The most difficult aspect of meeting consumer expectations today is, frankly, understanding exactly what they are. Between channel blur, the acceleration of e-commerce and the growing dominance of digital, it is becoming increasingly difficult for CPGs to delineate how best to communicate with consumers, and deliver to them the shopping experience they want — particularly as it relates to leveraging promotions to drive sales.
While declining coupon use has challenged marketers during the last several quarters, there's no evidence to suggest that shoppers have lost interest in making their budgets go further and saving money on groceries. So, what's happening with shoppers and promotions? And what does it mean for brands?
Per usual, Free-Standing Inserts (FSIs) continue to dominate distribution, comprising 90.6 percent of the 169 billion manufacturer-funded coupons distributed in the first six months of 2016. And, as could be expected with this disproportionate distribution, FSIs accounted for the largest share of coupons redeemed during the period — though their share of redemption was down 4 percent compared to H1 2015. Still, their predominance continues.
Conversely, Inmar's Promotion Industry Analysis for H1 2016 finds digital coupons (paperless load-to-card and print-at-home) "punching above their weight" and creating a 10x impact in redemption activity relative to their share of overall coupon distribution. While these two methods together accounted for just 0.6% of coupons distributed, they combined to capture 6.7 percent of total coupon redemption volume for the period. In spite of this, manufacturer commitment to digital lags.
The distinct (glaring?) contrast between the increasing impact of digital coupons and the historically low redemption rates for FSIs reveals a significant gap between what shoppers want and what marketers are providing them in terms of offers and ways to save. The way the industry is "talking" to consumers about savings and the way consumers want to be talked to regarding promotions are not aligned.
It's not unlike what a lot of parents are facing as they try to keep in touch with their children. The "rents" want to talk to their kids on the phone and the kids want to text. Shoppers, through their response rates, are telling CPGs they want a "digital relationship." (No doubt, some children are sending the same message to their parents!)
So it is within the existing communications gap — by delivering more promotions via digital channels — that CPGs have the opportunity to efficiently and cost-effectively engage shoppers and drive sales in a persistently sluggish marketplace. Shoppers' demands for easier and faster ways to save on their grocery bills — and their growing engagement with brands that meet these demands — make it incumbent upon CPGs to rethink marketing strategies and reallocate promotion budgets.
By making additional digital content available to shoppers, CPGs will be positioned to reinvigorate sales and build long-term brand loyalty. As a critical component of true omni-channel outreach, digital coupons will engage and activate shoppers at the appropriate campaign level — nationally or retailer-specific — and deliver back to CPG marketers key data and direction for enhanced, sales-driving targeting and messaging.
Employing an intelligent communication mix that is responsive to changes in shopper behavior and aligns with demonstrated media preferences is how CPGs will bridge the current gap, leverage the inherent opportunity for growth — and win.
This blog post was first published on the Shopper Technology Institute website - www.shoppertech.org.