, and innovation, to the industry. Not to miss out on significant opportunities, major CPG marketers are similarly building their own CPG DTC brands.
How much do CPG companies spend on marketing?
CPG is a very competitive industry. The CPG advertising business is where that competition happens and in grocery stores and online storefronts is where the winners and losers are decided. To capture and retail consumer loyalty, CPG advertisers spend a massive amount of money on marketing; significantly more than any other industry. According to the Wall Street Journal, nearly a quarter of advertising CPG companies’ budget goes to marketing.
In a high purchase frequency industry such as this one, advertising CPG products is largely a non-stop activity.
What percent of sales should you spend on CPG advertising marketing?
CPG advertising spend is currently around 22% of sales, and has been gradually increasing in recent years. For CPG advertising, consumers can quickly switch to a competitive brand and retaining their loyalty requires non-stop attention.
CPG advertising: Strategies that work
Not surprisingly, taking advantage of new data, media and marketing opportunities afforded by new innovations in market can yield great results.
Data, Data, Data
CPG advertisers, historically, have not had sufficient data to optimize their CPG advertising spend. As their products have largely been sold by retailers or other third-parties, they have not been in a position to capture data about who is buying their products or how frequently.
Working with leading companies like NCSolutions or others continues to be a critical piece of the puzzle for CPG brands, as they generally lack first-party data. Understanding CPG buying habits of consumers, and advertising based on them, is critical to making effective and efficient marketing decisions.
Move Beyond Just Reach with CTV
CPG TV advertising has traditionally been about reaching as many people as possible with CPG advertisements. As consumers have embraced streaming television in recent years, and the scale of audiences has grown, the advanced CTV targeting capabilities available now enable CPG advertisers to pursue much more nuanced CPG customer acquisition strategies. The ability to test and learn creatives by audience persona or CPG buying cohort may enable advertisers to achieve more, with less.
Develop Consumer Relationships
Without access to direct first-party data from consumers, CPG brands’ marketing potential can be limited. Pursuing DTC strategies, as many CPGs are doing, yields many benefits including better data, better margins, potentially higher consumer loyalty, and a more direct means to gain consumer insights.
Key Takeaways about CPG brands advertising
To say that this is a massive industry that is undergoing significant changes is putting it mildly as a CPG advertising overview. But all of the changes create opportunities for existing CPG brands to continue to evolve their businesses and for new start-up CPG DTC companies to gain a foothold in the industry.
As always, established CPG brands and DTC start-ups alike can benefit from augmenting their customer acquisition and loyalty strategies via social advertising with premium CPG data sets through DeepSync Labs!