FMCGs Go Direct -- Bad For Digital Display,Good For Content, Social And Mobile?

Another FMCG speech -- this time Nestle at CES, and more talk about the large food and drinks manufacturers looking to go direct to market, as Nestle has already done with its Nespresso and Dolce Gusto brands.

The most recent talk among fast-moving consumer goods companies didn't reveal an awful lot that was new, but it showed that Nestle is still very much looking to build direct relationships with consumers online and on the high street. Unilver and Mondelez have made statements along the lines of expecting future growth to come from ecommerce projects where they market directly to customers. 

For the companies themselves this raises massive new challenges in how they build, service and maintain a direct relationship with the customer rather than leaving the hard work to the retailers to whom they send container loads of household items every day. The bigger general question, for the marketing industry, however, is what this means for the traditional setup of FMCGs plastering the names of their brands on all channels so retailers feel supported. What happens when FMCGs start selling their own product instead of shouting about them on television, radio, print, outdoor and online with a call to action that can only be acted on within a store they supply?

The key here is performance marketing. If we take it to mean more than the new buzzword for affiliate marketing but to mean marketing where performance is closely measured and reported on, then the FMCGs switching tactics will have major impact. The minute you start selling direct, you want to know the ROI of everything you do in terms of how it leads to sales. Going direct is all about the bottom line because there is no retailer to consider -- just you and the customer.

Put simply, there's no more unreserved approval of spray and pray on digital display, no more high fives for getting a few likes and shares on social and little recognition for a print ad in the nationals unless a coupon led to a surge in sales. OK -- it wouldn't be an end to this type of brand awareness activity, but the brands would have to begin looking at sales -- and for the first time, CRM -- when they go market. The bottom line would become the primary focus alongside customer loyalty analytics measuring basket size, share of wallet and frequency of purchases. 

The good news is that this is likely to be a major bonanza for the ad tech guys. More targeted (programmatic?) display, a 360-degree view of the customer and refined analytics can only be good news for tool and platform developers. What would it mean on a more macro scale?

With marketing based on performance, you get a feeling that for everything you do, something measurable has to happen. If the desired event is a sale, then you would have to imagine digital display will be the big loser here. Sure, FMCGs will still need to raise awareness of their product, but any channel where an interaction rate of one in every few thousand has been accepted for the past decade is going to struggle when success is measured in dollars earned rather than purely "share of voice" or "brand awareness." 

Presumably it would be pretty good news for social too. Not just for "likes" and "shares," but for sales that have resulted from offers and sponsored content. Social channels -- particularly Facebook -- have to be the route to targeting a highly defined audience and then getting to know them better. Compare how you can do this on Facebook with display and there really is not much of a contest. One can imagine it would be good news for content marketing in general and especially for affiliates who will have a field day with a whole new type of advertiser looking to place offers and articles about their wares. 

Outdoor could potentially suffer, particularly in and around retail areas. If an FMCG has designed a brand to sell direct, you can imagine it will focus on advertising this in areas where it has own branded retail outlets, and these are bound to be far fewer than the number of high street stores selling their well known brands.

This is all conjecture, of course. Nothing will change overnight. The FMCG brands will still mostly be supporting products that are sold through third parties, but bit by bit there must be a change as they seek to go direct. Once brand awareness is high, one can imagine digital display would have to be the biggest loser -- with mobile, social and content, and perhaps native, poised to reap the rewards.

As mentioned, whichever channel prospers or does less well than before, the true winners will almost certainly be the marketing tech guys who'll be selling the shovels and measuring scales that let the big guys go out prospecting for gold. 

1 comment about "FMCGs Go Direct -- Bad For Digital Display,Good For Content, Social And Mobile? ".
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  1. Andrew Susman from New Value Associates, January 7, 2016 at 5:44 p.m.

    Interesting.  However, AdTech will likely not benefit - technology fungible and IP protection illusory, per McConnell.  Robots, which represent more than half the "audience" don't make purchases, see Dr. Augustine Fou.  

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