Digital marketing: a cost-effective investment for FMCG brands

Digital plays an increasingly important part in the life of British people affecting all aspects of daily life including grocery shopping. A growing number of Britons do their grocery shopping online. They also use digital tools to control their spending and find good deals. To engage these consumers, brands must invest in digital strategies. How is digital relevant to FMCG brands?

The growth of online grocery sales

The number of consumers who do their grocery shopping online keeps growing. Online FMCG sales are set to double in the next five years to represent $400 billion by 2022, that is 10 to 12% of global market share. The UK is one of the countries where online grocery shopping is the most advanced, with 6.3% of FMCG sales made online. According to Nielsen Brandbank:

• 48% of UK consumers do some online grocery shopping
• 14% of UK consumers do all their grocery shopping online
• 49% of UK consumers combine stores and online to fulfil their grocery needs

IGD estimates the UK online grocery market will grow by 68% between 2016 and 2021 to represent £17.6 billion in sales. Simon Wainwright, Director of Insight at IGD, says: “Growth is increasingly being driven by recent entrants to the channel and more delivery options. But we’re seeing more ambition from the Big Four as well, making ordering easier, improving picking, new capacity and faster deliveries. Analytics are also being utilised more effectively to target customers with more personalised content. Rising customer service expectations are encouraging the development of more rapid delivery services and other technological responses such as unattended delivery solutions.”

The influence of digital on in-store sales

In addition to the growth of online sales, digital strongly influences in-store sales with consumers massively using mobile apps. According to research from Deloitte on Digital Influence in UK retail:

• 78% of UK consumers used digital devices for shopping related activities before/during their most recent shopping trip
• In-store conversion is 42% higher for shoppers who used a digital device prior to or during their store visit
• 21% of UK consumers spend more when using a digital device while shopping
• 56% of UK consumers who used digital before/during their shopping trip would definitely shop at the retailer again.

In addition, a study from GlobalData shows that mobile apps are increasingly being used by consumers as a means to get promotional info. Half of UK consumers (50%) use retailers’ apps for notifications about promotions. It is the top reason for using a retailer app.

In general, UK consumers want omnichannel and connected experiences. More than half (52%) of UK consumers would like retailers to offer a more seamless experience between online and offline according to research by PushON.

The increase in digital marketing investments

According to e-Marketer, the UK is the largest market for digital ad spending in Europe. CPG is one of the largest-spending industries, with automotive, financial services, retail and travel. More than 65% of UK ad spending is digital. UK marketers spend twice as much on digital than TV or other traditional media.

Spending is expected to grow nearly 10% in 2019, with much of the growth coming from mobile. As a matter of fact, mobile now accounts for the majority of digital spending and video is the next big growth driver.

“Fundamentally, it’s consumer usage that’s driving the spend in mobile” said Andrew Mason, Media Operations Director at Digitas for the UK and EMEA. He added that the amount of time spent daily by mobile phone users in the UK is “driving brands to think mobile first”.

In addition, the return of investment (ROI) of digital campaigns tends to be better than the ROI of other media such as TV. The ROI of digital can reach up to 1.2 compared to 0.8 for TV according to the Nielsen Marketing Mix Modelling (MMM).

FMCG brands and digital marketing

• Diageo invests heavily in digital strategies. Ivan Menzes, Diageo CEO, told The Drum: “Traditionally, our marketing was focused on strengthening loyalty amongst our consumer base. But consumer habits have changed and consumers have more choice. Now we use great marketing to constantly recruit and then recruit them again.” He added that the content Diageo is creating now is “relevant to people and the occasions where consumers view it. It is not about doing ‘digital marketing’, it is about marketing effectively in a digital world.”

• Mondelēz has shifted most of its marketing spend to social and digital platforms. Bonin Bough, former Vice President of Global Media and Consumer Engagement at Mondelēz, told CMS Wire: “A lot of companies are hesitant to invest in social and digital platforms, but there are many compelling reasons why it makes sense. First, this is where customers are consuming media today, so it’s the most effective way to get your messages out. Second, digital has twice the return on investment of traditional media. Lastly, a digital approach allows you to influence consumers at the point of buying. “

• At L’Oréal, digital represents more than 38 % of the overall media spend. Lubomira Rochet, Global Chief Digital Officer at L’Oréal, shared in an interview with YouTube: “Digital is changing our industry for the better. Digital is the future of beauty, and it brings new dimensions to things that were limited before.” She explained: “Prime-time TV was quite straightforward compared to the world we market in today. It used to be that we relied on 30-second commercials, but now we produce 50X more content that lives as part of an ecosystem and engages people on different occasions.”

• Unilever is creating digital hubs as it unlearns ‘the old ways of doing marketing’ as reported by Marketing Week. Unilever has decided to invest two-thirds of the £1.75bn it plans to save through efficiency programmes into marketing and improving its digital teams. Alan Jope, Unilever CEO, told investors: “Our old mass market model of driving consumer goods with mass brands sold in mass channels through mass distributions, systems and mass media is really being complemented by a very different type of marketing where we put purpose centre of our brands.”

• Danone dedicates 30% of its media spend to digital. The company has made transforming consumer reach and engagement one of its strategic priorities to succeed in the digital era. To that end, Danone is working on optimising marketing spend and reaching new audiences, with a shift from traditional mass advertising to targeted precision marketing, leveraging digital and mobile. Danone is also moving to manifesto brands. Emmanuel Faber, Danone CEO, explained to Marketing Week: “The commitment that we’ve made is that our brands will be what we call ‘manifesto brands’, which means brands that are characterised by the way they engage with consumers, the positioning, communication, marketing and the product themselves.”

As a conclusion, digital is an increasingly relevant channel for FMCG brands with three main opportunities according to Nielsen. The first opportunity is the optimisation of e-commerce against (or together with) traditional networks. McKinsey says that, “after lagging behind other sectors with rocketing online sales, consumer-packaged-goods players are at an e-commerce tipping point”. The second opportunity is the increase in the profitability of marketing investments. The third opportunity is around mobile apps, which consumers use to find promotions and good deals. Brands that are able to embrace these opportunities will generate sales, strengthen the relationship with consumers and drive long-term loyalty.