Consumer packaged goods (CPG) businesses' interactions with customers have changed throughout time. CPG brands used to sell their products primarily through retail channels, and their interactions with customers were generally restricted. Companies are reevaluating their CPG brand strategies because the rules of the game have changed. The landscape of selling consumer packaged goods is different from what it was in the past due to shifting consumer preferences, new shopping channels, and the merging of offline and online purchasing.
As new and evolving channels like CPG-owned direct-to-consumer, marketplaces, last-mile delivery, social commerce, and metaverse emerge, it becomes more challenging for CPG brands to provide consistent consumer experiences across all consumer touchpoints.
The term "omnichannel" has dramatically changed in both scope and scale. Being accessible across all touchpoints is only one aspect of being omnichannel. Instead, it demands a unified and seamless customer experience. Seventy-four percent of consumers research products and make purchases using both physical and digital channels. Consumers do not perceive themselves as being either physical or digital consumers. They anticipate a similar experience across all channels (e.g., consistent pricing and the ability to conduct a transaction across channels). There are more opportunities than ever before to position a brand in the digital sphere thanks to the growth of social commerce, smart devices, in-game purchases, and the metaverse.
Having multiple channels allows you to direct products based on consumer demand and move them to where the best margins are. Imagine, for instance, that in addition to conventional brick-and-mortar retailers, you also sell directly to customers. If a product isn't moving quickly enough at a retail location, you can move inventory to another channel. With many options, there are more opportunities to use up back stock while keeping the margin. Additionally, it offers flexibility in how commodity price increases are handled and safeguard your customers from disruptions.
It is important to remember that an ever-growing number of channels does not necessarily translate into increased profits or consumer demand. While larger, established CPG businesses have the funds to experiment with a multiplicity of technologies available and upcoming, the shortage of best marketing practices introduces a high level of risk of alienating their established customer base.
The fledgling brands and CPG startup resources are too limited to afford to sell through a never-ending parade of new channels, none of which show promises of higher margins.
The vendors of an omnichannel retail marketing strategy appear to misinterpret the concept of customer experience to sell more technology. From everything I read, an omnichannel retail marketing strategy can be summed up as "sell everywhere to everyone all the time to be successful."
While I agree that an omnichannel distribution strategy can be a useful addition to achieving overall business goals, an omnichannel retail marketing strategy for smaller CPG brands is a destructive proposition. The power of a small CPG company lies in its focus on the needs of a specific group of customers. For example, a small organic baby food brand might focus on selling directly to health-conscious parents through its website and local farmer's markets. If they were to expand into a multitude of channels without a clear understanding of their target audience, they could dilute their brand and lose the trust of their core customers. It is crucial for CPG brands, especially smaller ones, to carefully consider the impact of an omnichannel strategy on their unique brand identity and customer base.
Only being present on channels that the brand's target market prefers is the most beneficial and effective retail marketing strategy a small CPG company can employ. The best marketing strategies are about selections:
Technology may help you perform these steps better and faster, i.e., less expensively, but it cannot eliminate the need to perform them. Engaging with your customers through the right channels (not omnichannel) is crucial for any business to succeed. By selecting the appropriate channels, you can gain valuable insights into how your best customers perceive the value of your products. Armed with this knowledge, you can tailor your messaging and marketing efforts to better resonate with your target audience. While technology can certainly aid in this process, it cannot replace the human touch required to understand and connect with your customers. It is better to stay engaged and responsive to customer feedback and concerns using a single channel than to be "seen" on many.
For example, a company may find out that their best customers mostly shop for their products on a social media platform like Instagram and local farmer's markets. They can then focus their marketing efforts on this platform and create targeted ads that highlight the value their products provide to those specific customers. The company can also collect sales data and customer feedback by personally interacting with their customers at the markets. This information can be very valuable for engaging local independent supermarkets and supporting the expansion with in store demo events. However, premature efforts to bring these products to the national supermarket chain or Amazon Marketplace may result in greater volume, but the cost of customer acquisition and the diffusion of management focus could destroy the business.
All fairy tales start with "Once upon a time..."
All sea tales start with "S*t! And there I was..."
All technology tales start with a variation on the topic, "Businesses must adopt a new paradigm to scale up quickly....."
Technology is not an enemy, but it is also not a crutch. Investing in "new shiny" technology cannot take the place of knowing who your best customers are and why they choose to buy your product over one from a rival.