Transforming Consumer Packaged Goods Marketing Success with Enterprise Marketing Return
Don’t follow ROI off of a cliff. How to balance the needs of short-term volume growth with the benefits of long-term influence on consumers by using Enterprise Marketing Return in your media strategy.
One of the biggest challenges in Consumer-Packaged Goods (CPG) is the lack of consumer-level data to make better decisions for the business. Historically, Marketing Mix Modeling (MMM) with syndicated scanner sources (Nielsen or IRI), has been the gold standard for media investment decisions. However, understanding marketing’s long-term influence on consumers using these tools has long been a challenge for brand marketers. Consumer data sources are fragmented and scarce. Multi-touch methodologies (MTA) are often narrow in scope, and traditional marketing mix generally biases toward short-term volume growth. Additionally, with cookie deprecation and signal loss becoming more of a reality, methods that help CPG marketers tie marketing activities to consumers are becoming even more constrained.
Recently, more consumer-level data sources have emerged for CPGs, including retailer 3P data, 2P data, and 1P Direct to Consumer (DTC) sources. These could be leveraged to both uniquely target individuals as well as provide a new lens for how media is connecting with consumers. CPG marketers have begun exploring how to best leverage these new data sources, but few solutions have enabled marketers to holistically measure the short-term volume impact to continue to drive the business and concurrently open insights into long-term consumer growth. We developed Enterprise Marketing Return (EMR) for CPG to help solve this challenge.
A Better Approach to Measurement: Enterprise Marketing Return
Enterprise Marketing Return incorporates the major levers of marketing into a single metric. It measures marketing’s impact on the total business enterprise, incorporating the impact on consumers to help balance between short-term and long-term business priorities. With our new approach custom developed for CPG, marketers can move away from a strictly short-term ROI focus to a more strategic and balanced approach.
Most marketing measurement solutions for CPG are a la carte, expensive, and often disconnected from business core needs. EMR is a holistic metric that CPGs can use to build confidence that their investment decisions will help sustainably grow their brands while not sacrificing short-term objectives. It leverages media incrementality through traditional marketing mix models and experimental testing to address short-term volume gains. EMR then harmonizes results with measures of new-to-brand consumer penetration and their future value to understand the long-term impact of marketing. These components can be leveraged as a single metric to inform marketing’s holistic return or can be transparently broken apart to balance strategic discourse across critical stakeholders in marketing, finance, and sales.
Additionally, CPG marketers can leverage EMR components at all stages in the marketing funnel. While media can be optimized directly to EMR or broken into its components to inform decisions, the single metric can be applied and understood in the context of existing KPI frameworks as well as core business metrics. By simply being able to understand media results in context of other critical media and business KPIs, EMR creates a common language to assess ongoing strategies and make decisions that most effectively drive the business.
Transforming CPG Measurement Using Enterprise Marketing Return
Ovative originally developed EMR for retailers using four core components: ecommerce and store revenue, incrementality, margin, and new and reactivated customer lifetime value. To customize EMR for CPG, we started with this foundational concept and adapted it to address the unique data sources, measurement capabilities, and business decisions brand marketers are challenged with every day.
This new equation is now comprised of three components, tailored to measure the holistic short and long-term impact of marketing on sales specifically for CPG brands:
- Media Incrementality: Incremental volume from media investments (derived from total brand buyers), captured through MMM and supplemented with experimental testing to understand and validate short-term sales impact (an O/g best practice).
- Future Consumer Value (FCV): The long-term future value (typically 1-3 years) of new-to-brand household penetration driven by media, excluding the first purchase captured by incrementality measurement methodologies.
- Profitability: Product margin to establish the bottom-line impact of volume driven by marketing.
New Metrics Drive Optimization Capabilities
CPG marketers can more comprehensively understand how marketing investments impact their consumer when we combine the following CPG-specific metrics in a new holistic metric, EMR: media incrementality, Future Customer Value (FCV), and profitability. The resulting metric arms CPG marketers with more power than traditional MMM, with the ability to optimize to short-term volume, long-term future consumer value, or a balanced approach through EMR. With Ovative’s EMR metric, marketers are now equipped with transparent data to make strategic optimizations that align with their business objectives.
A Breakdown of EMR for CPG Components
Incremental VolumeShort-term incremental volume attributed to media, derived from MMM and/or leveraging incrementality testing. The standard measure of volume is dependent on industry and category and ultimately transformed into dollars.
Future Consumer Value (FCV)New to Brand households acquired through media during campaign time period (did not purchase during past 52 weeks). Future value of of New to Brand households during a long-term time-horizon derived from historical buy rates and projected one to three years, excluding the first purchase.
ProfitabilityProduct Margin for incremental volume driven by media.
How EMR for CPG Compares to Traditional MMM
EMR for CPG Requires a Growth Mindset
The future of marketing analytics in CPG is complex and requires that marketers keep pushing for better measurement with new data sources. Ovative is continuing to innovate new ways to use additional customer datasets, brand health metrics, and enable increasingly granular reads at a faster cadence. EMR has transformed many businesses in retail and health insurance, and EMR for CPG has already had an outsized impact on our CPG clients. Is your CPG brand ready for EMR? Contact us to learn how we can help position your brand for short-term and long-term success!