Since the pandemic started, we’ve been talking to our customers and our colleagues in the industry about the dramatically changing CPG landscape.
In March 2020, we chatted with Kris McDermott (ecommerce expert, Edelman) and Joel Cartwright (trade promotion expert) about all that’s been going on with the pandemic and consumer preferences.
Topic 1: Consumer Behavior
(video time: 1:40)
Obviously, as everyday life changes, our shopping behaviors change. Brands have an opportunity to elevate their experience online in light of that. If it feels like everyone is shopping online these days… you’re right.
Kris: Edelman just completed a research panel on how consumers are behaving specific to trust. 54% said they’re not paying attention to new products unless the new products are designed to specifically help consumers with pandemic related life challenges. That’s very surprising. That’s over half of consumers!
We also ask consumers about what role they want brands to play…
Globally, 84% said they want brands to be a reliable news source that keeps people informed.
That’s not inconsistent with what we’ve been seeing for the past few years. We know that brands are becoming publishers and consumers really turn to them instead of news sources to get information.
We also learned that 58% of shoppers had NEVER done any online shopping before this crisis.
And knowing that the numbers are up, what I’ve been telling a lot of people, is that in many cases this is proving to be the thing that gets them over that the trepidation of trying online shopping for the first time.
We know that, statistically, when people buy online for the first time they like it… Shoppers frequently stick with it.
The pandemic has forced the hand in a lot of cases. Ecommerce experts have said this is going to accelerate ecommerce by 10 years – just because so many people are rapidly adopting – where normally we’d expect to see an incremental growth over time.
Joel: Well, the view about ecommerce, that’s absolutely echoed from large retailers. They’re seeing a huge shift to online purchasing. And, you’re seeing a shift in brand loyalty.
What does e-commerce mean for in-store promotions?
(video time: 5:10)
Joel: With the initial first wave, customers were stockpiling products. Retailers were forcing manufacturers from a short term perspective to stop all promotional activity. They just didn’t have the manpower in the store to stock shelves and change out the tags.
So from a brick and mortar perspective, in-store promotional activity kind of halted.
Some CPGs will continue promotional activity on certain products, but they’re going to limit it to fewer, velocity-driven promotional activities, like BOGO or 10-for-10 type of products.
CPG retailers typically do not do a lot of ecommerce. Deli meats and things like that, they’re not as prepared as they would like to be for ecommerce promotions. There is some work that has to be done there.
Kris: I advise clients that just because this behavior is happening right now, it doesn’t necessarily indicate intent. It might just mean that that’s what people are being forced to do.
There are some cases where we see that Instacart shopping is up on the weekends and Walmart shopping is up during the week.
You start to think that it’s because of the different kind of people using the apps and that kind of thing.
I’m very hesitant to make that sort of assumption right now. I think most decisions are being made based on circumstance and decisions are not based on demand or on interest.
I caution brands against making assumptions about consumer behavior.
You might buy a product because it’s the only thing left on the shelf – that doesn’t mean that that’s what you want. It just means that’s where you’re OK making a trade.
I certainly believe that more people will become omnichannel shoppers because of the pandemic, but I don’t think that most people will shift to online only because we’re still not there in terms of the experience… especially for grocery.
Topic 2: Brand Loyalty
(video time: 9:45)
Brand loyalty is something that has come up in a lot of the conversations that we’ve been having with our customers. CPG accounts, particularly in the grocery space are really concerned about brand loyalty. If their product is not the product that’s on the shelf when someone shows up to do their shopping, what will happen?
Joel: CPG retail manufacturers spend millions of dollars running trade promotional activity to gain category share and then maintain that loyalty.
But when you go to the shelf and it’s not there, you’re forced to try something else. CPGs run the risk of losing that category share and what they’re most concerned about is how much it will cost to get that shopper back.
Brand loyalty drives base volume — my base customer is the person that’ll buy my product regardless of deal.
During this timeline, that number – that metric – is out the window.
Some manufacturers may try to roll the dice and keep promotional activity to a minimum. Many CPGs don’t want to spend the promotional activity because they may not get what they want. What I mean by that is… I may buy a feature and display or an ad at a large retailer for – let’s say toilet paper – my consumers just went out and bought 50,000 rolls of toilet paper. Their pantry is full of it! So, do I want to spend that type of money?
There are a lot of uncertainties right now, but the main thing is these manufacturers want to understand what their base volume is.
(video time: 12:00)
Kris: One, I think this is a really interesting time, where normally we would expect low funnel activations to be the thing that drives conversion. The things that brands do outside of the direct conversion metrics are really going to impact consumer perception because a lot of people aren’t making active decisions based on price sensitivities right now.
Publix just announced that they’re going to purchase farmer goods because they’re going bad.. Publix is going to donate them. Again, anecdotally, I was just speaking to my mom who’s a very price conscious customer; she said well I’d never shopped at Publix before, but I’m going to start.
People are going to make a lot of decisions while watching what brands are doing.
Ultimately, price is still really important.
In terms of the price consideration, it’ll vary pretty wildly based on the retailer and the purchase behavior and the method. In general, we see that people are less price conscious in ecommerce because it’s more about convenience and less about price.
Topic 3: Promotion Management
(video time: 16:05)
Kris: We have seen a huge increase in terms of the number of brands spending and search which makes sense right. You’ve got a higher demand, which means that that space is becoming more saturated cost per click (CPC) prices are going up pretty consistently in the retail marketplaces which makes sense.
And I think that’s going to continue to be the case as long as demand increases. In a world in which everyone is using online options, we’re going get in front of consumers as much as possible.
It would not surprise me if the retailers start to build out more functionality around that. Right now, it’s pretty straightforward. It’s basically a sponsored product ad. It’s a heavy lifting conversion metric but I think in terms of elevating the experience. Most retailers don’t have promotional homepages or any sort of a retail media experience because they tend to be just really, really focused on search.
Joel: We said before – we really have to understand the brand loyalty. 70% of shoppers are saying that they’ve had to buy a different brand.
And 28% of those said that they may stick with that brand.
How do you maintain that brand loyalty?
What about Halloween events and so forth? A lot of retailers, because of the emphasis on the in-store shopper experience, they’re wanting to see what the manufacturers are going to put forward from an in-store marketing perspective. They want to make sure that that messaging is not insensitive to a buyer.
Kris: Brands need to think about this – it is literally a once in a lifetime opportunity to build a relationship.
All of our data suggests that people are watching the brands. That’s both scary and exciting. It’s very tempting to lean into clichés right now. I mean everyone seeing the same ads over and over. Keywords start popping out – turbulent times, and you know we’re here for you, unprecedented, etc. It’s very important to find a message that resonates and is true to your brand.
Remember that people are watching you and you’ll be rewarded.
The data does suggest that people will be buying the brands that they had positive experiences with even if they’re not buying them right now.
It’s a long game – not just in brand building but in also for trade spend – you’re a resource that people should rely on.
Joel: There’s some scary things ahead. And there are some good things that have come out of this.
The scary things for the manufacturers are how do I plan, how am I going to promote, how am I going to do this for next year? CPGs are coming up on an annual planning cycle – and will basically have to throw that out the window.
Prior to all this, there was a large disconnect between the manufacturer and the retailer.
There was always this kind of at odds. I think what the pandemic has done (due to the supply chain issues and so forth), it’s forced manufacturers and retailers to work better together. You’re going to see a better relationship which hopefully will trickle down all the way to the end consumer.
Unfortunately, I think we’d probably all agree that there won’t be a rapid return to normal. There are pros and cons associated with that. With this new world that we’ve entered, it’s critical to solve problems, protect and care for your consumers and one another.