The Data Opportunity for CPG: Fresh Pathways to New Product Development

There is at least one powerful reason for CPG organizations to now examine new ways to acquire customer data and respond to their changing behavior: Millennials and Gen Z are more receptive to using apps on their mobile devices.
The Data Opportunity for CPG: Fresh Pathways to New Product Development

Retailers are the envy of CPG organizations. Retailers have access to rich customer data that allows them to make precise decisions around the brands to carry, the SKUs to stock, the categories to expand, and the promotions to launch. Many even know their customers by face and can prompt instant, personalized, revenue-boosting suggestions that CPG organizations can only dream of. What can CPG organizations do – especially those without the luxury of transacting directly with the end customer – to create a better understanding of their customers? How can they do this without launching expensive and time-consuming surveys?

Many CPG organizations, such as those in the health and personal care segment or the snacks and beverages segment, cannot expect customers to log in to a brand website or use an app to order an eyeliner or a bag of potato chips. This handicap prevents them from acquiring dynamic and meaningful customer data that is critical to improving existing products, introducing new products, or making personalized offers to increase revenue. This is aside from the historical fact that has dissuaded CPG organizations from pursuing an aggressive D2C e-commerce strategy: online sales are a low-margin business.

However, CPG organizations cannot afford to ignore their need for customer data. It is their lifeline into the future.

There is at least one powerful reason for CPG organizations to now examine new ways to acquire customer data and respond to their changing behavior: Millennials and Gen Z are more receptive to using apps on their mobile devices. This trend offers a new ray of opportunity. Exploited correctly, it can provide insights into customers, where they are, what they do, what they need, and how they think.

How can CPG organizations harvest this opportunity?

Make Syndicated Data Your Superpower: Typically, syndicated data, say from Nielsen or IRI, contains vital customer level data (demographics, household size, purchase frequency, propensity to use apps, payment preferences, etc.). This data can bridge the data gap for CPG organizations. Other types of syndicated data provide anonymized store-level scan sales. Retailers also provide SKU-specific sales information to the CPG organization with customer details anonymized. With the right analytical tools and a layer of AI, the CPG organization can use syndicated and retailer data to create its own demographic clusters, which in turn can be used to refine and define its segments, determine what customers want when they want it, and what drives loyalty. Many CPG organizations have reported inordinately large benefits from deploying AI. One improved forecasting accuracy by 5 to 15 percentage points, resulting in optimizing sourcing, production planning, and transportation and a saving of more than $40 million. Another improved ROI on marketing spends by 10 percent in the first 12 months.

Create a High-Octane Social Media Presence: The right interaction on Instagram, Facebook, Twitter, Pinterest, YouTube, etc., with customers, will ensure they feel valued and in return provide (or leave behind) a treasure trove of data that is dynamic and deep. Often, it can also provide reliable clues to customer sentiment or point to fresh sales leads. These channels can also be leveraged to generate social predictions that can give rise to new product features or new products. PepsiCo used this methodology to launch a new product that consumers did not consciously know they actually wanted: Seaweed in a flavored snack called Off The Eaten Path. The snack is a major bestseller.

Experiment with Channels: Can vending machines be used to generate customer data via QR code-based coupons and payment processes? Can the act of buying a product via a vending machine be linked to social media that provides clues to the customer? Old Navy did this by placing Twitter vending machines in the US to dispense flip-flops. Users answered questions using the specially rigged vending machine; these answers were tweeted and the machine dispensed a discounted flip-flop. Somewhere in the background, Old Navy would have harvested the customer’s profile, preferences, and interests.

The quest for data has intensified. CPG organizations must make the extra effort to get under their customer’s skin. Besides, the future is clear: as the COVID-19 pandemic propels the D2C trend in CPG and cements it into normal behavior, customer data will become central to survival.
 

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