Actionable Insights From APT's Retail Practice

Optimizing CPG Advertising Spend in the Age of Digital Media

September 11th, 2017 | Posted by APT in Manufacturing

Over $14 billion. That’s the total measured-media spend for the categories of Food, Beverages and Candy and Personal Care in the US in 2016. Highlighting the large investments CPGs are making in advertising, these were two of the largest measured-media spending categories. Research also shows that internet ad spending is forecasted to be the biggest ad medium in the US in 2017 – even topping television – with an expected investment of $69 billion.

As digital advertising becomes increasingly prevalent and CPG advertising budgets continue to grow, organizations must carefully re-allocate media spend across digital channels as well as mass media platforms, such as radio and print ad campaigns. In order to make informed investments in this area, CPGs first need to understand the true value of digital campaigns for their business. From there, they can develop a better understanding of where to focus their marketing spend, and strategically distribute budget across programs for maximum impact.

The increase of digital marketing also offers a greater opportunity for personalization. In contrast with mass media investments, digital campaigns enable organizations to target outreach to the audience with which it will be most impactful. However, with any form of personalized outreach, there is the added complexity of the many different levers to pull, such as:

  1. Communication platform
  2. Messaging
  3. Cadence
  4. Creative

So how can executives develop an understanding of which campaign variations will be most effective with which consumers? First mapping the marketing spend in each geographic area to the nearest store location will enable CPGs to effectively measure the impact of their marketing efforts. From there, they can leverage business experimentation to refine their marketing strategies and ensure they reach the right consumers with the right communications, at the right times. This test vs. control approach entails testing marketing programs with a subset of consumers, then comparing their behavior to that of a group of similar consumers that did not receive the program.

Consider a CPG that wanted to focus on messaging digital campaigns to different consumer segments. For example, campaigns with messaging and creative emphasizing convenience may be most engaging for millennials, while other consumer segments may be more interested in outreach highlighting organic ingredients. By testing campaign variations with different consumer segments, the CPG could pinpoint which campaign messaging would be most effective, and with whom. This ability to target outreach is especially important, as many CPGs are now offering or hoping to offer direct-to-consumer (DTC) sales – such as Unilever, which now has a DTC play in the grooming space, thanks to its 2016 acquisition of Dollar Shave Club.

Given the rapid shift to digital advertising spend, it is more critical now than ever that CPGs refine their ability to quickly test new strategies and course-correct as needed. As CPGs work to optimize their marketing budgets across channels, leveraging business experimentation to understand the true impact of different campaign variations will help them make more informed decisions and confidently allocate marketing dollars across channels ranging from mass media to digital.

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