CPG Brands Playbook for Digital Transformation

BUILDIN CONSUMER PACKA ED OODS Brnd Lot Through Digit Consumer Strtegies

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TABLE OF CONTENTS

Executive Summary ...... 3 Introduction ...... 4 . . Turn Challenges into Opportunities ...... 6 .

Omnichannel Expansion 7

Reallocation of Marketing Spend 8

Increased Personalization Efforts 9

Incentivization and Brand Loyalty 10

The Evolving Path to Purchase 11

CPG Brands Playbook for Digital Transformation . . .13 . Hone Your Digital Consumer Strategies as You Learn About Your Consumer ...... 18. Conclusion / About Janrain ...... 19 . Endnotes ...... 20 . .

EXECUTIVE SUMMARY

We’re now in an era of digital marketing where Consumer Packaged Goods (CPG) brands have the opportunity to cultivate direct relationships with their consumers. Not just groups defined by demographics, but individual members. Loyalty and trust will flow to those brands who demonstrate they understand their consumers best.

The key: Using richer consumer data in more nuanced ways. First- and third-party data from social networks allows brands to attain a degree of clarity about individual consumers that isn’t possible with traditional demographic information.

Leading brands are already applying these insights to drive their expansion into omnichannel marketing, guide their budgeting decisions, enhance their personalization efforts, offer more relevant incentives and loyalty programs and tap into new paths to purchase.

This white paper outlines concrete first steps borne out of our work with some of the world’s leading CPG brands. Kickstart your digital consumer strategy with these tested, trusted principles.

INTRODUCTION CPG brands’ long-term success depends on building direct relationships with their consumers. Several trends fuel brands’ motivation: • Between 1999 and 2014, 25 percent of product brands fell off the list of top 100 leader brands. Over that period, consumer criteria for “leader brands” has shifted from “progressive, dynamic, innovative and up-to- date” to “trustworthy, authentic, reliable and, increasingly, visionary.” • The challenge to keep up with consumer expectations is as valuable as it is difficult: perceived leadership is an important purchase consideration for over 70 percent of consumers.¹ • U.S. retail store visits fell from 35 billion in 2009 to 17 billion in 2013.² • The age of the consumer—in which the most successful enterprises will reinvent themselves to systematically understand and serve increasingly powerful consumers—has defined the economy for several years.³ • Looking ahead, competition for per-capita consumer spending and loyalty is expected to increase as population growth slows.4

The previous trends, among others, drive these five questions that we regularly hear from the CPG industry:

How do we earn loyalty and sustain it? How do we create unique brand In spite of their sizable, sustained investments in marketing experiences that make consumers feel 1.and brand building, three quarters of packaged goods 3.valued and keep them coming back? categories have suffered from a decline in ‘must-have’ brand loyalty To stay in step with changing consumer behavior -and consumers’ since 2011.⁵ emerging preference for experiences as a path to happiness- brands are beginning to experiment with experiential marketing.10, 11 How do we build trust and maintain it? As consumer access to information grows with competition What type of data should we be 2.for their attention, trust is the best way to maintain their seeking? Once we have it, what loyalty.⁶ However, Millennials -now the largest living generation in the 4and5. should we do with it? United States- dislike traditional advertising and put much more trust CPG brands are very sophisticated in the acquisition methods and in information sources that are not actively focused on selling.⁷, ⁸, ⁹ quantity of data assets that they use to understand their consumers and the efficacy of their marketing. However, they haven’t historically needed a direct relationship with the consumer. We have found that 96 percent of consumers say they receive mistargeted information or promotions, an indication that brands may not have sufficiently personalized, timely consumer data.12

Find answers in a new model While the above challenges stump many CPG brands, early adopters have found ways to turn them into opportunities.

TURN CHALLENGES INTO OPPORTUNITIES

Brands that best resonate with consumer lives and maintain the strongest presence in retail channels will be able to demonstrate profitable growth. Consumers’ increasingly connected and idiosyncratic lives make it more challenging for brands to maintain that presence and resonance.

Here are five fronts on which we see leading brands rising to the challenge...

BRAND SUCCESS STORY: Coca-Cola Freestyle Originally introduced as a touch screen soda fountain to foster brand engagement and awareness, Coca-Cola Freestyle has matured into a coherent omnichannel experience. The iOS/Android Freestyle apps allow consumers to log in with their Facebook IDs, opening up valuable second-party demographic data to the brand. The data captured by the app—found locations, frequency of check-ins, favorite drinks and mixes—gives the brand OMNICHANNEL EXPANSION an unprecedented opportunity to understand As individuals, consumers think of each CPG brand holistically. Though individual consumer behavior and target they’re engaging with brands on more devices, they expect a consistent consumers in a myriad of ways based on their declared preferences. experience and message. Omnichannel expansion isn’t just about meeting consumers on their preferred devices, channels and platforms. It’s more than that. It’s the transition away from siloed marketing teams, toward a holistic strategy centered around the consumer .

REALLOCATION OF MARKETING SPEND Succeeding with an omnichannel strategy will take experimentation. In fact, experimenting is the only way to build the new organizational processes CPG brands need . Without experiments, there’s no chance to fail at a small scale and understand what works with consumers’ new behaviors and beliefs. This hobbles the ability to grow and innovate.

The opportunities to foster consumer engagement are causing CPG brands to reconsider how they allocate their marketing budgets: BRAND BEST PRACTICES • Clorox expects digital marketing to comprise 40 percent of its global media budget in fiscal year • Let your consumers influence your 2016, up from 30 percent the prior year.13 decisions. More sophisticated CPG brands • 2015, Coty cut out the media agency middle are gaining unparalleled insights into what man entirely when it purchased Beamly, a digital works on new channels and platforms marketing platform.14 by engaging their consumers on a more • Kraft-Heinz has adopted a zero-based budgeting personal level. This feedback loop drives framework for marketing. They reboot each year’s more informed decisions on media mix budget from the ground-up, rather than building and spend. upon the prior year’s budget.15 • Make more small bets. Shifting relatively This isn’t necessarily about spending more. It’s about optimizing existing spend: small amounts of budget from traditional across channels and across the consumer journey. For example, shifting ad channels to relatively new strategies— budget from awareness down the funnel to where consumers are already re-targeting or real-time bidding platforms— familiar could increase their lifetime value. offer potential for outsized gains. Give agencies more room to experiment. Conversely, overemphasis on top-of-funnel awareness, such as driving demand • Reallocating just 1 – 2 percent of a TV with coupons, will crumble under commoditization and consumers’ expectations budget for digital experimentation would for deeper relationships. That’s the kind of precipice awaiting brands that don’t fund the chance to discover untapped experiment. strategies.

BRAND BEST PRACTICES • Partner with retailers to share purchase data. By streamlining data that has historically been siloed—loyalty, digital offers, mobile data, etc.—CPG brands and retailers both gain unprecedented clarity around the consumer. Success from this partnership could help alleviate some of the trust issues that have hampered innovation.

• Inform personalized campaigns with innovative loyalty programs. Equipped with a holistic view of consumers, combine purchase history and predictive analytics to create highly relevant emails and INCREASED PERSONALIZATION EFFORTS digital coupons. Consider working with retailers who use ibeacon technology Historically, CPG brands have relied on retailers for consumer insights. But, only to send personalized coupons through 37 percent of consumers believe their preferred retailer understands them as your mobile app when a known consumer individuals, and only 35 percent said the communications from their preferred enters their store. retailers are “usually relevant.”16 The numbers are worse for “the average retailer.” • Don’t reinvent the wheel. Your core proprietary IT resource investment should As a result of mistargeted communications, we found that 93 percent [of be on factors that distinguish you from consumers] take action that does long-term damage to brands (e.g. unsubscribe your competitors: a recommendation from—or delete automatically—emails, avoid the brand’s products, etc).17 engine, or innovative brand experiences on the consumer journey. Rely on In recognition of this liability, leading CPG brands are putting more effort into best-of-breed technologies for the understanding their consumers . underlying infrastructure.

BRAND SUCCESS STORY: Dr Pepper Snapple Group (DPSG) Through extensive social media campaigns, DPSG has cultivated a highly active online community of over four million fans. The brand found that offering social login garnered a 360º view of its fans by unifying INCENTIVIZATION AND BRAND LOYALTY rich permission-based social profile data with In the few cases where loyalty programs have been implemented with consumer previous promotions, campaigns and website visits. For example, they track the promotions brands, they have been optimized to help brands increase the spending of their and contests each consumer participates in, best consumers. But there’s a more lucrative opportunity here: so that they can recommend new promotions How do brands grow the ranks of their loyal consumers in the first place? through email and targeted display. These A typical CPG brand hasn’t fully leveraged its loyalty program’s data. Combining fan insights have equipped DPSG to improve campaigns and messaging, develop and that loyalty data with social data reveals a road-map to evolving brand experiences share more relevant content, and engage with and cultivating the next generation of loyal consumers. consumers in more meaningful ways.

THE EVOLVING PATH TO PURCHASE: FROM BRICK & MORTAR TO ONLINE ONLY Digital technology such as smartphones, online outlets and social media are attributed for the rise of around-the-clock product promotion and availability, as well as the decline of retail foot traffic.18 While consumers have readily adopted BRAND BEST PRACTICES multiple paths to purchase, the transition hasn’t been as easy for brands. • Include social login in your loyalty program. By soliciting consumers’ preferences, For example, though brands can buy their way onto physical store shelves, they’re brands clarify their understanding of the finding more competition on the digital shelf space. An above-the-fold position in messages and platforms that will resonate an organic e-commerce search result page may only present consumers with six best with those ‘known’ consumers. options, a fraction of the in-store experience. On mobile devices, the shelf space • Complete consumer profiles over time. may dwindle to two options. The ‘online shelf’ is effectively smaller than its Rather than asking consumers for a lot of in-store equivalent, meaning steeper competition for brands . their data at once, try asking for just name and email to start. Then ask for a few What’s more, the social networks’ allegiance to their users further compounds more data elements at a time over future the challenge. They all measure daily and monthly active user numbers. To win engagements. Consider gamifying the on these platforms, brand content must engage users. If users care about a process to incentivize complete profiles. brand’s message, the networks will help them to share content and experiences. If users don’t care, unpopular messages will be filtered out. • Pay attention to product reviews. More and more people are finding different Finally, the traditional feedback mechanisms that CPGs have used to understand online resources as influential on their the path to purchase have weakened. Research, product discovery, engagement, buying habits.19 Today, it’s not uncommon purchase, subscription, and customer support all now happen in digital channels. to read reviews before purchasing a $.99 Though this new ecosystem is more difficult to understand and map out, some app in iTunes. As reviews’ influence on purchasing decisions grows, so does leading CPG brands have already begun to experiment. the importance of addressing negative reviews quickly and transparently.

FROM INSPIRATION TO ACTION

We have helped hundreds of brands through the process of developing a bespoke digital consumer strategy. What works for one brand may not work for another. Each brand has to develop its own digital consumer strategy, be willing to experiment, and use those lessons to hone its actions.

It’s time to begin.

CPG BRANDS PLAYBOOK FOR DIGITAL TRANSFORMATION

Because traditional channel relationships are more tenuous than ever, digital transformation is an urgent priority for CPG brands. Sustained success will depend on the ability to send consumers direct, relevant messages. Let’s begin that journey by answering the questions raised in the introduction.

OUR SOLUTION: THE CHALLENGE: Build direct consumer How do we create relationships with rich opt-in data unique brand experiences Savvy brands are putting their consumers at the center of their sales and that make consumers feel marketing strategies and decision-making processes. To improve conversions valued and keep them and make better decisions with richer insights, consolidate all consumer data, coming back? including: demographics, psychographics, purchase history, preferences and engagement. We’ve seen brands start strong with these steps: What type of data 1. Seed direct relationships should we be seeking? through opt-in registration. Industry best practices recommend sharing Once we have it, what 2. Use progressive profiling to collect data on a datapoint-by-datapoint basis, should we do with it? more data over future engagements. not ‘all or nothing ’. 3. For greater detail, combine that first-party data with third-party THIS ENSURES COMPLIANCE WITH: data drawn from social login.  The terms to which consumers agreed when they opted in. 4. Connect that consumer data to existing marketing platforms.  Any social network’s terms to which your brand agreed in order to access 5. Segment consumers to enable consumer data. personalized marketing experiences across devices and channels.

OUR SOLUTION: Focus on consumer lifetime value THE CHALLENGE: Think beyond purchase history, product registrations and sales inquiries. With How do we earn loyalty richer consumer data and relationships, CPG brands can now attribute value to and sustain it? the ripple effect consumer engagement—likes, shares and follows across various channels—has on their social networks.

This approach to engagement opens the path to new strategies to earn and sustain consumer loyalty. It’s not just about acquisition and media spend; it’s about each individual consumer’s lifetime value. It’s not just about granular detail; brands need to achieve a higher level of scale in the way they collect, organize, share and act on consumer data.

OUR SOLUTION: Nurture your consumers continuously THE CHALLENGE: Registration is the moment a consumer’s relationship with your brand begins. In How do we build trust that moment, you’ve earned their trust. Be candid about how you’ll use their data. and maintain it? For example, if you’re collecting mobile numbers on the registration page, you may offer an explanation such as: “Provide your mobile number for in-store offers,” or “Provide your mobile number so we can contact you if you’re the winner!”

To sustain that trust, show consumers that you’re making good use of their data with personalized engagement that demonstrates you ‘get’ them.

Your loyalty program may be the easiest jumping-off point. In working with industry brands that have sophisticated programs—Coca Cola, Dr. Pepper Snapple Group, and Philips—we’ve found this can be a natural extension to find new opportunities for connection.

Copyright © 2016 Janrain, Inc. All rights reserved. | www.janrain.com | US 888 563 3082 | Europe +44 208 973 2561 | 16 Description of an Ideal CPG Brands Playbook for Social Content Curation Digital Transformation Technology Toolset

OUR SOLUTION: Monetizing consumer lifetime value THE CHALLENGE: The majority of CPG brands get suboptimal ROI on poorly targeted digital How are we going to advertising and on-premise consumer data storage. By moving that storage to a pay for this? cloud-based solution, and using it to optimize ad costs, brands can fund digital transformation initiatives with budget reallocation rather than budget expansion.

For example, a beverage brand may analyze consumer profiles from first-party data they’ve collected, and learn that a substantial segment of their consumers like soccer and comedies. That data could influence a change in their advertising spend. They could put more money into witty commercials during soccer matches instead of other sporting events.

In addition to strategically reallocating marketing spend, CPG brands have an opportunity to derive more value from experiences and marketing campaigns they’ve already invested in. Compared to the initial setup effort and investment, it’s relatively easy to improve those existing touch points for richer consumer data.

Copyright © 2016 Janrain, Inc. All rights reserved. | www.janrain.com | US 888 563 3082 | Europe +44 208 973 2561 | 17 Hone Buyer’sYour Digital Guide Consumer for Strategy Companiesas You Learn About Your Consumers

HONE YOUR DIGITAL CONSUMER STRATEGY AS YOU LEARN ABOUT YOUR CONSUMERS

The challenge to implement a consumer digital strategy will be unique for each CPG brand. But the imperative is universal. And pressing.

CONCLUSION “The most successful Consumers’ unprecedented choice and control drives them to explore and refine their preferences, and adapt the consumer companies are possibilities to suit their lifestyles. In the process, they’re already looking beyond honing their expectations for brand engagement. This transformation of the consumer relationship will cause the seamless integration new winners and losers in the product landscape. Traditional of their sales channels methods to activate and engage with consumers will give and are focused on the way to untapped models. Marketing professionals at CPG brands still have time to integration of their entire explore questions of loyalty, trust and brand experiences, ecosystems, with their while experimenting with current trends and consumer data. Omnichannel expansion will shake the traditional marketing consumers at the very budget to its core and inspire a more nuanced approach; one center.”20 that puts the consumer at the center of new incentivization and loyalty strategies, and reveals new paths to purchase. — Consumer Goods Forum To take the lead, CPG brands must place strategic bets on high-growth categories like digital consumer strategy .

ABOUT JANRAIN Janrain makes it easy to know your customers and personalize every interaction. Our Customer Identity and Access Management Platform helps companies build a unified view of their customers across all devices by collecting accurate customer profile data to power personalized marketing. The platform encompasses social login, registration, customer profile data storage, customer segments, customer insights, single sign-on, and engagement. Janrain powers customer identity management for brands like Pfizer, Samsung, Whole Foods, Fox News, Philips, Marvel, and Dr Pepper Snapple Group. Founded in 2002, Janrain is based in Portland, Oregon, with offices in London, Paris, and Redwood City, CA. For more information, please visit www.janrain.com and follow @janrain.

ENDNOTES 1. PwC: Bonfire of the Brands (2015). Retrieved August 12, 10. Howell, R., Pchelin, P. & Iyer, R. (2011, December) The Preference 2016 from http://www.pwc.com/us/en/cis-brandscape/ For Experiences Over Possessions. Retrieved August 12, 2016 from assets/pwc-cis-bonfire-of-the-brands.pdf http://www.tandfonline.com/doi/full/10.1080/17439760.2011.626791 2. Maxwell, J. & Sviokla, J. (2016) 2016 Retail And Consumer Products 11. Schultz, B. (2015, August). Not Just Millennials: Consumers Want Trends. Retrieved August 12, 2016 from http://www.strategyand.pwc. Experiences, Not Things. Retrieved August 12, 2016 from http://adage. com/perspectives/2016-retail-and-consumer-products-trends com/article/digitalnext/consumers-experiences-things/299994/ 3. Gazala, M., Bernoff, .J , Condon, C., McNabb, K., Ryckewaert, E., 12. Janrain: 2015 Janrain US Consumer Research. Retrieved & Trafton, R. (2015, April) Winning In The Age Of The Customer. August 12, 2016 from http://www.janrain.com/resources/ Retrieved August 12, 2016 from https://www.forrester.com/report/ industry-research/2015-janrain-us-consumer-research/ Winning+In+The+Age+Of+The+Customer/-/E-RES119546 13. Faw, L. (2015, December). Clorox Launches Agency Review. 4. Dobbs, R., Manyika, J., Woetzel, J., Remes, J., Perry, J., Kelly, Retrieved August 12, 2016 from http://www.mediapost.com/ G., Pattabiraman, K., & Sharma, H. (2016, March) Urban publications/article/264191/clorox-launches-agency-review.html World: The Global Consumers To Watch. Retrieved August 14. Coty: COTY Announces Acquisition of Leading Global Digital 12, 2016 from http://www.mckinsey.com/global-themes/ Marketing Platform Beamly. (2015, October). Retrieved August urbanization/urban-world-the-global-consumers-to-watch 12, 2016 from https://www.coty.com/news/coty-announces- 5. Deloitte: The 2015 American Pantry Study. (2015) Retrieved acquisition-leading-global-digital-marketing-platform-beamly August 12, 2016 from http://www2.deloitte.com/us/en/pages/ 15. Seeking Alpha: The Kraft Heinz (KHC) Bernardo Vieira Hees on Q3 consumer-business/articles/2015-american-pantry-study.html 2015 Results - Earnings Call Transcript. (2015, November). Retrieved 6. KPMG: Seeking Customer Centricity - The omni business August 12, 2016 from http://seekingalpha.com/article/3655716-kraft- model. (2016, June). Retrieved August 12, 2016 from https:// heinz-khc-bernardo-vieira-hees-q3-2015-results-earnings-call-transcript home.kpmg.com/sg/en/home/insights/2016/06/seeking- 16. IBM: 4 Out Of 5 Consumers Declare Brands Don’t Know customer-centricity-the-omni-business-model.html Them As An Individual, According to IBM and Econsultancy 7. Fry, R. (2016, April) Millennials Overtake Baby Boomers Study. (2015, April). Retrieved August 12, 2016 from As America’s Largest Generation. Retrieved August https://www-03.ibm.com/press/us/en/pressrelease/46454.wss 23, 2016 from http://www.pewresearch.org/fact- 17. Janrain: 2015 Janrain US Consumer Research Consumer tank/2016/04/25/millennials-overtake-baby-boomers/ Identity and Mistargeting. Retrieved August 12, 2016 from 8. KPMG: Seeking Customer Centricity - The omni business http://www1.janrain.com/us-consumer-identity-research-na.html model. (2016, June). Retrieved August 12, 2016 from https:// 18. Maxwell, J. & Sviokla, J. (2016) 2016 Retail And Consumer Products home.kpmg.com/sg/en/home/insights/2016/06/seeking- Trends. Retrieved August 12, 2016 from http://www.strategyand.pwc. customer-centricity-the-omni-business-model.html com/perspectives/2016-retail-and-consumer-products-trends 9. The McCarthy Group: Engaging Millennials. (2014). Retrieved August 23, 19. Krishnan, N. (2016, May) The Changing Landscape of Consumer .com/what-we-do/millennials_survey/ 2016 from http://themccarthygroup Packaged Goods. Retrieved September 2, 2016 from https://www.cbinsights.com/research-cpg-trends-transcript