Consumer Behavior Matters More Than Sales Trends
In this article, Kelly Dotson, Chief marketing Officer, Numerator to discusses how misleading consumer insight data affects brands in a negative way. Drawing upon her personal experience and up-to-the-minute understanding of consumer trends, Kelly explores the reasons why there is so much misinformation flowing out to brands and how it impacts their growth potential. Conversely, she also shows how gaining real-time insights into consumer purchasing and behavior can help CPG brands identify missed segments that could lead them to robust growth rather than stagnation — or worse, losing market share.
The way CPG brands approach ever-evolving consumer trends and buying patterns must change. Today, those in the CPG industry need to analyze more than just sales trends, or they risk becoming obsolete.
For years, consumer buying behaviors evolved at a relatively predictable pace. The rules of engagement for manufacturers and retailers seemed clear: Stick to what you know and make changes incrementally. Today, those rules are obsolete. From online and app-based ordering to direct-to-consumer offerings, change is occurring at breakneck speeds — and this change is leaving the consumer packaged goods industry and its retailers with their heads spinning.
Learn More: Attributing ROI to your CDP
How do they keep up?
The Big CPG Brand Dilemma
Familiarity has created a trap for CPG companies. For years, consumer buying patterns were relatively stable. By today’s standards, yesterday’s product innovation and buying channels were incremental at best.
Historically, CPGs optimized production to improve profits, so they invested in large-scale production and distribution operations (often heavily centralized) to support this.
Usually, brands focused on driving top-line growth through incremental promotional efforts while boosting bottom lines. They did this by improving manufacturing and operations, which worked well for a time. Little by little, however, customer preferences evolved. Innovation focused on changes to flavors and packaging, which worked within the established infrastructure.
Today, this is no longer the case. Thus, food retailers and brands are often ill-equipped to respond to the shift in consumer habits. Change “at pace” becomes more important than change “at scale.”
Consider, for example, today’s consumer preference for locally sourced foods. Excelling in centralized production and national distribution, the very capabilities in which big brands have invested, flies in the face of this trend. Brands are wired to drive a return on those big investments — only today’s trends run counter to what’s been built. Additionally, just because a company excels at centralized production doesn’t mean it can accommodate the latest consumer trends.
And that’s true across trends, regardless of whether it’s the shift to online buying or the emerging consumer preference for intimate buying experiences. In short, a disconnect exists across what the biggest players can do, as well as specific consumer desires and the returns that investors demand from brands. The same is true for retailers.
Bottom line: The market has undergone a drastic change, and food brands must follow suit.
Learn More: Revamping Marketing Strategies by Harnessing Sleeping Data
When It Comes to Growth, Behavioral Data Is More Valuable Than Sales
New challenges require new thinking, and it starts with understanding the consumer.
Ironically, while brands talk about adapting to a changing marketplace, they’ve failed to make changes in how they understand consumer behavior. Instead, even in the face of radical change, they persist in using legacy consumer insight panels whose very design predates the dynamics they seek to understand.
Just as brands built centralized production centers, they also built centralized research and reporting teams focused on efficiency. As big brands digested global scope, they sought reporting metrics of global scope. When change happened incrementally, brands could get away with this. In fact, in this relatively fixed environment, many brands were lulled into accepting an artificial alignment between point-of-sale data and consumer insights data.
It made life easier: There’s less to explain when consumer insights reporting seamlessly aligns with POS data. But that convenience comes at a price, as ease is traded for meaningful insight. In a stable environment, this error of convenience can be tolerated. In an era of radical change, it undermines growth and compromises results.
To connect with modern consumers, brands must let go of the old paradigm involving sales analysis. Counting revenue and driving revenue require different tools and insights. Regardless, brands must start looking beyond retail stores.
Learn More: What Are the Key Marketing Metrics to Track Your Customer Journey
Data Analysis Must Change
While it sounds obvious, different data is required to understand how people purchase goods through myriad channels. Using legacy panels creates a blind spot — not just in sales, but also in understanding consumer behaviors — that can’t be solved by using factor adjustments or existing consumer data projections.
In simple terms, it’s impossible to accurately project data that’s fundamentally missing. Traditional CPG food brands are slower than their fast-growing upstart brand counterparts to recognize this challenge.
Because consumers are utilizing so many different channels — and new trends are emerging almost daily — the barrier to entry for new brands is much lower than it once was. Because of this, a brand’s competitive advantage will depend on its ability to see and understand those ever changing needs.
To win in this new market, throw out old methods, cast off convenience, and invest in learning exactly who your customers are. Their expectations evolve rapidly in this new age, and their loyalties lie with brands that can keep up.
