Modern Trade Promotion: Thinking Digital

How can you influence the digital shopper’s purchasing decision? Many consumers are wary of product quality and freshness when ordering online. By advertising shipment schedules or providing money-back guarantees, retailers and CG manufacturers can address shopper concerns and affect their decisions.

CPGs saw sales soar during the pandemic. Statista.com says that in 2021, 230.5 million US consumers shop online. These connected consumers expect online grocery shopping to be consistent with the convenient digital retail experiences that other industry categories have set as the norm.

Consumer goods manufacturers take note: The line between the physical and digital world is cloudy, and it’s time you consider how the complex consumer journey to purchase impacts your trade spend.

Grocery ecommerce specialist Mercatus and research firm Incisiv projects that online grocery will grow to 21.5% of total US grocery sales by 2025, more than doubling its current share of the overall grocery market. The five-year growth forecast marks a more than 60% increase over pre-coronavirus pandemic dollar sales estimates for the online grocery space.

There’s no doubt that the pandemic accelerated the migration to ecommerce. McKinsey reports that the expected 5-year trajectory happened in just 3 months.

Before the pandemic, only 13% of US households had purchased groceries online. By late March 2020, 31% had! Mass retailers’ online sales in 2020 were 93% higher than they were in 2019.

Online grocery shopping will continue to grow; 43% of consumers say they plan to buy at least some of their groceries online post pandemic.

Competition to Influence the Digital Shopper

Online shopping is experiencing growth, but brick-and-mortar retains advantages in the consumer goods category.

“Online sales make up less than 3% of total food and beverage sales,” Sam Gagliardi, IRI Senior Vice President of E-Commerce. This data implies that most folks still head out to the store to buy their grocery products. And while consumers fill their shopping cart – browsing aisle after aisle of product – they’re likely to impulsively choose a product from an end cap or pick up an item from a brand with a BOGO offer.

In this era of omnichannel shopping, there are endless channels that influence a shopper’s purchasing decision.

As you might guess, there are certain food and beverages better suited for success in a digital grocery store. Retailers and CPG manufactures expect canned goods, condiments, and packaged products to shift to digital consumption faster than perimeter items like produce and meat.

Some shoppers are wary of online ordering because of the inability to inspect the item and the uncertainty in freshness or quality. A Nielsen survey revealed that 69% of respondents agreed that they prefer to examine products personally. To address this, retailers and manufacturers should proactively advertise shipment schedules or provide a money-back guarantee.

But, look at coffee; coffee sales are booming online. US (in-store) retail ground coffee sales were down 0.3% from the previous 52-week period, according to IRI data. “We do not see in-store growth returning here in the foreseeable future,” said Gagliardi.

Shopping Lists

According to a survey from AdAdapted, 93% of CPG marketers are looking for ways to reach consumers when they are engaging with a product category and making their decision to purchase the product.

This is a key point in the buyer’s journey.

Marketers also estimated that approximately 49% of consumers make digital shopping lists, and consumer studies indicate that 81% of consumers purchase every item that’s on their digital list.

Shopper Marketing

The Path to Purchase Institute defines shopper marketing as the use of insights-driven marketing and merchandising initiatives to satisfy the needs of targeted shoppers, enhance the shopping experience, and improve business results.

An important tactic in shopper marketing = trade promotions.

Examples include:

• BOGO offers
• Loyalty discount programs
• Coupons attached to products
• Cross-selling (buy Product A, get a deal on Product B)

“Shopper marketing is based on a deep understanding of shopper behavior and designed to build brand equity, engage the shopper, and lead him/her to make a purchase. The premise behind shopper marketing is that manufacturers and retailers can together create a more engaging shopper experience, influencing shoppers at the point of purchase where they make final buying decisions. Shopper marketing is about using insights and specifically targeting the core shopper with the right environment, the right products, the right packaging, the right prices, and the right marketing communication — all combined to satisfy the shopper in a way that was not traditionally possible.”
— Delivering the Promise of Shopper Marketing, Deloitte

CPGs are increasing their overall trade promotion spend to attract consumers and win overall competition. In fact, according to Deloitte, 50% of CPG respondents say they have increased their trade spend in the last 5 years.

Your Product and Promotion Success

Traditionally, CPGs track the success of in-store promotions through POS scanner data provided by research firms like Nielsen and IRI. With POS data, CPGs can identify product movement by retail channel and specific retailer.

But, Kraft Heinz US COO, George El Zoghbi, notes, “With the changing retail landscape, measuring consumption is not as simple as it used to be.” For Kraft Heinz, ecommerce sales make 1% of total sales, but is growing at a 60% rate.

To learn about consumption in ecommerce, CPG manufacturers must jump into the world of digitized big data sources and turn information into profitable promotions and business value. What are consumers searching for online? What are shoppers saying on social media? Where are your competitors running advertisements? McKinsey and MIT reveal that companies mining big data outperform their peers by 5% in productivity and 6% in profitability.

Your promotions should be a growth engine for your business. Remove any guesswork from sales planning by using accurate baselines and automating post-event analysis with a trade promotion optimization solution. Your team will dramatically reduce manual work, mistakes and mismanaged data to become more productive and strategic.

Impact on Trade Spend

Trade promotions can influence a consumers purchase decision. Trade promotions are marketing events executed between manufacturers and retailers. Trade promotions help you increase product visibility and incremental lift. Trade promotions include trade allowances, ads, and in-store displays.

Driving digital sales is no simple task.

Final Thoughts

To influence today’s shoppers, CPGs should evolve their promotional strategies to align with consumer preferences and behaviors.

Trade promotion optimization technology helps CPGs run more effective promotions.

Digital shopping is alive, and your product promotions have to cut through the noise. Communicate with your shoppers across all the channels they touch and analyze digital data details to provide the right promotions to the right customers at the right time.

Ecommerce is one part of the digital landscape. Brick-and-mortar locations can incorporate tech tools to create a better shopping experience for consumers, bridging the cloudy line between physical and digital purchases. The most successful retailers and manufacturers will strategize for both the physical and digital world.