CPG Companies Getting Serious About Online Channel Management

Consumer goods companies, having previously lagged behind other sectors with rocketing online sales, now appear to have reached an e-commerce tipping point. They're learning from traditional e-commerce retailers when it comes to their use of online customer and competitor insights to understand buying patterns, price sensitivity and new competitive product offerings to improve category management for e-commerce channels, according to findings of a survey that Periscope By McKinsey recently conducted at the Consumer Goods Sales & Marketing Summit 2017.

Ninety-one percent of the survey’s respondents saw e-commerce as a strategic priority, and 57 percent are investing in online category management to support fast-paced growth in online market share by better understanding and reacting to online consumers.

However, the survey also showed that for the overwhelming majority of respondents (75 percent), the journey towards using advanced online category management capabilities to inform product assortment, pricing and promotional decision making in online channels is only just beginning.

When asked about reasons for improving their e-commerce capabilities, evolving consumer needs and expectations was the top reason for 81 percent of respondents. This was followed by the desire to build a channel for direct customer interaction (45 percent) and the ability to leverage digital to raise brand awareness or control online representation (42 percent). While 48 percent of respondents ranked building online category management capabilities as a key priority for senior management, just 22 percent were already up and running with their initiatives.

In addition, getting the right system architecture in place was proving problematic for 50 percent of respondents, while the lack of a fully functioning e-commerce platform and/or scarcity of reliable data on online shoppers were a barrier for 46 percent.

So, what can CPG companies that want to successfully compete in online channels do to be most effective?

Tips for Generating Measurable Online Category Management Outcomes

1. Implementing a robust analytics platform will make it possible to identify important shopper, product and channel insights.
2. Online marketing campaigns need to grab consumer attention and support demand generation. That includes implementing personalized marketing to better connect with consumers.
3. Product assortments need to be differentiated across channels to minimize conflict and make price comparisons more difficult.
4. Pricing and promotion decisions need to factor in consumer consensus and sentiment about value. Sector winners know their customers and tailor products to them, coordinating their promotion plans to drive incremental sales rather than simply shifting traffic among channels.
5. Using online consideration maps can highlight how consumers trade off brands and deliver deep insights into the competitive landscape.
6. With online competitive sets, companies can see how brands compete for clicks and purchases, as well as gain a clear illustration of brand strength.
7. Leveraging reviews and insights make it easier to deliver a personalized experience to select target audiences, as well as provide intelligence into how consumers rate competitor products and support the identification of performance trends.
8. Using online competitive intelligence to spot products that are outperforming the category enables CPG companies to pinpoint new trends in long-tail online marketplaces, and inform product innovation and brand acquisition.

As the research shows, many within the consumer goods sector are already embarking on their online category management journey. By following the above approaches, CPG companies will be well-positioned to experiment with new models — testing, learning what works fast and monitoring results to continuously improve. For more details on the research findings, visit Consumer Goods Goes Digital: The Journey to eCategory Management.

Paul Thompson is the vice president and global sector manager for consumer goods at Periscope By McKinsey, a platform that combines world-class intellectual property, prescriptive analytics and cloud-based tools with expert support and training.