Three Old-School Fallacies CPG Brands Must Drop For Online Success In 2019
Jennifer Silverberg, CEO, SmartCommerce
Conventional wisdom is a funny thing. It’s there for a reason: It works in some -- or even most -- situations. But there are situations where conventional wisdom becomes outdated and not only doesn’t work, it makes things worse. And/or it gets applied to seemingly similar situations where it simply doesn’t apply. Consumer packaged goods manufacturers find themselves in this situation when it comes to digital marketing.
What works to accelerate purchases for many other items online can actually postpone (or halt) sales for CPGs. This is because shoppers approach CPG buying online in fundamentally different ways than they do other categories. The good news is, it’s still quite a lot like how consumers buy CPG offline! Three things we’d strongly suggest that CPG brands re-think when promoting their products online are: prioritizing engagement, highlighting digital price comparison and presenting options.
Engagement is a loaded gun for CPG brands
It’s easy to understand why engagement works so well for certain product sectors (yes please, I WOULD like to virtually test drive that car!), but consider a real-world shopping journey to buy a CPG item in a store. Would you want to be pestered to fill out a survey before you can put a product in your cart? What if the checkout clerk wouldn’t take your money until you subscribed to weekly delivery? These tactics stand in the way of you purchasing your item and getting on with life, and the same is true online.
Based on monitoring over 10 million consumer interactions in the last year alone, SmartCommerce knows that CPGs lose about 80% of their interested shoppers EACH time they are forced to click something. Consider the compounding impact of that. If you start off with 1,000 interested shoppers, even presenting just three clicks on the path to conversion whittles sales down to only eight people. CPGs live in a unique world where consumers decide very quickly whether to buy a product. Once that happens, they’re ready to buy -- they don’t want to think/reconsider/engage … and if you force them to do so, they’ll bail.
Paths to purchase that are as direct as possible work the best for CPGs. Digital ads work best when a single click can add items directly to a shopping cart. This mimics the real-world experience where a display drives interest and items are easily picked up and tossed into a cart without jumping through hoops. The digital landscape also provides opportunities for additional convenience, like sending multiple ingredients for a recipe or bundles of cleaning supplies to a cart.
Price sensitivity is way lower than friction sensitivity
Price is always a factor in every purchase decision. In the world of CPGs, though, price differentials are usually a matter of a few cents. Almost all consumers are much more interested in making their purchases and getting on with life than saving a small amount of money. This is one of the main factors driving the success of Amazon’s Prime program. Amazon Prime members almost always purchase items from Prime sellers. Often, one of the sellers on Amazon is actually selling the item for a bit less money, but shoppers want to make the purchase and be on their way. They believe Prime purchases are going to be reasonably priced, ship quickly, and offer a streamlined return process.
SmartCommerce real-world data shows that less than 2% of CPG consumers even bother comparing CPG prices online, even when the prices are right there for the consumer to review. Contrast this to the days our grandmothers saved green stamps (and if you don’t know what those are, ask someone over 40) … today, convenience is very much the new “dollar off” when it comes to online CPG purchasing. Brands and retailers offering frictionless convenience are in much better positions than those fighting costly and - and perhaps fruitless - price wars.
Less is more - curation is king
Many brands mistakenly believe shoppers want to see many different options on package size, flavors, colors, fragrances, etc. before making a choice. The truth is, too many of these options just confuse people and stand in the way of a buying decision at all. After watching millions of consumers choose products online (and millions SKIP choosing products online), we know that keeping choices down to three or fewer quadruples the number of items added to carts than when four or more options are offered. Similarly, digital ads offering a single size option actually drive 13 times more sales than those that stop consumers to ask them to choose among multiple choices.
This is part of the winning formula Costco uses to grow at a faster rate than similar retailers. The store stocks a tiny fraction of the SKUs kept in inventory by its largest competitors, less than 4% of what Walmart or Target sell. Its customers love that curated experience, knowing many choices have been made for them and they are only being offered quality products. Harvard Business Review calls it “decision simplicity” and pointed out five years ago it’s the biggest driver of brand stickiness.
The sky’s the limit for CPGs online
CPG sales are continuing to explode online. In their report, “North American Consumers’ Online Shopping Habits,” SAP reports that 47% of consumers say they are buying CPGs online. The digital future is extremely bright for CPG brands as these numbers are poised to continue skyrocketing in 2019 -- for brands that play it right. The market is huge, but also enormously competitive as smart manufacturers figure out how to drive interest and seamlessly convert it into sales at their partner retailers. Abandon the fallacies of digital marketing to make sure you are one of them.