“The consumer is our boss.” This statement is at the core of a defining principle at my former employer, Mars, and the spirit of this idea is similarly at the core of many B2C companies’ operating philosophies. Forrester calls putting the customer at the heart of everything you do “customer obsession,” and it’s proven to lead to better business outcomes.
Many consumer packaged goods (CPG) marketing leaders already have a strength in understanding and tailoring to their end consumer. But in CPG companies where there is often an intermediary seller, being obsessed with the end consumer — their wants, needs, and experience with your brand — is only part of the equation. You must not ignore the needs of the gatekeepers to your consumer.
The actual “customers” for most CPG transactions are the retailers who stock your brands or the third-party distributers who serve those retailers. Putting these customers at the heart of everything you do is vital to sales and supply functions and can yield great results for brand leaders — but can lead you astray as well (“why yes, of course I’ll sponsor your company’s water polo event with my limited marketing budget even if it’s not relevant to a vast majority of my consumer base”).
Focus On The Needs Of The End Consumer To Deliver Category Growth
Driving category growth is the key to your success as a brand leader because:
- A rising tide raises all ships. A McKinsey study of packaged food companies found that a majority of company growth comes from category growth. It stands to reason that when more consumers enter a category and they engage with multiple brands within that category, most brands will benefit.
- Retail buyers are measured on growth. A retail buyer holds a tremendous amount of power in the value chain of your brand, and they’re measured on category growth. They might personally like your brand, or they might hate it — but either way, they will likely make decisions based on making the most productive use of retail space and driving overall growth in the categories for which they are responsible. Be the star in their portfolio and you will reap disproportionate rewards and make an important partnership even stronger.
If you’re a CPG marketing leader, you likely didn’t need to be convinced of any of the above, but a reminder can’t hurt. The big question is: How do you put yourself in the best position to drive category growth?
Employ A Balance Of “Trade In” And “Trade Up” Strategies To Drive Sustainable Growth
- Bring in light/lapsed category users with new category benefits, a focus on usage occasions, or entry price tiers (aka “trade in”).
- Disrupt through innovation that increases transaction size (aka: “trade up”). Note: To be a true category steward, use this strategy selectively or in conjunction with a trade-in strategy. Otherwise, you could turn away light category users and shrink the consumer base in the long term.
- Drive premiumization through product or packaging innovations that deliver functional or emotional value to the consumer at a higher price.
Make The Story Of Your Growth Strategy Compelling To All Of Your Stakeholders
Whichever strategy or strategies you pursue, prepare to convince your retail partners (and of course your internal sales partners) that your goals are achievable and backed up by your marketing tactics. Otherwise, you will find your brand in scattered distribution or subprime store placement and with subsequently low return on your marketing efforts.
Can you grow your brand successfully without delivering measurable category growth? Yes, of course. And one healthy way is to incrementally grow outside of retail channels, especially with direct-to-consumer (DTC) channels becoming more prominent. Forrester estimates that online share of sales of several CPG categories in the US (including food, personal care, over the counter, and nutraceuticals) nearly doubled from 4.4% to 8.5% of total sales from 2018 to 2021. We forecast those categories to almost double (again) their online share within the next five years. Despite the accelerated growth, that’s still a sliver of overall US volume for a brand, so focusing on customer obsession in a way that delivers category growth is critical to your success.
Keep an eye out for Forrester’s updated US Online Retail Forecast publishing shortly, and read Digital Go-to-Market Review: CPG Brands, 2021 for guidance on must-dos in going DTC with your brand. To learn more about how Forrester can help you apply the forces that shape the trajectory of your category, like fundamental shifts in consumer behavior and technology, set up an inquiry with one of our analysts or reach out to me. Your retail partners and stakeholders in your business will thank you!