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6 CPG industry challenges and how to overcome them

June 29, 2021
  ●  
Charlotte Crawford

The CPG industry is currently facing unique market challenges. By investing in intelligent and data-driven digital strategies like digital product sampling, CPG brands are preparing for long-term success.

From shrinking budgets, to massive supply chain disruptions, and  ever-changing consumer behaviour, the CPG industry is transforming in ways that even the most seasoned marketers couldn’t have predicted. CPG professionals across the sales cycle, whether that be in marketing, sales or e-commerce, are forced to do more with less.

In this piece you’ll learn about the 6 challenges the CPG industry is currently facing, how you can not only adapt but stay ahead in the industry's current evolving landscape and 5 actionable ways to maximize your brand’s budget and impact in 2021.

Let’s get started.

CPG industry challenges

1. Supply-chain pressures

Manufacturing costs for CPG brands worldwide have soared after the pandemic, causing many to go into defence-mode and protect their discretionary dollars.

  • Fixed costs such as, labour and material costs, have risen for supply chain managers
  • Both have been further impacted by COVID pay, labour and material shortages
  • Transportation and container shipping costs have increased between 25-50%
  • Packaging and commodity costs have significantly increased - with the rising cost of lumber, wood pulp, resin and aluminum for example, brands are experiencing higher prices in paper, cans, and plastic

For many of CPG brands,  day to day supply chain operations costs have increased up to 50%. In this current moment, to say that every dollar counts for CPG brand managers feels like an understatement.

2. Retailer pressures

Nervous retailers are putting a lot of pressure on CPG brands. For retailers right now, every consumer trip made and dollar spent is increasingly pivotal to their bottom line.

  • The number of store trips has decreased for consumers, while their average basket size has gone up by almost 20%
  • With the massive increase in online shopping and  transparency in pricing - consumers have more power than ever to price compare when they shop
  • Increased health and safety costs, such as sanitizing carts, wiping down conveyor belts, installing plexiglass shields and other safety measures

Many consumers switched to new brands during the pandemic due to limited availability and showed retailers they can get by with fewers SKUs on shelf.  Retailers are now prioritizing their own private store brands’. Securing your retailer distribution with data and consumer feedback has never been more important.

3. Marketplace uncertainty

Most of us are sick of the word unprecedented by now, but we are without a doubt living through a time of unprecedented uncertainty.

  • Many 2019 products plans catered to the pre-pandemic market, to trends around snacking, on the go, rapid meals - that all very quickly had to change
  • Brands are now deciding it is too risky to change their prices and/or promotional strategies as they can’t predict what the impact will be
  • Innovation is also on hold or delayed at the moment, or even outright cancelled

In almost a marketplace standstill, brands are tasked with planning for the future without wasting valuable time and resources.

During their digital sampling program with Sampler, Path of Life tackled this challenge by directly engaging with and collecting feedback from target consumers through a post-sample consumer survey. The plant-based frozen food brand realized many of the target consumers were very interested in purchasing organic products, these insights then directly sparked the brand’s new organic oatmeal line.

4. Changing consumer demands

With e-commerce behaviour and online shopping patterns changing overnight, the CPG industry was impacted across the board, but some categories more than others.

  • Some CPG categories greatly rely on premises sales or food service (for example, fountain drinks, half of Coca Cola sales come from away-from-home channels)
  • Even with the reopening post-pandemic, demand for such products won’t be quite back to normal
  • Impulse categories and certain cosmetics, such as lipstick also experienced a decrease in sales  

Brands had to not only keep up with but account for ever changing consumer expectations and needs.

5. Unrealistic 2021 Growth Plans

When consumers were all buying a lifetime supply of toilet paper and cleaning products and anything they could pantry load at that moment, brands saw a massive peak in sales for certain categories. As a result, many failed to take the 2020’s consumer buying boom into consideration when building their financial plans resulting in unrealistic growth plans.

  • Many 2021 sales plans were built based on the growth seen over 2020
  • Months where brands witnessed “panic-buying” significantly  skewed year-over-year growth  

The unexpected sales decline this year caused many brands to pause, reduce or even eliminate budgets.

6. Back to “old” normal or new normal?

With marketplace uncertainty, which consumer behaviours will stick post-pandemic? Harvard Business Review reported, as of May 2021 80% of U.S. consumers are still changing the way they shop.

  • Despite vaccine rollout and in-person activities opening, COVID-19 health and safety concerns remain for consumers
  • 60% of consumers are currently visiting brick-and-mortar stores less than before the pandemic
  • 43% shop more often online for products they would have previously bought in stores

Having survived the initial impact of the COVID-19 crisis and facing the above challenges, CPG brands are now beginning to pivot to recovery and future-proofing their businesses for longer-term competitiveness. So, how do you remain impactful and efficient as we transition and evolve into this new post-COVID era?

A digital product sampling program goes far beyond a free product trial. It really is a way to build the infrastructure that enables lasting, data-driven and most importantly, profitable relationships with consumers. This unified approach to sampling lets you optimize your marketing spend and boost operation efficiency - and here’s how.

1. Identifying your target audience & highest value customers

With the added budget pressures brands are facing today, it’s more important than ever to direct your efforts (and budget) to those high-value consumers and potential customers.

But how do you target, reach, and keep this ideal consumer base while reducing costs?
One of the most exciting things about digital product sampling is that you can choose from over 700+ segments. These targetable segments include everything from a consumer’s region, to how often they exercise and what type of hobbies they have so the targeting possibilities and data sources are quite significant.

This allows you to create a data-driven marketing strategy that can evolve and adapt to current and future market trends. Not only can you target very specific segments like demographics, beauty routines, food & beverage, personal interests, health & fitness, and shopping habits but you can further use the data collected in your program to redefine who your target audience actually is.

As Sampler’s Growth Marketing Manager, Morgan Kingdon said:

2. Capture and action first-party consumer data

Retailers have historically held the direct-to-consumer relationship, however the pandemic showed brands and retailers alike the importance of not only building but owning your relationships with consumers.

Google may have pushed their end to cookies to the end of 2023, but the increasing need to own consumer relationships especially persists for CPG brands. The value of first-party consumer data moves beyond marketing efforts for CPG brands. First-party consumer information is crucial for things like new product development, pricing strategies, product assortment, retail partner negotiations, demand planning and many other areas.

The data you collect during your Sampler program is 100% first party declarative (self-reported). So you’re able to build a direct path to get to know your consumers beyond just transactional data and better keep up with their changing needs and behaviour.

The insights you collect during a digital sampling program will allow your brand to discover things like why certain consumers choose your brand over others or which of your products certain audiences enjoy the most. Such discoveries can help you detect important patterns and make every marketing dollar count.

3. Grow your email marketing list for personalized re-marketing

A recent Google study showed that the largest CPGs have databases of CRM and site data that are, on average, one-tenth the size of the databases of their retail peers. This disparity means that for most CPGs, the opportunity to capture and action consented consumer data remains largely untapped.

Consider this: offering a high-value incentive like a product sample will typically drive a 5-10X increase conversion to your email marketing list. This not only helps you reach target markets or specific demographics in the future, but also helps you plan more effective re-marketing strategies.

For example, with Sampler a leading CPG conglomerate was able to grow their email list with 64.6% of 90,000 sample claimants opting in to receive communications from the brand. They additionally collected direct consumer feedback on what kind of content different target audiences prefer to receive from the brand which guided future marketing initiatives.

By understanding more about your consumers’ demographics, psychographics, behaviours, and lifestyle, you can personalize the communication and improve your overall consumer experience as they move along the funnel.

As Forbes discusses, in this current moment “competitive advantage (for CPG brands) will come from being able to anticipate customer needs and offer highly relevant choices at the right time and place.”

Valuable tidbits of information discovered in your digital product sampling program arm you with the insights you need to:

  • Personalize your content
  • Build targeted email campaigns
  • Effectively guide consumers through every step of the shopping journey

4. Collect ratings and reviews to drive sales

We all know ratings and reviews, and the consumer sentiment within them, are powerful drivers in consumer spending. 72% of consumers won’t purchase a product before reading a customer review. For many brands, it can take a significant amount of time, effort, and budget to generate a sufficient amount of reviews to gain a consumer’s trust.

One of the primary use cases for digital product sampling is the ability to ask your consumers for valuable feedback, such as:

  • What did they think of the product, would they recommend it?
  • How does it compare to other brands they’ve tried?
  • Is there anything in particular they would change about it?

That is all useful information you can bring back into your product development, customer experience, marketing campaigns and sales efforts.

You can easily syndicate all of the ratings and reviews you collect during your digital sampling program to your eCommerce website. This helps in building trust and credibility with your customer base at the point of purchase.
Your sampling dollars are therefore not only working to engage consumers in a memorable way, but also sustaining a steady flow of consumer feedback.

5. Boost digital ad effectiveness with sampling CTA’s

Lastly, digital product sampling can be an excellent way to boost the effectiveness of your current ad spend. Offering a free sample incentive on your website or ad can drive up to 5x higher rate of ad recall for consumers and drive 7x more consumers to complete an extended profile for your email marketing list -- in comparison to a digital ad or CTA with no incentive.

By reinvesting your media spend in a digital sampling program, you can achieve the same or better acquisition metrics all while having your ideal customer actually experience the product.

As Sampler’s Director of Client Success, Christine Smith, recently told Modern Retail in their piece Free samples are returning to the post-pandemic world, “consumers crave the kind of physical experience that sampling provides. But they need it on their terms.”

Takeaways

The CPG industry is currently facing unique market challenges, including supply chain challenges, marketplace uncertainty, retailer pressures, changes in consumer behaviour, and unrealistic growth plans.

As industry challenges and market uncertainties will continue, CPGs must be ready with sufficient agility, speed, and flexibility to not only anticipate but also respond quickly to future challenges.

By investing in intelligent and data-driven digital strategies like digital product sampling, CPG brands are preparing for long-term success. Whatever your brand’s unique objective is, Sampler’s team of sampling experts will support your brand in powering resilient and holistic operations across the sales cycle, despite what future trends the global supply chain holds.

Consumer feedback
Consumer insights
CRM
Data
eCommerce
Re-marketing
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