It’s a great time to be in marketing with all the targeting options available, especially in digital (mobile included) marketing. Consumer Packaged Goods (CPG) marketers are able to better understand shopper behavior and reach the most valuable shoppers thanks to so much first party data from both retailers and third-party technology now available. Naturally, the spending on digital tactics in CPG shopper marketing programs for physical store channels has increased, and it appears to be working. Shopper marketing events with digital tactics have much higher returns.
However, for every action, there is a reaction. This increase in digital spending has been at the expense of in-store marketing, which is a vital part of the path-to-purchase marketing strategy. While the share of shopper marketing spend on digital tactics has increased from 20% to 48% in the past five years, the share of spending on in-store tactics has declined 12 points to just 30%.
Sometimes too much use of a good tactic can erode the broader strategy. When deregulation in the airline industry allowed airlines to set discriminatory prices, airlines were able to offer low prices for unsold seats and make a profit since costs didn’t increase much. That caused severe price competition that drove all the profit from the industry and it lost $20B in the next four years.
The path-to-purchase strategy is an important part of the effectiveness of shopper marketing. Shopper marketing is not just a lower purchase-funnel element, but a way to bring your brand’s equity into the store. As shoppers are scanning through the 40,000 products in a grocery store, your brand’s benefits are not top-of-mind, so they need reminders, especially at the first moment of truth (when standing in front of the shelf deciding which brand to buy). Reaching shoppers at the shelf with your brand’s equity message can be very powerful. One prepared meal brand for kids had a very effective marketing strategy using tie-ins with kids’ movies. The marketing program reached moms at home with coupons and reached kids with TV advertising. This was a very effective strategy. One year, they stepped up the effort and put the movie characters on the package, bringing their partner’s borrowed equity into the store and the program ROI nearly doubled. At Foresight, we examine the integration strategies across the 25,000 shopper marketing events we have measured to find patterns that work best. For example, programs that have both pre-store and in-store tactics as well as both offers and ads will return 21% better than average, despite higher spending for these programs.
In-Store Marketing Spend
Looking broader, we have found that shopper marketing returns decline when the spending on in-store tactics fall below 40% as they have in the past two years. We grouped all retailers into one of the four groups to the right and averaged the ROI for each group. Only the group with above 40% spending on in-store tactics had above average ROI. Two retailers did not reduce in-store shopper marketing — Albertsons and Walmart. The return on investment for shopper marketing increased for both retailers in the past three years, as has spending on digital tactics.
A short-term immediate reward can have consequences on long-term outcomes as we learned from the Stanford marshmallow experiment. Psychologist Walter Mischel conducted an experiment where children were offered a choice between one marshmallow immediately or two if they waited for a short period, approximately 15 minutes. He found that children who were able to wait longer for the preferred rewards tended to have better life outcomes, as measured by SAT scores, educational attainment, body mass index (BMI), and other life measures.
CPG marketers have some choices to make going forward. Just like the famous marshmallow test, some will take a short-term view and seek instant gratification and others will have enough foresight to understand the underlying dynamics and be strategic in their investments. So, you must ask yourself, whether you want one marshmallow now or two later.
Foresight ROI is the leader in shopper marketing measurement, decision support, and software solutions for CPG companies and retailers. To learn more about our measurement, software or industry ROI benchmark solutions, contact us at: contact@ForesightROI.com