Food brands are getting to know consumers one to one, and at times it's like an awkward first date: Communication is a little uncertain, and the next steps are unclear. 2020 may have accelerated the direct channel between CPG companies and shoppers but capitalizing on it takes customer data platforms (CDPs) that churn through the process of learning about shoppers as individuals. It's a capability that's new to food manufacturers -- and one that's critical to master quickly. In the quest for brand relevancy, there's often only one chance for a second date.
DTC's sudden takeoff for food brands
It's no secret how we got here. As consumers turned to online shopping during the global pandemic, the economics of the direct-to-consumer (DTC) channel suddenly shifted for food and beverage brands, and what began as modest efforts to acquire consumer data became lucrative revenue streams. Brands responded with rapid rollouts of services, such as PepsiCo's launch of Snacks.com and PantryShop.com in 30 days. Enrollment in food and beverage subscription programs surged 25%. CPG brands experienced more absolute growth in 2020 than in the four-year period from 2016 to 2019.
Now comes the task of continuing the trajectory and doing so profitably. Managing assortments for DTC is key for food brands, including optimizing SKUs and basket sizes. So is the introduction of differentiated pricing models such as subscriptions and premium pricing for channel-exclusive offerings.
Most challenging – and vital -- is creating the marketing engine that's necessary to make the economics of DTC work. Understanding customer lifetime value and retaining customers is the foundation to profitable DTC growth, and it's where CDPs come in, enabling food manufacturers to control the post-purchase experience and keep their brands relevant.
When it comes to building out CDPs, however, food brands are on a learning curve. Most maintain data management platforms (DMPs) in which they house second- and third-party data, the large, anonymized pools of information that CPG advertisers and agencies traditionally rely on to improve ad targeting. The value in first-party data, however, is its potential to create unified views of individual consumers, and that takes a CDP. Think of DMPs as core to the adtech stack, and CDP as core to martech.
While brands can gain 360-degree customer views without building CDPs -- cloud technologies and open systems also provide unified views and unique IDs -- CDPs go a step further. They add real-time unification and decisioning capabilities. By ingesting customer data from multiple enterprise systems such as CRM, mobile app logs and ecommerce, CDPs create powerful customer insights that brands can use for real-time activation of personalized content and messaging to orchestrate the desired experience. The result is a path to connect with consumers and boost brand relevance in ways that food brands have not had until now.
If data is currency, first-party data is the bitcoin for food brands. Like bitcoin, which just became a trillion-dollar asset class, first-party data is scarce and has significant store of value for food brands. If leveraged effectively through a CDP, it can yield the higher customer lifetime value that's required to succeed in the DTC channel.
How brands use CDPs to boost relevance
As the race to acquire first-party data heats up, food brands are building and refining CDPs and exploring the platforms' ability to work in tandem with DMPs. The two platforms are complementary: The DMP's demographics and location details enrich the personal preferences of the CDP for smarter customer communication, and the CDP first-party data helps the DMP improve ad targeting.
CPG manufacturers that are winning relative to their category are twice as likely to have a robust CDP that integrates data from multiple sources, including retailers and syndicated data. Yet building a dynamic CDP with a unified, real-time 360-degree customer view has inherent challenges for food brands. Within most organizations, data is often siloed and fragmented due to functional, technology or geographic boundaries. For large multi-brand, multinational food companies, brand silos add to the woes.
But the opportunity to view the total value of consumers across the enterprise and capitalize on it is a major motivator for brands. For example, Kellogg's is using data and analytics capabilities across the consumer journey to capture and retain new cohorts, engage across occasions, and deepen relationships to grow its share of wallet and loyalty. To create more targeted communications with consumers, the company is combining data from 33 million US households in its family rewards loyalty program, which is first party data, with its Keystone platform's tracking of social, point of sale and contextual data.
Similarly, Jack in the Box combines first- and third-party data in the digital customer platform we created for the San Diego-based hamburger chain. The solution connects customers' front-end experience to the brand's back-end operations. The mobile app our team developed – the company’s first ever -- improves business insight and decision making by integrating with the chain's kitchens and CRM tools. Same-store sales increased 2.7% in the first quarter the app was released. By adding our Evolutionary AI capabilities, which use AutoML to refine the model in real time based on performance, Jack in the Box curates personalized offers and maximizes its response rate and profitability.
For food brands, it takes acquiring data sets, understanding consumers' needs and applying behavioral insights to answer the question of what drives relevance for customers. CDPs let them get to know consumers, one conversation at a time – and create the stickiness that delivers higher customer lifetime value.