DISRUPTING THE CPG MARKETING SERVICES ECOSYSTEM

By | May 21, 2015

MarketingConsumer goods marketers employ a cadre of contractors, agencies and consulting firms. That’s not going to change rapidly in the next 1-2 years, but what will change is the role these parties play with the Consumer Goods manufacturer. Something must change. According to a recent Deloitte survey of 4,047 respondents encompassing 28 product categories and more than 350 brands, brand loyalty is declining. The Deloitte study cited in this Inc. article describes price-sensitive consumers still reeling from recession as the norm, challenging any attempts to develop brand affinity. The solution? “Brand segmentation,” which requires consumer goods companies to “Rethink their product portfolio in light of the widening gap between the affluent and lower-income households. Consumer products companies may need to have distinct strategies (e.g., brands, product offering, pricing) to target affluent and lower-income consumers.”

That sounds like a data and analytic problem. How prepared are CPG brand marketers to attack it?

The Consumer Data Asset

Data about your consumers should be your data – not something outsourced, scattered among contractors or agencies. This data and its insight could be an asset that drives better decision-making across the organization. If it were, it would be accounted for on your company’s balance sheet. None of this means you need to necessarily own the technology that collects analyzes and puts consumer data to use. It does imply that traditional marketing services companies purporting to offer this capability simply cannot.

Marketing service provider business models are based on the premise that their clients care little about the underlying data and marketing technologies working behind the scenes. Instead, they emphasize servicing virtually any outsourcable marketing need. Diversity to this extent makes for thinness in certain areas – and this is becoming more and more apparent as business demands rapidly shift out of traditional marketing techniques. It is leading many to retreat from the strategy of using “one” agency for all needs and shifting back to preferring best of breed providers for specific business needs.

Marketing services providers are largely ill-equipped to handle the realities of a data driven world – one characterized by big data, the proliferation of consumer channels and rapid technology innovation. The pace of change is so fast; only firms putting their full prowess behind adapting are capable of delivering the most differentiated capabilities.

To fill the agency gap, CPG business leaders are investing in and partnering with new entrants in the technology space – especially in the areas of creating new social networks, mobile applications and other ways of engaging consumers. In a data driven world, the quality and effectiveness of marketing technology isn’t an inconvenience to be delegated to a services company; it’s a mission critical competency that generates insight with immense value.

Picking the Right Partner

In October 2014, McKinsey’s Global Co-Lead of Digital, David Edelman, posted an article to LinkedIn titled, “Time for Marketers and Agencies to Shake it Up.” His piece describes the need for agencies to change the nature of their business models to focus on higher value services. He also says:
“Who do you need as a partner? When every different channel has its own specialist agencies claiming expertise in it, a client can get overwhelmed by a mix of as many as 14 different traditional, media, digital, social, mobile, sponsorship, etc. agencies. If each corporate business unit and geography gets to choose their own agency, the complexities are overwhelming and negate much opportunity for scale or cross-channel coordination.”

Agencies and marketing services companies are not prepared to address these issues – it’s simply not their traditional business. Replacing redundant and wasteful database and technology development efforts across the contractor ecosystem with standards helps agencies deliver the most impactful and measurable creative. Standards also yield consistent and comparable metrics across brands and campaigns; an absolute necessity at a time when marketers are under the microscope (“The heightened focus on marketers and their related costs will spur marketers to better use analytics”).

Bottom Line: The digital marketing business model employed by most Consumer Products companies is not flexible nor suited to enable data driven business priorities. Outsourcing is actually less efficient in a world where latency between insights and actions is not something struggling CPG brands can afford. Utilize agencies and marketing service providers for what they are “best at” (e.g. content, creative, web, mobile, programmatic, etc) and clearly define your internal data driven marketing strategy which includes who owns the data, where the consumer data should be stored and maintained, definition of insights and analytics, etc.

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