October 01, 2019 - By Zhelko Genev, Director, Solutions Consulting, Nielsen
The balance of power between manufacturers and retailers has shifted in industries as varied as consumer packaged goods, apparel, and grocery. The increase in the sheer number of products plus the rise of superstores means that a smaller number of retailers are essentially gatekeepers for millions of consumers.
Manufacturers, distributors and wholesalers compete for precious shelf space. They need every advantage to build retailer trust and secure in-store placement. In this climate, manufacturers must show retailers how they are supporting a brand to earn more -- and more prominent -- shelf space for their products.
Measurement techniques that calculate how well a marketing campaign has boosted sales are a fast, cost-effective way to get this proof.
Consumers enjoy an amazing volume of choice, no matter what type of product they’re looking for. The average number of items in a grocery store has grown from 7,000 to over 40,000 in the past twenty years. Fast fashion tempts with new apparel every two to four weeks. And Walmart supercenters offer 142,000 products in-store (and over 70 million skus online) while Amazon tops out at over 500 million.
While this choice (arguably) benefits consumers looking for the best option, it’s created new challenges for manufacturers. This is especially true for consumer packaged goods (CPG).
Retail distribution is a difficult first hurdle for any product, and securing space on increasingly crowded shelves is a close second. Manufacturers with high-performing product lines may initially get the best locations, but must fend off competitors, while newer brands must work their way up from the bottom shelf.
A third challenge is the rise of premium private label products, which is reshaping retail strategies across the CPG landscape. Retailers have developed private labels to counteract the power of manufacturers. Quality private-label brands now compete with internationally renowned manufacturer brands. Premium tiers of private-label products now represent over 19% of sales.
The fourth biggest challenge facing manufacturers is the popularity of e-commerce, which is driving consumers to new outlets. Online shopping is now 11% of all retail sales in the U.S. Many consumer-products manufacturers have launched their own shopping sites, hoping direct-to-consumer will help them reduce or eliminate their dependence on retailers.
The explosion of digital channels, platforms, and devices is both a blessing and a curse for manufacturers. They can reach audiences in new ways, but budgets need to stretch further as customer journeys become more complex.
Today’s constantly changing media landscape makes it harder to find target audiences and build an effective plan to reach, engage, and convert them. Delivering the right offer at the right moment is essential for increasing the number of trips online and to the store, growing the size of the basket and driving conversions.
To succeed, marketers need to continually test new campaigns and tactics. They also have to prove the impact of those investments on sales. Taking a smart, data-driven approach to measurement is essential for understanding what’s working, what’s not, and where to spend the next marketing dollar.
Marketers in general need to demonstrate that their tactics motivated buyers to take some action—visit a site, request a trial or coupon, or make a purchase. Manufacturers have an additional need: to prove the value of their marketing support to retail partners. They must show that they’re investing in their brands as well as driving sales for retailers.
Measuring incrementality through a short-term test of campaigns is one surefire way to demonstrate value. Incrementality is the lift that marketing and advertising provide above native demand. It’s the increase in leads, sales or other KPIs that would not have occurred without marketing efforts.
Lift analyses can provide both manufacturer and retail marketers with powerful insights into the incremental impact of new channels, campaigns, and tactics. Sales impact is measured by analyzing changes in consumer purchase behaviors – such as purchase frequency, basket size and more – for buyers who were exposed to a campaign versus those who were not.
By tying marketing activities directly to sales, marketers can not only maximize revenue outcomes but also end the debate over the business impact of their efforts. A direct connection between advertising efforts and actual sales gives manufacturers proof to win over retailers and secure critical shelf space.
Make sure that you don't invest time, resources and budget in marketing and advertising that won’t generate sales down the line. In today’s landscape, marketers must be open to improving their measurement practices if they want to get ahead. Ultimately, success depends on having a true understanding of customers and the tactics that influence their decision to buy.
Testing the effectiveness of every marketing dollar will help manufacturers and retailers alike connect spend with results. By working together, brands and retailers can improve their product marketing, win the sale, and increase revenue for all.