Digital Consumers – Are they driving CPG companies to think out of the box?
From ideation to making the product available on the shelf, a typical CPG company spends majority of their promotion and advertising dollars on traditional channels- TV, radio and newspapers. Now pause for a moment and consider this:
- Close to 300 million Facebook users- a potential consumer base equivalent to the size of the US population!
- More than 100 million users log into Facebook at least once a day.
- 7 million unique visitors in Twitter in Feb 2009 – that’s a growth of 1382% over last year
With such exponential growth of digital traffic, are the rules of engagement beginning to change? Can CPG companies afford to ignore this new ‘emerging digital market’ and its potential purchasing and influencing power?
Let’s take a look at how companies are reacting to this new awakening. In 2009, the first sighting of Britney Spears’ new back-to-school commercial for Candie’s wasn’t on TV. In fact, it was on Facebook and Twitter. Recently, Bebe launched its new jeans on a friendly blogger’s site where chatter was positive. They used this as a ‘test platform’ before showing them elsewhere. PepsiCo ran their AMP Energy drinks promotion on Facebook and so did Coca-Cola with their primetime Vitaminwater promotion. Dozens of other companies are active in such social media- P&G, Nestle, Unilever you name it. One thing is for sure- CPG companies are realizing that they cannot afford to ignore this world. So what are the drivers?
- Opportunity to directly engage with consumers
- Collective purchasing power
- Best form of advertising- word of mouth in social circles; recommendations from someone you know
Well you would think that the CPG companies are reallocating a substantial portion of their budgets to focus on the digital world. Trended data show that TV spend accounts for about 58% of total ad spend and this has been a consistent share of total ad spend since 2005. However, we see that so far in 2009, internet ad spend has increased from about 2% to 4%, but these ad dollars were reallocated from newspaper and radio (source: TNS Media Intelligence). The defining moment will be a shift from TV- that in my mind will be a clear metric on how serious the CPG companies are towards internet and social media.
Research data is encouraging- $455 million that companies spent on social networking in 2008 will balloon to more than $3.1 billion by 2014 (source: Forrester Research). The latest data shows that 81% of US consumers use the internet for product research and 71% purchase online (source: Pew Internet Study). From a CPG company’s perspective, this warrants a reexamination of their go to market strategy and increasingly digital is the winning choice.
