A CDP for CPG?!
A Customer Data Platform (CDP) for CPG manufacturers?! Yes.
Let’s start by defining a Customer Data Platform (CDP): A CDP is a technology platform that creates a persistent, unified customer view (e.g., a single view of customer activity). Data is pulled from multiple sources, cleaned, and combined to create a single customer profile. For example, think about your last online grocery shopping experience. You likely searched for multiple platforms before selecting a service to use (e.g., Amazon Fresh, Instacart). You scanned for a few online recipes on different sites. Then you researched food brands that you haven’t bought before. You did a quick search for online coupons. And, throughout all of that, chances are you also interacted multiple times with the company that you ultimately purchased from — through website visits, live chat, online ads, and/or email.
You might have noticed that each interaction with that company resulted in an experience that felt more personalized to you. The ads you saw on Facebook might have felt extremely relevant. The website may have made subtle changes to seem more personal to what you were looking for. Relevant coupons might start to “show up” in different search results. By the end, your online experience feels customized for you! This is the result of a CDP tailoring content and pathways based on your actions.
CPG manufacturers are investing in CDPs for numerous reasons. First, many CPG manufacturers are investing in becoming more “data driven.” Furthermore, the use of third-party cookies and ad identifiers is dwindling, putting $65B of ad spend at risk. All companies (especially CPGs moving into Direct-to-Consumer) must collect and make sense of customer data (first-party) and use it for: customer experience, ad optimization (ROAS), shopper insights (R&D), and next best action (see the example above). Next, consumer shopping changes and several other factors are influencing CDP investment while consumers switch brands at unprecedented rates. According to McKinsey, 75% of consumers reported changing their shopping behavior based on economic pressure, store closings, or changing priorities. Now add inflation and cost pressures to the mix.
CPG ecommerce exploded after COVID (43% YoY growth and 18% of total CPG sales). CPGs are focused on execution in ecommerce (pricing, trade promotion, media, and demand planning), as well as rushing to direct-to-consumer to acquire first-party data and test new models, such as subscriptions and quick turn delivery.
91% of shoppers are more likely to buy from brands that send them relevant offers and recommendations. Mastering customer obsession starts with data—demographics, psychographics, transactions, purchase records, support cases, product usage, shopping habits, content preferences, paint points, and more. A recent Gartner report found that less than 10% of companies have a 360-degree view of customers and less than 5% use this view to systemically grow their business. Furthermore, Gartner found that the top technology area where CIOs are increasing investment is a “Business intelligence or data analytics solution.” 45% of CIOs are increasing investment, and only 1% are decreasing investment in this area.
The same report shows 63% of CEOs are likely to change the business model over the next two years. Performing analytics prior to, during, and after changes of this magnitude is crucial. It’s paramount to measure the return on investment for digital activities. If you aren’t measuring it, then you’re not taking it seriously.
The benefits of a data-driven enterprise are well-documented, delivering 20% more revenue and 30% reductions in costs. CPGs take data from ads, social, web sites, mobile, loyalty, and ecommerce, and then put it into a CDP. Then, they can run artificial intelligence (AI) routines and use insights for ad efficiency, channel revenue, and revenue-per-member. A CDP allows marketers to use customer preferences to build custom audiences for campaigns. This can improve return on ad spend (ROAS). Moreover, a CDP enables recommendation engines for online product selection.
The goal of the CDP is to bring value to your business and your consumers in a way that honors privacy laws and best practices.
Challenges in creating a single view of customers
There are numerous challenges to setting up a CDP in the CPG environment.
First, disparate and duplicated data – There is often store overlapping and conflicting information about a customer, be it across lines of business, channels, brands, or business functions.
Second, the proliferation of data – Data is growing rapidly, not to mention the types of data, such as structured, semi-structured, and unstructured. New channels open and create new opportunities to interact and transact, with new data to manage, match, and merge into a single customer view. Consumers are engaging with brands in new ways – dot com, emails, webchats, social media, review sites, and more, generating 2.5 quintillion bytes of data every day.
Third, the actionability of insights – Unifying data is only one part of a CDP. Once data is unified, it takes investment in time and analytics to be able to continually generate insights and take actions in support, engineering, sales, and ecommerce.
Fourth, confidently resolving identities – Whether it’s anonymous data or known data, a customer’s identity varies across systems (order management system vs. billing system vs. ecommerce site), and even across different agencies managing similar data.
Finally, governance of PII and first-party data – Unlike other data in the enterprise, such as data from manufacturing systems or a supply chain, data about customers must adhere to strict regulatory compliance guidelines. Furthermore, add to that the consent that enterprises must obtain to handle first-party data.
CPG trends driving CDP
What do CPGs want from a CDP?
Value from our investments in first-, second-, and third-party data: As CPGs invest in the collection of first-party (owned by the brand), second-party (purchased or shared by a partner), and third-party data (purchased from a public provider such as Nielsen), they want shopper insights and value/revenue from the data in a way that is privacy compliant. Value comes from increased Return on Ad Spend, lower Customer Acquisition costs, higher Consumer Lifetime Value, larger Average Order Size, and deeper Market Penetration.
Ownership of data and insights: CPGs are experts in understanding their consumers, their brands, and the categories that they are within. They don’t want agencies and vendors controlling their data and then charging them for insights. They know that getting insights from data is a competitive advantage and something to develop and own.
A best-in-class consumer experience: CPGs want to create an end-to-end consumer experience, from the product experience to the experience of purchasing online, loyalty, and consumer communications. They want to do this by owning and crafting a personalized experience and also by knowing consumers, their path to purchase, and the purchasing occasions.
Revenue growth and customer lifetime value: CPGs want to boost revenue by increasing customer lifetime value, average order value, and market penetration. They want to improve CSAT scores and lower customer churn by improving contact center experiences.
ROAS and market penetration: CPGs want to use insights from a CDP to get better Return on Ad Spend and increase market penetration by combining first- and third-party data in clean rooms to target lookalike audiences.
Insights for M&A and R&D: Finally, CPGs want to glean insights from their CDP to inform R&D and help with product innovation and insights for mergers and acquisitions.
Discover AWS Industry Partner Solutions with AWS-vetted CDPs for CPG.
Algonomy Customer Data Platform delivers actionable algorithms and personalized engagement to help CPG brands impact every aspect of business, from supply chain management and merchandising, to marketing and customer engagement.
An Enterprise Customer Data Platform, Amperity accelerates the way brands identify, understand, and connect with their customers by leveraging AI to deliver a comprehensive and actionable Customer 360.
Tealium Customer Data Platform provides companies with the data foundation that they need to put their customers at the heart of every decision.
Treasure Data offers an enterprise Customer Data Platform that balances privacy and data to deliver great customer experiences across marketing, service, and sales.
Twilio Segment delivers a Customer Data Platform that helps consumer brands collect, clean, and control customer data to power personalized communications across every channel.