From Promotion to Emotion: Driving Profitable Growth In CPG

While CPG firms have historically set the benchmark for other industries in understanding customer needs, delivering consumer benefits, and building powerful brands, they are not connecting at an emotional level nearly as well as they could. As a result, revenue and profit growth have become increasingly elusive.

Across a wide range of industries, customers whom we term Emotionally Connected generate anywhere from 30 to 100 percent greater annual value (and even higher lifetime value) than those customers who “merely” perceive functional benefits or high brand differentiation. After 10 years of work defining and measuring the effects of Emotional Connection, analyzing over one billion data points on more than 1.5 million consumers, we’ve discovered that Emotionally Connected customers consistently concentrate their purchases, pay higher prices, and stay loyal longer.

Most CPG companies are leaving money on the table by failing to maximize and monetize their Emotional Connection with consumers in a precise and predictable way. For example, while 66 percent of consumers of Coca-Cola rate it a “good brand” (8 or higher on a scale of 1-10), only 24 percent of Coke’s consumers are Emotionally Connected. This “Emotional Connection Score” is equally modest for other well-perceived brands such as Budweiser (27 percent) and Dove (29 percent). The same pattern is true with well-liked non-CPG brands: Nike’s Emotional Connection Score is 30 percent; Starbucks’ is 26 percent.

This isn’t surprising because Emotional Connection isn’t easy to achieve. Traditional approaches to consumer insight lack the ability to define precisely the emotions that truly matter, measure their impact on behavior, and predict their financial value. Organizations lack the predictive metrics necessary to focus customer-facing investments toward these key emotions. And digital competition and seas of customer data increase the challenge (as well as the opportunity) of reaching consumers with the right messages at the right time.

As a result, what we often see is a vicious circle. CPG companies attempt to differentiate their brands by concentrating on functional benefits and key claims such as “better taste,” “healthier options,” or “the cleanest clean.” While the products and messages they then introduce may have an emotional aura and generate a temporary bump in sales and price realization, that’s usually followed by competitive imitation and promotional pricing that return sales and profitability to the status quo (or worse).

Combining emotional and behavioral big data and predictive analytics, leading-edge CPG companies have developed Emotional Connection-based strategies to focus their brands on the underlying emotional needs, values, and motivations of the most profitable consumers in their categories. They understand that Emotional Connection is not about them; it’s about how they gratify what consumers are seeking in their own daily lives. These are often unspoken, deep-seated emotional motivators such as an individual’s desire to “stand out from the crowd,” “have confidence in the future,” “enjoy a sense of well-being,” or “enhance my social standing.”

Companies that increase Emotional Connection by even as little as three to five percentage points reap huge financial benefits because of the impact of Emotional Connection on customer value. For a leading household cleaner, for example, Emotionally Connected customers purchase nearly twice as much annually than customers who merely perceive functional and brand differentiation. For a major condiments brand, this ratio is 1.7:1. And for a venerable OTC pain medication, Emotionally Connected customers are almost twice as willing to pay a higher price.

CPG companies that gain advantage via Emotional Connection typically follow four key steps:

First, they quantify and model the value of building their brand’s Emotional Connection.
Second, they identify the precise emotions that drive the most profitable customer (and prospect) behaviors, developing an “Emotional Connection Lens” through which their brand investments can be focused directly on the critical emotional drivers of customer value (such as purchase, price realization, loyalty, or advocacy).
Third, they test and implement changes with the highest potential to impact Emotional Connection (from brand positioning, message design, and media selection to on-line targeting and interaction, product development, and channel strategies).
Fourth, they monitor Emotional Connection over time to ensure that all customer-facing functions are generating the highest returns from their investments.

These four steps replace the vicious circle of functional benefits and price promotion with a virtuous circle that builds continuous competitive advantage, driving higher Emotional Connection and financial results.

A frozen snacks brand whose sales and market share were in long-term decline had been relying on heavy couponing which was eroding profit margins. New product introductions weren’t making an impact. Big data-based analytics helped them discover the value of Emotionally Connected consumers versus those who were just “highly satisfied” with the product and perceived strong brand differentiation. Those Emotionally Connected consumers comprised 22 percent of their customer base, but purchased 2.4 times as much annually, spent 1.7 times as much every time they bought (due in part to higher price realizations), and were 6.4 times more likely to purchase the brand even if a competitor’s was on sale.

The brand team’s focus on the primary emotional benefit of “helping Moms keep their kids happy” drove consideration, which was already high for their and competitors’ brands. But after Emotional Connection analysis, the team found that what actually drove purchase frequency, loyalty, and price realization were surprising emotional factors such as “reward myself” and “perform at a higher level” that didn’t come through in conventional research. Those successful emotional factors were about the Moms, not the kids.

Based on these precise and actionable insights, the brand reconfigured its messaging, reduced promotional activity, and invested in the touch points that the analytics said would generate higher Emotional Connection, such as the mobile app and consumer-generated website content. As a result, across its entire customer base, their Emotional Connection Score rose to 29 percent, surpassing the leading competitor. Overall household penetration grew from 12 to 15 percent, the average price per purchase increased 39 percent, and the click-through rate more than doubled – all of which drove a 21 percent increase in sales.
This example illustrates the power of focusing big data and predictive analytics on the fundamental goal of all CPG companies: to generate an Emotional Connection with consumers. In an increasingly challenging and competitive marketplace, leading-edge CPG firms are leveraging Emotional Connection to revitalize lifetime customer value and organic revenue and profit growth.

Alan Zorfas is the Co-Founder and Chief Intelligence Officer of Motista, a predictive consumer intelligence firm. Daniel Leemon is a Senior Executive Advisor to Motista.

CloudTags: Digital Insight In Physical Stores

They say that knowledge is power — and for physical retailers, it is a matter of survival.

It’s also the inspiration for in-store marketing technology provider CloudTags, whose mission is to make in-store shopping more informative for retailers, as well as more digitally engaging for consumers.

“Online provides a tremendous amount of data for retailers: what specific products the customers look at, who they are,” said CloudTags Cofounder and CEO James Yancey in a recent interview with PYMNTS’ Karen Webster. “But once you get into physical store environments, most of that data isn’t able to be tracked.”

Until now, Yancey said, when a consumer enters a mall, unless they download apps, sign up and scan barcodes for every item they look at, there’s no record left behind for merchants unless a purchase was made. It’s this gap in customer behavior data that CloudTags aims to bridge for merchants, as well as to provide consumers with a digitally augmented in-store experience.

“We wanted to create the connective tissue,” said Yancey, “that was app-free and browser-based. So that you can go into multiple stores without having to download, sign up and register on your smartphone.”

In a nutshell, CloudTags works with merchants to create connected stores using app-less technology to both provide customers with a digital shopping experience in-store, while allowing merchants to collect data on in-store customer behavior and interactions.

It starts with what Yancey calls a “cloud block,” a modular, repurposable physical fitting structure for tablets. “You can invest in a single unit that sits on a shelf edge,” said Yancey, “or you can take all the individual units and snap them together to build a wall.”

These interactive screens, said Yancey, can be used by online native merchants looking to experiment with pop-up stores to showcase their extended digital catalog of goods, while housing select items within a limited square footage.

Likewise, traditionally brick-and-mortar retailers can use the screens to enhance the physical store experience with digital functionality. Current brands that use CloudTags’ technology include Crate and Barrel, Timberland and Ashley HomeStore, to name a few.

When consumers enter a store using CloudTags, they can enter the store’s domain on their smartphone to interact with the in-store screens by sharing mobile browsing cookies or an email if the customer so chooses.

Shoppers can select an item on the screen and then browse through similar and suggested items related to the first. This creates a closed loop of recommendations, said Yancey. “As soon as you touch something on the wall, two additional data inputs update what’s happening on the wall in real time.”

As the customer browses on their phone, the next item to appear on the in-store screen is updated. “The wall is the visual stimulus that is getting you to move information onto your phone,” Yancey noted. “You’re viewing more information on your phone, and as you’re doing that, we’re updating the wall.”

The benefit is twofold for merchants. The first means increased consumer engagement in-store. The second comes when the customer leaves — because now the merchant has the consumer’s in-store browsing data, which can allow for larger, more targeted digital marketing campaigns from using data from physical stores.

CloudTags has found that in-store digital engagement significantly increases open and click-through rates for advertisements and promotional emails. “If I go to the store and I engage digitally, the open rate for those ads and emails is 30–40 percent greater, and the click-through rate is sometimes 50 percent greater,” said Yancey.

From the data CloudTags’ technology brings in, Yancey said that participating merchants have found that, while the specifics vary by segment, an average of 70 percent of customers who engage with the digital wall but don’t buy in-store were previously unknown in the merchant’s existing analytics.

“People who are digitally engaging in the store are not the same ones engaging on the website,” he said. “If that [in-store] customer goes and buys online a day, a week, six months later, merchants now have that mobile browser cookie, and they’re able to use to attribute that value.”

Another benefit, said Yancey, is that merchants looking to optimize the use of floor space can use the customer data collected by CloudTags to prioritize what items to display in physical stores. These are what Yancey refers to as “connector products,” items that both sell well and, by association, for whatever reason, lead customers to look at a number of additional relevant products as well.

“The objective,” he said, “is not to put your top-selling physical items in the store. It’s to do an analysis of products that will lead to the consideration of more. As in, when consumers physically see this couch, it encourages them to also look at five or six things in the digital space versus just buying the couch.”

In an age where digital retail is rushing to the forefront, having this kind of insight handy is an invaluable tool for merchants looking to optimize the use of physical floor space. Knowledge is power, after all.

North Carolina’s Research Triangle is Ready for its Startups to Go Big

Last year, some would argue, Raleigh celebrated its 40th year as a bona fide tech hub. 1976 was the year when James ‘Jim’ Goodnight, left North Carolina State University to go it alone in software. Today his company, SAS Institute, is worth over $3 billion and employs 14,052 people worldwide.

“Until that point we had the global players like IBM and Northern Telecom, but SAS was our first homegrown technology company of significant size,” says Ben Brooks, founder of investor Southcap. “It put us on the map.”

North Carolina’s sprawling capital has long been a destination for leading technology brands. In fact it is the biggest part of The Research Triangle, a metro area comprising itself, Durham and Chapel Hill, and including Goodnight’s alma mater NCSU, Duke University and the University of North Carolina at Chapel Hill.