The 'New Direct:' Countering the Decline of National CPG Brands

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It's no secret that store brands have been on a tear for many years now, and the recession only helped accelerate their growth. The deteriorating loyalty of consumers to the national CPG brands has been well-documented, and recent research, such as the Deloitte 2013 American Pantry Study below, suggests that the affinity for store brands could be here to stay.

 

There are two key factors that have eroded the market share loyalty and, as a result, the profit margins of many national CPG brands. First is the common consumer refrain, “I can't really tell the difference between the store brand and the national brand, so why pay more?” The second, and perhaps most damaging, is that retailers have been able to disintermediate brands—in essence, cutting out the middleman—by creating direct relationships with their formerly loyal customers.

The physical store lends itself to higher touch emotional experiences, and retailer loyalty programs both reward and—when done right—show shoppers that “their store” understands them. These loyalty programs also create channels for ongoing personalized communications, and as omnichannel shopping is deployed, bricks-and-clicks retailers will have the ability to offer a compelling cocktail of convenience and immediacy.

So what's a poor national CPG brand to do? Step one is to directly connect with consumers so that the brand story and its purpose can be shared in personal and relevant ways. The good news is that many national brands have moved away from relying primarily on the sometimes on, sometimes off paid advertising campaigns of yesteryear. They have been investing in “always on” brand communications that range from dedicated mobile applications to owned email programs and evergreen social programs.

These earned and owned brand platforms are a great foundation on which to build these new relationships. Here are two strategic approaches that CPG brands can apply using the ‘new direct' to regain the relationship with (and therefore share of) their consumers.

1. Lock in your most loyal. Direct marketing has always excelled at asking for the sale, and in the new direct world, where a sale is only a few clicks away, online e-commerce subscriptions through sites like Amazon and Alice.com make it easy to have your favorite brands delivered to your home on a custom schedule. These subscriptions offer both savings and the security of knowing you won't run out of key household items. Most importantly, in a category that is plagued by the low cost of brand switching, these subscriptions will tend to lock in sales for months or even years.

2. Make it personal and make a difference. Personalization is in the DNA of direct marketing, and great brands have always had a purpose that extends far beyond the limits of the literal product. They can articulate this purpose through an idea or a cause, like the Dove Campaign for Real Beauty or the Brawny Wounded Warrior Project.

The shift is that the earned and owned platforms that they've built allow for engagement at scale that can often be delivered with a one-to-one level of relevancy. These engagements can simultaneously amplify the cause and strengthen the relationship with the brand.

It's this brand purpose and feeling of affinity that can tip the value scale when people ask themselves, “What's the difference between this brand and the lower priced store brand?”




John Rich is VP and digital strategy director at Moxie.

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