Consumer packaged goods (CPG) manufacturers are faced with the growing challenge of how to connect and interact with consumers in efficient, targeted and value-added ways. Retailers account for such a large portion of CPG sales – and the resulting data – that manufacturers are in the dark about exactly who they should be targeting. The retail “middle man” knows what consumers want, while manufacturers spend billions dollars on advertising and marketing to figure it out. With such vast consumer insight, big-box retailers have created their own brands—private labels that copy manufacturer products at lower prices.
Retailers are now not only able to leverage customer insights to create competitive products, but also often remove manufacturers’ products from the limited store-shelf space altogether. The competition for the consumer is intensifying; a recent Nielsen study reported private label brands account for nearly $81 billion in annual sales.
While retailers are enticing consumers into stores with well-known brands, customers are walking out the door with private label. Store brands are even being advertised comparatively in catalogs and Sunday Circulars, such as the Target advertisement below. When budget-conscious consumers see ads like these, of course they will ask themselves, “why pay more?”
But manufacturers can stay competitive with private label by selling directly to consumers through new online platforms. For the first time, manufacturers can gain a retailer’s inside look at customers’ purchase behavior, which has opened up a wealth of opportunities for manufacturers to leverage consumer behavior data to create effective and measureable marketing initiatives. Manufacturers are now able to acquire the consumer data and insight they need for product development, marketing strategy and loyalty programs. Programs such as electronic couponing, sampling, efficient focus groups and targeted offers help manufacturers reach out in the most efficient way to the correct audience. With such clear insight into consumer behaviors, manufacturers can improve, innovate, connect and deliver to consumers in ways they never thought possible.
In this article, Alice.com President and Co-Founder Mark McGuire will further discuss the private label issue and how CPG manufacturers can sell directly to consumers, passing along significant cost savings and transforming mass-market advertising dollars into direct consumer value.
