The Future of CPG Marketing

The Future of Consumer Packaged Goods Marketing

Stores have turned on the lights, rolled up the blinds, and opened their doors again. After weeks (and weeks!) of stay-at-home orders, local lock-downs, and coronavirus-related constraints, physical stores are selling products again — packaged foods, cosmetics, dry goods, you name it. 

But things are different from before. 

Welcome to the "new normal" — a post-COVID retail landscape where consumers wear masks, and cashiers wear gloves. There's been a radical shift toward e-commerce, people have (finally) realized the benefits of sustainability, and brand-consumer relationships have evolved. Everything's changed. This is consumer packaged goods 2.0. 

But what does the future of marketing hold? And how can marketers in the consumer packaged goods sector adapt to these changes? 

Current State of Play

Recently, our SVP of Strategic Growth Jonathan La Greca spoke to 100 marketing and consumer/shopper insight leaders in the fast-moving consumer goods (FMCG) industry. Most agreed that the pandemic — and subsequent economic fallout — would turn the FMCG sector on its head. We agree. 

Jonathan predicted the COVID-19 crisis would have three distinct phases — the pandemic itself, a great financial "repression," and a "brave new world" where consumers adapt to the crisis and develop new shopping habits. 

Right now, we're somewhere in-between the first and second phases. The shock and fear of the pandemic have dissipated, slightly, and businesses are (slowly) opening up again, but we're on the cusp on an unprecedented recession that will influence the way we shop. 

Most consumers have changed their shopping habits to some degree — people visit brick-and-mortar stores less frequently than before the pandemic, for example — but there's been no real paradigm shift in retail. Not yet. Many shoppers think this is just a "blip" and things will return to normal soon enough. 

We don't think this will happen for a long time. We also think marketers should prepare for these long-term changes.

Looking for the latest consumer packaged goods marketing insights that power your brand post-COVID? Learn more here. 

(Some) People Don't Feel Comfortable With Physical Retail

Although every state had different re-opening requirements, most stores and malls in the United States are welcoming customers again. Despite an initial boost, large numbers of consumers just don't feel comfortable with physical retail at the moment, resulting in a drop in footfall. 

Research shows that:

?         32 percent of shoppers feel "unsafe" or "very unsafe" visiting malls.

?         When it comes to consumer packaged goods, 80 percent of women feel "uncomfortable" trying on makeup and beauty products in stores.

?         68 percent of shoppers feel unsafe trying on clothes in dressing rooms.

?         61 percent feel unsafe trying on shoes in stores. 

"As retailers take precautions to a new level to try to welcome shoppers safely back to stores, consumers are still wary of returning to brick-and-mortar retail," says CNBC. 

It's unclear how long these fears will last. Shopping habits might not revert until scientists find a COVID-19 vaccine. By then, there could be long-lasting damage to the physical retail sector. 

How can marketers adapt? 

Savvy marketers need to convey safe shopping practices in their campaigns (both traditional and digital media). Marketers should recognize consumers' fears and reassure them that retailers in the FMCG market are taking the necessary precautions to keep shoppers safe. 

Many brands have already incorporated safe shopping policies in their marketing. McDonald's did this as early as March (before most of their restaurants closed in April). Even at the beginning of the pandemic, McDonald's (as well as many retailers in the FMCG space) communicated important health and safety messages that reassured consumers. 

Early on, most of this reassurance came in the form of in-store signage — notices that remind customers to socially distance. 

"McDonald's, Coca-Cola, Audi, and Volkswagen are just a few of the corporate conglomerates that are interpreting "social distancing" with logo redesigns," said CNN in March. "The term has become popular recently because of the spread of the novel coronavirus. Social distancing means standing 6 feet apart from others to lower the risk of contracting the illness."

Marketers should use the following strategies for communicating health information on online and offline channels:

?         Updating social media pages with the latest health and safety information.

?         Sending health information to consumers via email.

?         Using traditional channels like TV and radio to increase the exposure of health information.

Post-COVID, retail marketers should communicate the following:

?         Store closures/reopenings

?         New opening/closing hours

?         In-store restrictions (closed dressing rooms, limited purchases, etc.)

?         Social distancing guidelines

?         Hand washing policies

?         Face mask requirements

?         Hygiene practices during manufacturing 

?         Delayed shipping timelines

?         Awareness of online services

?         Whether you accept cash/card payments in-store

Marketers should communicate this information clearly, and update consumers when policies change. Inaccurate health information not only risks the spread of the virus (and endangers lives) but jeopardizes sales. Consumers won't think twice about visiting a competitor if it's safer. 

Consumers Favor "Purpose-Driven" Brands

Post-COVID, many consumers will remember how brands acted during the crisis. Poor communication and customer service could influence future sales, so marketers should "right these wrongs" in their messaging. Going forward, brands need to change consumer perceptions toward retail as a whole and invest in high-value marketing strategies.

Research shows that consumers have different values now, with an emphasis on healthier lifestyle practices than before the pandemic. These practices include conscious eating, with half of all consumers in Western countries favoring "purpose-driven" brands that help meet personal goals like authenticity and reducing meat consumption.

"Digital media and the ubiquity of digital data are transforming how consumers learn about brands," says McKinsey. "Price sensitivity is skyrocketing in importance in the wake of COVID-19. In Western markets, what consumers value is shifting, with younger consumers seeking brands they see as special, different, and authentic."

How can marketers adapt?

Marketers should focus on what makes brands unique and authentic and communicate this in their messaging. Consumers are sick of the same-old cookie-cutter campaigns that don't accurately reflect brand values. Post-COVID, people expect so much more from their favorite companies — responsibility, sustainability, value, etc.

As well as a global health crisis, much of the West has experienced protests in the wake of the death of George Floyd. Some brands (with the help of marketers and public relations professionals) were quick to distance themselves from racially-stereotyped images in old marketing messages and committed to diversity in future campaigns. Many consumers demand inclusive racially-diverse marketing going forward. 

From now, marketers should

?         Create marketing that reflects all segments of their customer base

?         Recognize previous mistakes and commit to diversity

?         Create marketing that's authentic and purpose-driven

?         Realize that consumers' perceptions of brands have changed since the pandemic 

This is a topic our Research Director Nicole LeBarr discussed in more detail in a recent blog post. She talked about how, post-COVID, consumers have a stronger emotional need for companies (and advertising campaigns) that provide them with feels of stability. 

The message is clear: Stay true to your brand when evoking a sense of trust and stability.

Here at Hotspex, we believe that evoking these feelings has always been important in FMCG, but now it's critical. 

E-Commerce Sales of Consumer Packaged Goods Have Skyrocketed (How Long Will It Last?)

This one comes as no surprise. Most companies in FMCG have experienced a surge in online sales as consumers shun brick-and-mortar for digital e-commerce. 

Of course, e-commerce boomed pre-COVID: 

"E-marketplaces have experienced meteoric growth of 17 percent over the last five years, generating 65 percent of the growth among the top 150 retailers across the globe (and across all categories)," says McKinsey.

But there's been a significant surge in online shopping since the pandemic, especially in consumer goods. Grocery sales on Amazon have increased 45 percent in the United States and a massive 80 percent in the United Kingdom. It seems COVID-19 has drastically altered the way we purchase packaged goods. 

It's hard to predict the future. As we said, we're someone in-between phases one and two of the current crisis (the pandemic and subsequent economic fallout), and consumers have yet to completely embrace market-wide changes. It's unclear whether more consumers will return to physical stores in the months (and years) ahead. For now, marketers should continue to market online and offline for maximum sales growth. 

How can marketers adapt?

Marketers shouldn't abandon physical retail marketing. Instead, the opposite should happen. Investing in a good marketing strategy could entice shoppers back to physical outlets again, especially when campaigns include important health and safety messages (as detailed above.) 

Physical retail offers consumers a wide range of benefits and experiences that digital retail can't — the ability to hold and touch packaged goods, no shipping costs, in-person customer assistance, etc. Marketers should showcase these benefits in their marketing. 

Recommended reading: 10 Ways Our 2021 Insights Innovation Agenda Might Be Relevant To Your Brand

Savvy Marketers Should Look "East" for Profitable Returns

Developing markets are fueling the consumer goods market — a trend that existed long before COVID. As national economies adapt to the virus in the months (and possibly years) ahead, people will continue to spend money on FMCG worldwide, and Western brands can capitalize on growing international markets.

"While developing markets will continue to account for 70 percent of consumer goods growth, the mix of geographies has shifted, with emerging Asia generating far more growth than other developing markets (representing about half of the global private consumption growth over the next 10 years)," says McKinsey. 

"Local competitors and digitization of the trade structure are key dynamics in emerging Asia. Of course, all trends vary by market. Averaging can risk masking the intensity of trends in leading countries —for example, China for digital sales, South Korea for beauty regimen, and Germany for price and value."

How can marketers adapt? 

Some brands might decide to reduce marketing spend in an economic downturn — this was certainly the case during the last financial crisis in 2008/2009 — but upping marketing budgets could provide companies with a lucrative return on investment. Eventually, the pandemic will wane and things will get better. In the interim, marketers should think up creative ways to promote packaged consumer goods that resonate with consumers. 

However, marketers need to realize there are permanent changes to the retail landscape. Primarily, the rise of international commerce will open up lucrative new markets for Western brands. This is why, even right now, it's a good idea to think of long-term marketing campaigns that target international consumers. 

International marketing is wrought with complexities and requires a long-term roll-out for maximum success. Companies might want to adopt a "one-size-fits-all" approach, where marketers use the same campaigns for multiple markets, but this rarely works. Marketers should consider cultural and contextual differences when targeting different customers in different regions. 

Before investing in international marketing, companies should research:

?         What packaged goods are successful in different markets

?         Gaps in the market in different countries/regions

?         The most successful/lucrative social media channels/digital marketing platforms in different markets

?         How consumers view brands in different markets

?         Think about marketing innovation. How can you communicate with consumers in a fresh, exciting way? 

Recommended reading: Restaurant COVID-19 Recovery Playbook: New Research & Insights to Help Restaurants Get Through This

It's All About Amazon

No other company has been as ubiquitous during the pandemic as Amazon, which posted $75 billion first-quarter revenues back in April. As brick-and-mortar stores closed in many parts of the country, consumers took to Amazon to purchase packaged goods such as cosmetics, toiletries, and consumables. Convincing them to return to previous shopping habits will prove a challenge. 

However, you can do it.

How can marketers adapt?

When marketing small brands, marketers should focus on "what Amazon can't do" — local service, bespoke products, home-grown manufacturing that supports local economies, etc. Emphasizing these differences might not be enough to convince consumers to shun Amazon, with its low prices and speedy shipping, for other brands, but it will certainly plant the seeds for long-term change. 

One thing Amazon lacks is personalization, and marketers can certainly make up for this on social media when marketing smaller companies, especially local ones with loyal customer bases. Here are some tips:

?         Respond quickly to messages on social media.

?         Build an engaged following of local customers interested in products 

?         Encourage followers to like, share, and comment on content

?         Introduce promotions/offers for sales and engagement

Invest in Analytics 

With new digital technologies, growing international markets, and severe disruptions to supply chains and product lifecycles across the consumer goods sector, marketers need real-time intelligence to fuel future campaigns. This is where analytics comes in.

As the pandemic develops, the latest predictive analytics and reports provide marketers (and their respective brands) with unparalleled insights into consumers' shopping habits and behavioral changes. It's the only way marketers can "market" in today's world. 

How can marketers adapt?

Analytics provides marketers with genuine marketing insights such as: 

?         How customers interact with brands

?         How customers value products

?         The most popular products 

?         The most popular COVID marketing campaigns

Marketers can use this information to segment customers into specific groups and create bespoke campaigns that result in more sales and exposure. Whether it's drip emails or social media, marketers use the latest analytics and reports to supercharge their campaigns. 

Recommended reading: Salon and Stylist COVID-19 Playbook – Your Clients Need You!

Consumers Worry About the Crisis

It's a scary time for everyone right now, especially when the future is so uncertain. As we mentioned before, it's the job of the savvy marketer to alleviate these fears and adapt to changing consumer demands and trends with accurate, authentic marketing messages. 

According to research from McKinsey:

?         66 percent of people are "very concerned" or "extremely concerned" about the U.S. economy

?         63 percent worry about how long this situation will last

?         58 percent worry about overall public health

?         54 percent worry about vulnerable relatives

With so much fear and uncertainly, how can marketers target the population? 

How can marketers adapt?

?         Marketers should steer clear of inauthentic glossy campaigns that provide little value to consumers, especially those worried about their finances

?         Marketers should focus on experiences rather than product specifications — what value does a product provide? How does it benefit the consumer? Why should consumers spend their money? 

Is Brand Loyalty a Thing of the Past?

Perhaps one of the most interesting developments in consumer packaged goods over the last few months is how many consumers abandoned long-lasting brand relationships for personal or financial reasons, without a moment's notice. Research suggests that 15 percent of consumers changed their primary grocery store during the beginning of the pandemic, even if they'd been shopping with the same store for years (or decades.)

The reasons for this change are unclear. Perhaps recession fears spurred consumers to find low-cost alternatives. Or, with limited product ranges at the beginning of the crisis, maybe consumers gave up brand loyalties for convenience. Whatever the reason, it's clear that consumers will abandon loyalties if it suits them, and marketers should realize that even the strongest relationships are fragile. 

How can marketers adapt?

As many brand loyalties dissipate, brands should change the way they approach relationship-building but not abandon customers. In the era of social distancing, brands should never distance themselves from consumers.

"This has created a powerful opportunity for brand leaders to get closer to the consumer while reasserting the benefits of scale in the supply chain and key account relationships," says McKinsey. "But the crisis is also accelerating consumer demand for value and reliance on digital. All of this constitutes a call to action for the industry."

Recommended reading: Guidelines For Conducting Research During COVID-19

Localization is More Important Than Ever Before

While COVID-19 is a global problem, we dealt with it on a local level. National, regional, and city governments all initiated responses to deal with the crisis, and many of these policies overlapped with others.  

In a marketing context, brands should realize that different local markets have very different experiences with COVID-19, which is why a blanket approach to marketing just won't work. Some places experienced few cases (and even fewer deaths); other places experienced unparalleled levels of suffering. 

Going forward, marketers will place a greater emphasis on local campaigns that resonate with people in specific parts of the world. Here in the U.S., marketing campaigns should target individual communities rather than the population as a whole. 

McKinsey agrees:

"Given the variability in COVID-19’s impact across the country, adjust your pricing, promotions, and assortments to best serve local communities. Consumers in areas that are still under heavy restrictions, for example, may respond better to value messaging around pantry loading and at-home eating," they say in a recent report. 

How can marketers adapt?

When it comes to post-COVID marketing, brands should recognize the differences between communities. Pre-COVID, many marketing agencies saw consumers through the lens of New York City or Los Angeles, failing to take into account the habits of consumers from the rest of the country, which resulted in poorly-received campaigns that provided little value. 

In the future, research:

?         The values of local communities 

?         The most popular packaged goods by region, state, county, city, and neighborhood

?         What traditional and digital marketing channels local communities consume 

Final Word

Some marketers Many marketers in the consumer packaged goods space have experienced major challenges over the last few months, and things will continue to be in transition. This is why it's crucial marketers adapt quickly to a changing world. If companies want to survive, the future of marketing consumer packaged goods will involve being ultra agile and having and always on understanding of the drivers of consumer behavior.

Hotspex is North America's No.1 "most innovative" consumer and shopper insights firm. For more consumer packaged goods marketing insights, click here.