For more than a decade, I’ve been focused on digital transformation at scale. An inevitable change, supercharged into reality during the pandemic of 2020. With omnichannel consumption among U.S. consumers increasing by 50% according to the Nielsen Omnichannel Shopping Fundamentals Report, nearly half of all consumer goods purchased last year were via an eCommerce channel.
Digitization and specifically, the intersection of direct-to-consumer engagement and supply chain, is a fascinating and rapidly evolving area of the industry. Over the next several months, I’ll be taking a deep dive into the digital transformation of the consumer goods industry. This month, I’m going to focus on digitization as it relates to consumer engagement — completely disrupting the way brands and consumers interact. I invite you to connect with me on LinkedIn or email me directly at firstname.lastname@example.org.
Demystifying Digital Transformation
Having spent a large part of my career in data driven/digitally-focused marketing — having run a digital agency, gyro (acquired by Dentsu) and leading digital transformation efforts (MarTech / AdTech) for Ogilvy — I understand consumer brands’ need to seamlessly connect with customers — online, in-store and post-purchase. Even before the pandemic, brands were trying to figure out how to better use the evolving technology landscape to meaningfully connect with consumers. The stakes were understandably raised in 2020.
As a greater portion of retail sales moves online, product digitization is creating a more immersive, personalized shopping experience for customers.
According to research by Invesp, companies with omnichannel customer engagement strategies retain on average 89% of their customers compared to 33% customer retention rate for companies with weak omnichannel strategies.
Product digitization is allowing brands to create personalized experiences at scale. A digitized product connects to the web with a digital identity and is therefore trackable across its lifecycle. Digitized products also allow brands to create a direct to consumer channel for personalized engagement. Consumers interact with products (and brands) using their mobile device — effectively turning the product into the medium. A key challenge for brands, in the post-COVID world of dramatically accelerated ecommerce, is being present with consumers when they want to buy. There are numerous touchpoints outside of the physical store that brands can better take advantage of in their online store or marketplace, examples include:
- when a consumer receives a product purchased through a third party e-commerce channel,
- when a consumer encounters a product a friend recommends,
- when consumers look for complimentary products to goods already in the closet or basket, and
- when a consumer wants to upgrade or replace an existing item.
All of these moments, and many more, are situations where the brand can now directly engage with the consumer through the product as an owned digital medium.
For instance, The R Collective digitized its Denim Reimagined apparel line, creating a direct-to-consumer channel to educate consumers on the importance of sustainable care habits through its garments.
According to Christina Dean, The R Collective’s CEO & Founder, “We recognized early that the success of our initiative would require full participation by our entire ecosystem — from sourcing to designer to the consumer. Working with EVRYTHNG, we are quite literally turning each clothing item into a direct-to-consumer channel to educate and engage consumers with our denim’s sustainability message, while also providing the product authenticity and transparency information they demand.”
Disrupting the CPG Industry with Connected Packaging
Over the past several years the Consumer Packaged Goods industry has been buzzing with the promise of connected packaging. A world in which products no longer sit idle on the shelf, but rather buzz with life, smart with data previously lost as items journeyed through the supply chain. A few industry disruptors have changed the trajectory of the consumer goods industry forever, making the promise of connected packaging a reality. Billions of products are now being ‘born digital’ with a digital identity on the web (also referred to as a digital twin), providing consumer product brands with real-time data intelligence and end-to-end supply chain traceability. Additionally, providing consumers with full transparency and personalized digital experiences.
According to Accuray Research, the global connected packaging market is expected to grow by 5.4% to $52bn by 2025. Connected packaging is not new to the CPG industry with a mix of product categories embracing technology to stay connected with consumers, especially during the pandemic. Those who had already invested in the technology pre-pandemic, were well positioned to ride the wave while those who had previously been on the fence have since jumped in with both feet.
The breakthrough is found in the past year’s requirement for contactless transactions. Consumers have familiarized themselves with an assortment of digitized tags and labels — QR codes, NFC tags, etc. — to view menus, interact with payment processes, and learn more about the products that they are consuming. In fact, more than 11 million US households scanned QR codes in 2020 (Statista). And with iPhone and Android smartphones now able to automatically scan QR codes, digital mobile engagement is accessible to 81% of US adults today.
Puma provides a great example of why product digitization is so valuable to building lasting brand-consumer relationships. Consumers in PUMA’s flagship NYC store access digital experiences as part of the physical store experience, but even more interesting, PUMA is also reaching consumers post-purchase with direct-to-consumer experiences through their products. PUMA reported some 30% of digitally engaged consumers transacting post purchase – creating a powerful new channel for the brand.
By taking a holistic approach to its eCommerce and brick-and-mortar channels, PUMA is able to meet consumers’ growing demand for a full omnichannel experience.
But how do you measure consumer engagement?
The good news is that product digitization, giving every product item a digital identity in the Product Cloud, allows brands to capture real-time data intelligence through every consumer interaction with the product. Because consumers opt-in to the experience, the first-party data is richer and more apt to reflect valuable behavioral insights to inform future marketing programs and business strategies.
Winning with Connected Packaging
With brands increasingly relying upon omnichannel consumer engagement strategies to grow and retain customers, the technology behind the creative has become the winning difference. This is particularly evident when trying to grow brand awareness with millennials and generations after. RITZ’s ‘Top Your RITZ’ campaign was targeted at millennials.
Each RITZ Crackers product is assigned a QR code with a corresponding active digital identity in the Product Cloud to manage the data from and about that item. The RITZ mobile experience allows consumers to scan a QR code on the connected packaging, automatically identify the product and initiate the relevant, personalized consumer experience. This is made possible through context-based rules to determine the exact, personalized brand content and mobile experience to dynamically deliver to each individual consumer. Another key differentiator in the ‘Top Your RITZ’ campaign is the use of geo-fencing which allows the brand to pinpoint exactly where a consumer is engaging with the product:
- In-store, consumers are given a store-branded mobile experience for the specific retailer (e.g., Walmart, Kroger or Lowes Foods). Contextualized experiences include: suggested food and beverage pairings, recipes, and coupons.
- Post purchase, consumers receive continued suggestions for fun, new food and beverage pairings by simply scanning the QR code on the box.
Brands are able to track consumer actions during product engagement to reveal unique consumer behaviors and preferences to aid in retargeting activities. Brands can also track engagement by store to gain insight to valuable in-store activity — typically a blind spot for brands.
Still on the fence?
If nothing else, the pandemic affirmed product digitization as a business strategy for consumer brands. Those who had already embraced digital transformation pre-pandemic — Ralph Lauren, P&G, Unilever, PUMA, Mowi, among others — strategically navigated the wave of COVID-19 and continue to thrive. For others, the past year was an unexpected wake-up allowing them to now make the transition without hesitation. For brands who still aren’t sure… I ask you to consider the data. The world has changed. With eCommerce growing at an unprecedented rate and consumer retail behaviors significantly shifted, brands must adapt in a thoughtful and strategic way. Digitized products provide a mechanism for brand owners to scale dynamic direct consumer engagements across product lines, markets, and channels.
I’d welcome your thoughts on this topic and specifically, how your company is or isn’t embracing digitization, and why. Next month I’ll be diving deeper into the role of digitization in the supply for consumer brands.