Consumer packaged goods manufacturers are becoming very adept at utilizing their Web sites as critical communications and information links to the consumer, a new SN/Experian study revealed.
CPG companies' increased use of the Internet was just one of many findings in this wide-ranging, annual 2003 Survey of Manufacturer Promotions. Results are based upon an online survey of more than 100 CPG manufacturers.
When asked about their Internet activities this year, 37% of respondents said they are using the Web for consumer communications, including targeted e-mails and newsletters. This is an increase from last year's study, in which 21% reported doing the same. Manufacturers are basing such communications on information solicited on their company Web sites. Among the information they collect: names and addresses, 51%; product opinions, 47%; product-usage patterns, 42%; and demographics, 31%.
Just one-fourth (28%) said they do not solicit any information from Web site users, down from 34% who said the same last year.
Nearly all (94%) plan to use information gathered from Web sites to create a database for the purpose of sending targeted e-mail promotions to consumers. This is a switch from last year's survey, in which three-quarters of respondents said they plan to use such information to conduct research on brand users.
Further, about two-thirds (64%) said they plan to use the information to provide requested promotional materials, including samples and coupons, via the mail.
"Manufacturers are starting to use the Web as a way to have a relationship with consumers and to build their loyalty," said Bethany Stanley, senior industry marketing manager, Experian, Costa Mesa, Calif.
The Internet is a perfect medium for customer relationship management (CRM) because it is interactive, highly targetable, and a very low-cost alternative to other media, noted Carlene Thissen, president, Retail Systems Consulting, Naples, Fla.
Along with Internet activities, manufacturers answered questions about other promotional tools, including couponing, loyalty card programs, premiums, and account-specific and ethnic marketing.
Among the results:
37% are co-marketing with other manufacturers, up from 18% who said the same in last year's study.
26% are involved in ethnic marketing this year, up from 12% in 2002.
While 37% said retailers are more likely to share loyalty card data, 53% said the biggest hurdle to getting data is the amount that retailers charge for it.
When asked about trade-promotion practices, 41% said expenditures have increased this year compared to 2002. Another 31% said spending decreased, while 28% said it remained the same.
The outlook for 2004 shows a lower amount (31%) planning to increase spending. About one-third (29%) said spending will decrease; 40% said it will remain the same. These results are similar to last year's study.
As for consumer promotions, 41% said spending rose this year. A comparable amount (40%) said expenditures will increase in 2004.
"Manufacturers see the value of their relationships with consumers," Stanley of Experian said of the data on consumer promotion spending.
Forty percent said media expenditures grew this year, and 41% expect spending to rise again in 2004. This is an increase from last year's study, when 32% of respondents reported higher media spending.
ETHNIC MARKETING More manufacturers (26% in 2003, vs. 12% in 2002) are executing ethnic promotions.
Of the 85% of respondents who answered a question about participation in ethnic marketing, 47% said their company uses bilingual/multi-language packaging; 37% said they have consumer-marketing initiatives targeted at ethnic shoppers. More than one-quarter (29%) use people of different nationalities in advertising. "Our respondents are starting to market to America's melting pot of nationalities," said Stanley.
Bilingual packaging should not only explain what the product is, but also how to use it, said Thissen. Such packaging will have a big impact on repeat sales, she said.
"It is particularly important that products have instructions, or else the consumer will not know how to properly use or prepare the product," Thissen said.
Twenty-two percent reported "other" forms of ethnic marketing. A common response in this area was employing sales staff from ethnic backgrounds and with multi-language skills.
While results show that manufacturers have placed more emphasis on ethnic marketing, just 18% said they have a dedicated Hispanic-marketing group.
This number is "pitifully low," said John Stanton, professor of food marketing, St. Joseph's University, Philadelphia. Stanton finds it incomprehensible that most manufacturers have dedicated marketing groups for Canada, but not for U.S. Hispanics. Hispanic marketing should become part of every organization, he said.
LOYALTY CARD DATA
More than one-third (37%) said retailers are more likely to share frequent-shopper-card data, although a comparable amount (30%) said they are less likely.
Such information doesn't come cheap, however. More than half (53%) said the biggest hurdle to getting the information is the amount of money that retailers charge for it.
This could be why just one quarter (25%) reported using loyalty card data for targeted consumer promotions.
At a time when manufacturers are already buying consumer data from market research firms like ACNielsen and Information Resources Inc., the added expense of buying retailer data could be cost-prohibitive for many manufacturers, said Stanton.
"Manufacturers are becoming concerned about paying more and more to retailers," he said. "Many wonder if there's no end to how much money [retailers] will ask for."
The only way the situation will change is if retailers realize that customer data should be shared with manufacturers, said Thissen. By doing so, programs can be jointly developed to increase customer loyalty to the store, improve category sales, and provide incremental CPG sales, she said.
"Treating customer data as a profit center is just going back to old paradigms, and shows that retailers don't understand the reason for having a loyalty program," said Thissen.
However, several progressive retailers, including Ukrop's, Pathmark and Bashas', want manufacturers to become more active beyond the monetary aspect, Thissen noted.
Such retailers will benefit from these partnerships in many ways, including gleaning manufacturer marketing expertise, she said.
Eighty-four percent of manufacturers have a corporate site, and 32% have separate brand sites.
Manufacturers are using these sites to offer a variety of consumer services. Most (87%) offer product information, up from 53% who said the same in last year's study. CPG Web sites also feature recipes, 61%; sweepstakes/contests, 36%; coupons, 35%; e-newsletter sign-ups, 25%; and samples, 23%.
Other Web features include links to other manufacturers, 18%; games, 16%; and links to e-retailers, 11%; and brick-and-mortar retailers, 11%.
The results show that Internet marketing has clearly evolved from generic online billboards to more targeted communications, said Alison Chaltas, vice president, Euro RSCG Meridian Consulting, Westport, Conn.
"CPG marketers want to create everyday conversations with consumers, and become part of their lives," Chaltas said.
While survey results demonstrate that manufacturers are indeed collecting consumer data via their Web sites, Stanton of St. Joseph's said they could do a better job of leveraging it. One reason why is that a lot of Web site data is managed by IT people, not marketing executives, he said.
"In my opinion, most [manufacturers] don't have a sound strategy of what they're going to do with this information."
Nearly half (42%) of respondents reported increased couponing expenditures this year. Another 23% reported a decrease, while 35% said spending remained the same.
Despite drops in overall coupon redemption, coupons remain an efficient way to generate product trial, said Ted Taft, vice president, Euro RSCG Meridian.
"Couponing is also an accepted vehicle to generate business with the trade," he added.
Freestanding inserts are the couponing vehicle of choice. Nearly half of the respondents (45%) said they plan to use FSIs in 2004. This is a slight decrease from the 49% who said they're using the tactic this year.
Respondents also reported decreased use of two other leading tools: in/on-pack (45% this year, compared to 38% next year) and non-electronic, in-store coupons (41% this year, compared to 38% next year).
Nearly three-quarters (67%) of respondents are using account/retailer-specific promotions. Nearly half (44%) plan to increase the amount of trade-promotion dollars spent on these programs in 2004. Just 18% said expenditures will decrease, while 38% said they will remain the same.
"This shows that rather than run a BOGO [buy-one-get-one free offer] across the board, manufacturers are trying to help retailers achieve their own unique objectives," said Stanton.
More and more, retailers and manufacturers are using trade dollars to target specific consumers, added Thissen.
"That shift should have a major impact on trade-promotion spending, and we expect to see those funds used for even more account-specific programs in the future," said Thissen.
The number of account-specific programs will increase substantially as retailers start to share more of their loyalty data, and work with manufacturers to find effective ways to increase category sales, said Thissen.
The top three tools used for account-specific promotions are in-store sampling/demonstrations, 64%; co-marketing, 51%; and frequent-shopper-club tie-ins, 49%.
Along with teaming with retailers, manufacturers are also working with each other. Nearly 40% of respondents reported partnering with other manufacturers for multi-brand promotions, up from 18% who said the same in last year's survey. One-third (34%) reported using tie-ins involving brands from only their own company.
Stanton expects the number of co-marketing programs to rise even further next year, saying there's a trend of bundling products for meal solutions. Some marketers have large enough portfolios that they can bundle their own brands for easy meals. Those with smaller portfolios can tap into the trend by teaming with other companies to co-market related products.
Co-marketing not only benefits marketers, but also retailers, who see it as a way to compete against Wal-Mart, said Stanton.
"Since it's hard to compete with Wal-Mart's prices, retailers need to give shoppers another reason to shop their store. Offering meal solutions is one way to do that," said Stanton.
Multi-brand promotions are especially effective for smaller brands, as they can benefit from the strength of a major anchor brand with high household penetration and brand awareness, said Thissen.
The majority of respondents (71%) use sampling as part of their consumer-promotion activities. About one-third (29%) said they don't use sampling.
Nearly half (44%) of respondents said they increased sampling activities this year, compared to 36% who said the same in 2002. Meanwhile, 15% reported a decrease this year, and 41% said expenditures remained the same.
When it comes to preferred sampling tactics, in-store sampling came out on top, with 79% reporting using the tactic this year, and 75% saying they plan to use it in 2004.
Event sampling placed second, with 34% reporting that they will use the tactic next year. Direct mail ranked No. 3 (24%).
Seventy-one percent of manufacturers reported using premiums as part of their promotional mix. Of these, nearly half (47%) said they distributed premiums with a product purchase this year. The exact amount said they plan to use this vehicle next year. Manufacturers are increasingly relying on other premium vehicles. Next year, they plan to place more attention on premiums with multiple purchases (36% in 2004, vs. 28% in 2003) and premiums with a product (31% in 2004, vs. 29% in 2003).
Retailers are making it difficult for manufacturers to execute trade promotions, according to many manufacturer respondents to the 2003 SN/Experian Survey of Manufacturer Promotions.
Manufacturers lashed out at retailers for skyrocketing promotional fees and preference for private labels over national brands.
Following are excerpts of write-in responses from consumer packaged goods manufacturers.
Question: What's been the most challenging aspect to executing your promotions this year?
Complaints from retailers that when they promote brands, it affects store-brand volume. This results in branded items being discontinued from stores.
It's hard to create win-win opportunities when the retailer is looking to find a way to move some of the promotional funding to its bottom line.
Several retailers want to make money on items coming in the back door, rather than on the sale itself.
Retailers want your marketing events, tools and programs, but they don't want to give you anything in return, such as ad support.
Retailer costs have significantly increased.
The typical retailer is more interested in making money on the backside through slotting and ad charges than in selling groceries through the front door.
(Retailers) can't expect national companies to come in with money and promotional dollars when they keep knocking them out of ad programs due to private label.
Retailers want their margins to remain at the highest level, leaving the supplier to take all the hits with price reductions for ad promotions. * Grocers expect more from us, while their business with us is decreasing.
Many retailers have been realigning organizations and changing buying directions, which has made it difficult to gain authorization and participation in programs.
Nearly all manufacturer respondents said they plan to create an e-mail database from information gathered from company Web sites.
Planned Actions for Information Collected from Web site Users
64% Provide requested promotional materials via the mail
39% Research on Web visitors
56% Research on brand users
94% create an e-mail database
29% Input into a multi-channel database
Nearly half of respondents said they use bilingual or multi-language packaging.
29% Advertising features people of multiple countries/origins
37% Separate ethnic-marketing initiatives
22% offer multiple language U.S. customer support
20% Offer language option(s) on Web site
47% bilingual/multi-language packing
18% Dedicated Hispanic-marketing group
Participation in ethnic Marketing
PAY TO PLAY
More than half of manufacturers said obtaining supermarket loyalty care data is too costly.
37% Retailers are more likely to share information
30% Retailers are less likely to share information
53% biggest hurdle is the amount that retailers charge
25% Use date for targeted consumer promotions
Experiences With Retailer Frequent-Shopper Card Data
Nearly 40% of respondents reported teaming with other manufacturers for multi-brand promotions, up from 18% who said the same in last year's survey.
37% Multi-brand tie-ins, different manufacturers
34% Multi-brand tie-ins, same manufacturer
26% Ethnic marketing
Type of consumer Promotions Used in 2003
CONFIDENCE IN COUPONS
Nearly half of manufacturers reported increased coupon spending.
Remained the same 35%
Expenditures on Couponing in 2003, compared to 2002
Bearly half of manufacturers planned to increase the amount spent on account-specific programs.
Remain the same 38%
Percentage of Trade-Promotion Dollars to Be Directed Toward Retailer account-Specific Programs in 2004
TRYING IS BELEVING
More than one-third (44%) of respondents said they increased the amount of sampling this year, up from 36% who said the same in 2002.
Remained the same 41%
Sampling activity in 2003, vs. 2002
About The Study
This is the second of a two-part proprietary report based on the 2003 Supermarket News/Experian Survey of Manufacturer Promotional Practices, a survey on promotions in the consumer packaged goods industry.
Published annually, the survey is the result of a partnership between SN and Experian, a global information solutions company with U.S. headquarters in Costa Mesa, Calif.
The first part, published in SN's Oct. 6 issue, focused on how consumers respond to various promotional tools.
The second part of the survey, presented here, reveals how manufacturers are spending their promotional dollars. Results are based on more than 100 CPG manufacturer responses to an online survey posted on www.supermarketnews.com in August 2003.
Following is information about the respondents.
68% answered for the entire company; 32%, a single division.
68% represented companies with annual sales under $500 million; 16%, $500 to $999 million; 2%, $1 to $1.9 billion; 4%, $2 to $5 billion; 10%, over $5 billion.
About two-thirds (60%) market food products; one-tenth (9%), beverages; and one-tenth (9%), general merchandise. Other categories represented were household goods, 5%; non-edible grocery, 5%; beer/wine/spirits, Rx/OTC, beauty care and other health care, 2% each; other, 4%.