With the changing dynamics of consumer-brand relations and the ever-increasing complexity of data—customers are now seeking personalised products and consider personalisation as an important differentiator.
However, in the case of FMCG (Fast Moving Consumer Goods) brands, even if they sell their products in record numbers, they don't really know who their customers are. Historically, FMCG brands have suffered because of lack of data.
“Worldwide, FMCG brands face a strategic business problem across the consumer journey—from generating awareness to influencing purchase. At one end, FMCG brands are increasingly dependent on walled gardens such as Google, Facebook and Amazon to reach their consumers and generate awareness about their brands.”
“At the other end, they are relying more and more on some of the biggest retailers in the market to help influence consumers' purchase decisions at the point of sale,” said Lakshmana Gnanapragasam, Senior Vice President, Analytics–Epsilon APAC.
In this context, Google and Apple’s announcement to phase out third-party cookies only adds to their troubles.
Cookie-less future
Brands often rely on cookies to track website visitors, collect data and target the right audience with advertisements. So, with Google’s announcement that it would block third-party cookies from Chrome in 2020, things changed significantly for FMCG brands.
Lately, people have become more aware and have raised concerns about being tracked online by different parties—be it social media firms, advertisers or some other companies.
“If digital advertising doesn’t evolve to address the growing concerns people have about their privacy and how their personal identity is being used, we risk the future of the free and open web,” Google said in a blog post.
This, however, is a concern for FMCG brands, which rely primarily on third-party cookies. Third-party cookies have been around for over 25 years and banning them is expected to change digital marketing tremendously.
“Now businesses are constantly worried about how to future proof their marketing and brand strategy for continuous growth. This is a real problem,” Lakshmana Gnanapragasam said.
According to GetApp, as a result of Google's announcement, 41 per cent of the marketers believe that it will become very challenging for them to track the right data. Nearly 44 per cent of them expect their expenditure to skyrocket from 5 per cent to 25 per cent.
While this has only added to the brand's troubles, this is not the end of the road.
First-party data
The pandemic gave digitalisation a significant boost. Brands are now aware that switching to a digital-first approach will help them in the long run. At present, progressive FMCG brands are investing in technological solutions to acquire first-party data on their consumers.
First-party data offers brands greater insights into their customers. Brands could have data such as demographic information on their best buyers, gender, and the spending habits of buyers across locations.
"Simply put, first-party data is information the brand owns and is a custodian of. This could be the data brands have on their own consumers and prospects. A good example is the information brands gather when consumers log in and browse their websites and apps."
“A solid first-party data enables brands to deeply understand their consumers and their purchase journeys and turn it into a competitive advantage, thus delivering higher returns on their marketing and media investments,” explained Lakshmana Gnanapragasam.
Conversely, third-party data could prove to be expensive. The uncertainties associated with the accuracy, completeness and unknown origins of such data also make it challenging for brands working with them.
Tech solutions
In order to resolve such reliability and cost-related issues, brands are now turning to technology in their bid to acquire first-party data. This shift to technology solutions comes in the light of their importance in helping brands identify consumers visiting the brand's websites and apps.
Lakshmana Gnanapragasam elaborated through an example—“If a consumer is coming to your website or an app or your mobile site and the same consumer is going into a retailer's website and purchasing your brand, there needs to be a way for us to identify that it is the same customer. For example, it could be the same customer who might visit a brand's website to form multiple devices. But you need to know that these are all the same customers.”
Investing in Identity Solutions will help brands overcome this challenge. For instance, Unilever invested in an online-offline consumer identity solution and onboarded millions of their active consumer records for improved online targeting.
Brands are also investing in Consumer Data Platforms. Lakshmana Gnanapragasam said, “These customer data platforms would have customer ID and information around their web address, phone number and email. It would also have information like demographics, their transactions and engagement history, and all of that is consented data.”
He added that brands are also investing in something called Clean Rooms, which is merely an embellished name for a non-PII database. Brands need to track the traffic on their websites and maintain a database of their engagement activity and what they do outside of their portal. However, these processes need to be privacy compliant.
"And that's why we're calling it a Clean Room because they technically wouldn't hold any personally identifiable information such as name, phone number, address, email id. But there will be a unique ID associated with that individual."
Another way of collecting data directly from the consumers is through incentivisation like scanning a product’s QR codes or uploading invoices for additional rewards and discounts.
In turn, when a consumer scans a QR code, the brand can acquire data like phone numbers and email addresses to send personalised coupons, offers and other relevant information. Brands are also building digital communities of like-minded consumers to create a deeper connection with them and further influence them to become brand advocates.
“Kellogg's has a ‘Family Rewards’ programme in many countries across the world where millions of consumers engage with the brand through their loyalty programme. [Likewise] Pet food brand ‘Nestle Purina’ created a vibrant community of pet lovers and owners, thus pushing Purina to the top of their minds when it comes to the needs of their pets," explained Lakshmana Gnanapragasam.
Data analytics
Collecting first-party data is one thing, but analysing and interpreting them in the best possible way is a whole another matter.
“You need to have your data scientist and analysts log into an environment where all of this data is available, be able to create features on top of this data, and then create cohorts of customers that you can activate across multiple media channels."
Analysts will use the data for consumer segmentation and profiling. Brands also analyse the customers’ path to purchase. If the data is accurately analysed and interpreted, brands would be able to successfully map the path taken by consumers before they buy the brand's products.
Can AI help?
“I wouldn't say FMCG companies, as an industry, are as advanced as, let's say, retailers or some media companies. But we've started to see that some of the FMCG companies that started investing in consumer data platforms and loyalty platforms over a period of time are beginning to use AI and ML to optimise the result,” explained Lakshmana Gnanapragasam.
FMCG brands are constrained by a lack of data and have therefore witnessed inconsistent growth in terms of employing AI/ML driven solutions.
The emergence of DTC brands has also changed the landscape. These new brands are tech savvy compared to the legacy FMCG brands and could force existing brands to choose a digital-first approach or even modify their business model altogether.
“We've seen some of the biggest brands like Unilever have taken on this journey and are investing heavily. Some of the mid-sized FMCG brands are also asking questions around what is our data strategy and how we can use it to get better at our media, even product development, identifying distribution opportunities, or even partnering with e-commerce and DTC companies.”
“It is just a matter of time. With the right level of leadership, I think the FMCG brands are beginning to invest in this area,” said Lakshmana Gnanapragasam in conclusion.
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