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CPGs top 5 Retail Challenges - solved with Customer Data.

First-party data is driving transformation in every sector. Without it, CPG brands are being left behind and are struggling with their customer relationships. So what challenges can Customer Data overcome?

Who are your customers? What do they like, dislike, want, need?

For most sectors, data has been answering these questions with increasing accuracy for years, with e-commerce, social media and other online activity creating a direct route between businesses and the consumers who buy from them. It’s estimated that 2.5 quintillion bytes of consumer data is generated every day, helping businesses get a much clearer picture of their target audience, develop closer relationships with those customers and build trust in their brand. That’s without mentioning the influence that data has had on decision-making, product development and commercial direction – look at how KFC, for example, have used data to drive fast change over the last two years, changing their delivery model and their menu to respond to consumer demand. Consumer data has, for a lot of organisations, and a lot of sectors, been a huge success story.

For CPG brands, it’s been a little more complicated.

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As consumer packaged goods (CPG) are traditionally sold via retailers or wholesalers, CPG brands haven’t benefitted from the boom in consumer data in the same way that other organisations have. They’ve relied on whatever third-party data filters through from their sellers and, while that data has been useful, it’s not always as relevant, complete or timely as first-hand data. It’s also becoming harder to come by: rules and regulations around third-party data sharing have scuppered CPG brands’ access to the customer data they need to guide their business, putting more distance between themselves and their end customers.

In an increasingly data-driven world, this just isn’t good enough. To differentiate themselves against their competitors, every business in today’s hyper-informed, fast-moving market needs data to fuel their operations. While ten years ago, consumers found activity like personalisation and tailored messaging new and exciting, they have now become an expectation – something that every brand should offer.

If CPG brands don’t move with the times and start using first-party data to their advantage, they will be left behind. Loyalty to your logo will only take you so far when other brands are actively seeking ways to build better relationships – and earn that customer loyalty – through data.

Here are our top 5 of the biggest challenges that Customer Data insights can help solve for CPG brands...

1. ‘Long-distance’ customer relationships

A lack of first-party data means that CPG brands don’t have a direct route to their customers. They can’t market directly to them, they can’t see their purchasing behaviour first-hand, they can’t offer them a tailored experience. This creates a ‘long-distance’ relationship between the brand and the consumer, one that makes it harder to react quickly to audience behaviours, expectations and preferences.

Let’s say you’re a chocolate manufacturer. When your products are sold by a retailer, it takes time for customer information to make its way back to you (if it makes it back at all, thanks to those third-party data issues we just mentioned). Who’s buying your product, what version they’re buying, what versions they’re not buying, what promotions they’re responding to…this is all timely, critical information, but it’s bottlenecked by the retailer. As a result, you can’t then offer those customers a better experience with your brand: there’s no opportunity, or avenue, to serve promotions that are tailored to their buying habits, or product suggestions based on their preferences, or messaging that is bespoke to them.

First-party data should open a two-way conversation between you and your customer. When you don’t have it, you’re not part of that conversation: you’re sending and receiving messages from a distance, and it’s damaging the way that your customers perceive your brand.

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2. Increased competition on third-party sites

When your product is sold via a third-party website, it’s up against hundreds, sometimes thousands, of competitor products. You don’t have any control (outside of paid promotions and deals) over how your product appears on their site, or whether it makes it into product recommendations, which are often generated by algorithm. You could find competitor promotions are taking sales from your brand, or that your customers are being served competitor alternatives along the path to purchase, even up to point of sale. Add scroll fatigue to the mix, and the odds start to seriously stack against your product – regardless of how brilliant it’s features or USPs are, or how perfect it could be for any one particular customer. Direct to consumer sales allow you to put your product directly in front of your customer, without having to fight for their attention.

3. Prevention from reaching a new audience

Third-party sellers can help you reach a new market segment, but they can also prevent it, depending on how their product search and recommendation algorithms work. If an e-commerce site bases its recommendations on previous purchases, and a customer has never bought from your brand before, your product might not be as discoverable to them as those brands they have tried and tested in the past.

First-party data can help you to reach out to new audience segments, but it takes a creative approach to attracting their attention in the first place. This is where it becomes important to use every digital avenue available to you in your first-party data collection – such as social media platforms and digital marketing – to make sure that you’re attracting consumers and connecting with them effectively.

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4. Lack of insight for product and business development

Your end-customers should be the driving force behind your organisation’s decision-making: they are, after all, the people buying your products. You should be able to create new products (and ditch old ones) with those customers in mind, making business decisions that reflect what your audience wants from your brand.

But if you don’t have first-party data then, well, you can’t. Third-party data (if you can get it) just isn’t strong enough to rest these heavy-weight commercial decisions on: you need your own, reliable, relevant, quality-controlled data to give you the insight you need. Yes, you can continue to invest in market research and test-based product development, but it’s not the same as having rolling, up-to-date information on your customers short and long-term purchase behaviour.

5. Supply and demand guesswork

Insight into peak sales times, customer demand fluctuations and seasonal shopping habits can have a big impact on your supply chain efficiency, especially if you manufacture perishable goods. Businesses are using customer data to address supply chain issues such as resource availability, sustainability and cost efficiency, helping the to tighten up operations, control costs, and reduce their impact on the planet.

An increasing number of manufacturers, for instance, are exploring on-demand production, where goods are made on demand based on customer purchase data, reducing waste and expenditure. CPG could benefit from this approach to manufacturing goods, but without that first-party consumer data, it’s just not possible.

Going direct to consumer: the CPG data solution

Direct to consumer sales are an opportunity for CPG brands to get the first-party data they need to overcome these pain points – and with post-pandemic e-commerce activity booming, now is the time to explore it. To find out what you need to make first-party data initiatives a success, download Amplifi and Semarchy’s latest guide: Data, unwrapped: the benefits of going Direct to Consumer.

Download the guide - Data, unwrapped: the benefits of going Direct-to-Consumer

Download our latest guide, where we take a look at how CPG brands can grasp this new opportunity with data:

  • Understanding the benefits of going DTC
  • Making sure you’re ready to process the data you collect
  • Utilising the customer data to benefit the wider business
Download Guide