HOW CONSUMER BRANDS ARE LEVERAGING DATA FOR EACH ASPECT OF THEIR BUSINESS FROM PRODUCTION TO FULFILLMENT TO MARKETING AND ADVERTISING

HOW CONSUMER BRANDS ARE LEVERAGING DATA FOR EACH ASPECT OF THEIR BUSINESS FROM PRODUCTION TO FULFILLMENT TO MARKETING AND ADVERTISING

Leveraging Data Across the Company

Nike and PepsiCo are two examples of brands that are leveraging data for each aspect of their business from production to fulfillment to marketing and advertising. During the current COVID-19 pandemic, Nike’s digital sales increased to 30% of total revenues and PepsiCo made $13.9 billion in sales, higher than Wall Street projection of $13.21 billion.

Nike

  • Nike has been more focused on its D2C strategy and terminated its contract with Amazon in late 2019 to enable it to collect the data of its customers.
  • The company acquired several AI-based and data analytics startups, including Celect, in order to gather data to increase personalization, understand its customer journey, increase personalization, enhance demand predictions locally, and improve customer experience worldwide.
  • Nike also wants to optimize inventory, cut out-of-stock rates, enhance inventory control, and increase profit margins.
  • Nike Direct, the company’s latest marketing and retail strategy, is largely data-driven, and it is eliminating intermediaries.

Nike is cutting intermediaries to get closer to customers

  • Through the effective use of customer data, Nike has been able to improve its “customer acquisition and retention by identifying which customers to target and predicting the right time to target them”. The company has also been able to manage its local supply chain networks.
  • Nike’s investments in digital and data analytics capabilities paid off during the current COVID-19 pandemic as online sales rose by 75% between March and the end of May 2020, “new membership registrations to Nike apps more than doubled to 25 million“, and digital sales increased to 30% of total revenues.

PepsiCo

  • PepsiCo, Inc. is investing in data analytics in order to remain relevant in the evolving consumer marketplace. The company is digitizing its consumer insights and marketing efforts. The company is also using data-driven analytics to enhance cycle times and boost innovation beyond the expansion of lines and flavors.
  • The investments in enhanced data analytics capabilities are spreading throughout the company and impacting all aspects of its business.
  • PepsiCo wants to improve its “ecosystem of data and consumer insights” to enhance the efficiency of its promotions and achieve more dynamism with its marketing spending.
  • PepsiCo generated $13.9 billion in sales revenue and its share price was $1.07, in the first quarter of 2020, higher than Wall Street projections of $13.21 billion and $1.03.
  • PepsiCo has launched two D2C websites during the current COVID-19 pandemic for snacks and beverages in order to meet the rising demand for at-home eating.

PepsiCo goes direct to consumer with online snack sites

  • PantryShop.com and Snacks.com were created within 30 days by leveraging the customer data insights, resources, technology, and inventory to meet the evolving needs of consumers.

Research Strategy

While we focused on data from February 2020 – present (e.g. COVID-era), we expanded to the past 12 months because the strategy of leveraging data to integrate each aspect of a business has to be developed and deployed over time for it to yield the desired result. Both Nike and PepsiCo were able to perform better than most of their competition in the current COVID-era because they could easily implement data integration strategies that they have developed before the pandemic.According to industry experts, brands that did not have digital and data analytics capabilities found it difficult to thrive during the lockdown. According to Nike CEO John Donahoee, “COVID-19 has shown that our strategy is sound, the company would continue to maintain its focus on its digital strategy”.

Integrating New Data Strategies

The research develops two brief business cases on the integration of data strategies in marketing and advertising campaigns. Although both of them are in the retail space, one is the incumbent (Nike) while the other (Harry’s) relies more on the direct-to-consumer business model. Overall, there is a shift towards the direct-to-consumer business model, which is driven by the competitive advantage formed through data analytics and accurate, targeted marketing campaigns.

Nike

  • The multinational footwear, apparel and equipment manufacturer has started to focus on its direct-to-consumer business model with the support of customer data and predictive analytics. Nike uses data collected from the Nike app to improve the retention and acquisition of customers through an enhanced understanding of customer journey and demand prediction. Predictive data analytics allows the company to correctly choose which customers to target and when to target them.
  • The deployment of the new business model is triggered by recent new startups in the retail space and Nike being not the real owner of customer data on e-commerce platforms, such as Amazon. The shift of business model is expected to be accelerated by the COVID-19 global pandemic, which has caused people to reduce the visit to brick-and-mortar shops and increase the exposure to the online browsing and ordering of goods.
  • Nike’s recent marketing strategies have been largely driven by big data and the Nike Direct initiative aims to cut down on the number of intermediaries between manufacturers and consumers. The direct-to-consumer initiative has generated a sales revenue of $10 billion in 2018 and is expected to grow by 60% by 2020.

Harry’s

  • The American firm manufactures men’s shaving gears and personal care products online and via retail stores. The business is primarily driven by its e-commerce platform where Harry’s collects data and generates insights on the customer journey. The company used the online referral system by offering new products to a group of customers for free, in return for a certain number of friends to be on the waiting list of the products. The emails of referred friends together with referrals obtained via its social media channel put together a significant amount of data that inform precise marketing campaigns.
  • Direct-to-consumer business is driven by the trend of online shoppers, especially millennial customers, and the real-time order fulfillment for both consumers and businesses. The outbreak of COVID-19 has further advanced this trend, as there has been a noticeable change in consumer behavior, such as online purchase, delivery service, and curb-side pickup.
  • The product prelaunch initiative has turned out to be a great success for the razor company, which uses advertising as the source of data to develop more accurate, targeted marketing campaigns.

Research Strategy

The research reviewed a series of papers, marketing insights, news and case studies. There is limited information publicly available on data integration marketing case studies since February 2020 or over the past 12 months before September 2020. By following digital marketing trends, we identified two brief business cases published during the period of the COVID-19 global pandemic. In line with the trends pre-COVID, we incorporated new trends induced by the pandemic, which supplements the motivation for integrating new data strategies in marketing campaigns.

AI for Marketing

With most companies collecting first-party data about their customers, many brands are turning to AI techniques to glean actionable insights from all that data. Brands across industries are leveraging machine learning and predictive modeling tools to predict customer behavior, determine their most valuable audiences. They leverage AI to offer digital and personalized consumer experience by organizing, improving and streamlining tasks such as generating custom experiences, personalized emails, offers, and chatbots.

Smart Segmentation

  • Brands use AI and smart segmentation to identify the best target audience for their products. Through a much quicker and accurate process, brands can even find more specific customer segments within these identified target audiences, allowing the brands to offer more personalized and unique customer experiences.

Establishing Relationships with Customers on Their Terms

  • As much as brands use AI to segment target groups, they also have to get their messaging right through the right channels and right time. Brands leverage AI to prepare the right messages, determine the quantity of those messages to deliver to each customer, and select the proper channels to ensure customer engagement.
  • Through an analysis of the number of messages sent to customers and the number of active customers, brands are able to get a good picture of their target audience’s preferences for interacting with their messages.

Providing Curated Content to Each Segment of a Target Group

  • After identifying target audiences and the best ways to engage them, brands still use AI to make product recommendations tailored to the expectations of each target group segment based on the behavior of web browser users and product similarities. This means that brands are more effective in introducing customers to products they most likely buy.

Solving Attribution Challenges

  • Brands are leveraging AI to connect and analyze online and offline customer behavior at scale, making it easier to determine which cross-channel campaigns are most engaging. The insights derived through AI, brands are able to cut back underperforming campaigns and increase their advertising ROI, even as the environment has become more competitive.

Where Do D2C Brands Stand in All This?

  • D2C brands don’t have to beg for customer insights and are able to retain all their first-party customer data without sharing with retailers. They have details about their customers, including the time and channels through which they purchase products, as well as insight into returns and customer feedback.
  • All of this data presents a significant advantage to D2C brands over traditional retailers. D2C brands are able to maintain full control over their business, including product development, messaging, go-to-market strategies, and expansion plans. More control over customer data means they can more easily “expand their audience of prospective customers by identifying similar consumers who may be interested in the brand.”

Data Privacy Laws

We had to expand the scope of our research to include larger companies that service consumers, in order to find most of the insights about how brands/companies prepared for/complied with the new data privacy law called the California Consumer Privacy Act (CCPA), which was the only data privacy law we found such insights about that was implemented within the past year. The companies we found such insights about were Dollar Shave Club, Bonobos, Walmart, Target, Amazon, Sherwin-Williams, Thumbtack, Hulu, Condé Nast, and Postmates.

Dollar Shave Club

  • Dollar Shave Club is an example of a D2C brand that updated its Privacy Policy to ensure compliance with the CCPA.
  • A pertinent part of that policy states as follows: “You also may request to opt out of DSC’s sale of your Personal Information to third parties, and to our affiliated companies that do not share the same brand name, for their commercial use. This means that, if you opt out, going forward, we will not share your Personal Information with such third parties to use for their purposes unless you later direct us to do so. To effect the opt out, please click on the Do Not Sell My Info link which also is on our website footer.”

Bonobos

  • Bonobos is an example of a D2C brand that appears to have added two new buttons to its website, in order to ensure compliance with the CCPA.
  • Those buttons state “Request My Personal Information” and “Do Not Sell My Personal Information.”

Walmart

  • Walmart has been working through legal ambiguities within the CCPA, such as “the language around loyalty programs and if retail companies can offer them going forward.”
  • Walmart also increased its investment for creating data maps with regard to the CCPA, which enables the company to “collate the extent of personal information collected by different business units, where and how this information is stored, what they do with it and who it is shared with.”
  • In further regard to the CCPA, Walmart’s various business teams, such as advertising and technology, were “investing resources in auditing and making decisions on how to respond to requests from customers to see their data or those who ask for it to be deleted.”

Target

  • A spokeswoman for Target stated that in light of the CCPA, the company would include “a ‘Do Not Sell’ button on its website, [which] will be visible to all U.S. shoppers and California residents will have access to information outlined under the new law.”

Amazon

  • According to a spokeswoman for Amazon, the company’s preparation for CCPA included “launch[ing] a revised privacy notice and . . . review[ing] the final regulations to ‘understand what signage may be required to inform customers how to find the privacy notice’ at its stores.”
  • The spokeswoman also noted that Amazon did “not plan to put a ‘Do not sell’ button on . . . [its] website because Amazon is not in the business of selling customers’ personal data and it never has been.”
  • Like Walmart, Amazon also increased its investment for creating data maps with regard to the CCPA, which enables the company to “collate the extent of personal information collected by different business units, where and how this information is stored, what they do with it and who it is shared with.”

Sherwin-Williams

  • According to Reuters, paint retailer Sherwin-WIlliams placed links pertaining to the CCPA on its “websites in California.”

Thumbtack

  • Thumbtack’s CEO “assigned staff on his engineering, product, marketplace, policy and legal teams to prepare the company for the new [CCPA] rules. But he hopes to have them back to their regular jobs soon. “

Multiple Brands

  • Many brands, including Hulu, Condé Nast, and Postmates sent emails to their customers notifying them of updates to their privacy policies in advance of the CCPA going into effect.

Research Strategy

We looked for insights about how consumer brands prepared for/complied with new data privacy laws, such as the CCPA, but we could not find much information about that. The vast majority of the information available about this topic was advice for how companies can comply with such data privacy laws. However, little information about how specific consumer brands prepared for/complied with such laws was found. Based on the limited findings about such even for large companies, a potential reason why this information was not readily available is that companies likely don’t want to publicly discuss how they are preparing for/complying with such laws.
We looked for the information about preparation for and compliance with new data privacy laws in the U.S. in three ways. First, we reviewed numerous articles about such from sources including Forbes and Ad Week. Second, we tried expanding the scope of our research beyond February 2020 to the past year, but that also did not yield many insights specific to consumer brands (though it did yield insights about some of the companies identified above). Third, we expanded the scope of our research to include companies that service consumers, instead of just consumer brands. By doing so, we were able to find insights about how companies prepared for/complied with the CCPA. We also tried looking for such information about another major data privacy laws implemented in the U.S. within the past year (New York’s SHIELD Act), which went into effect on March 21, 2020. However, we could not find any information about how any brands or companies had prepared for/complied with the SHIELD Act. The CCPA and SHIELD Act were the major, new data privacy laws we found that went into effect within the past year in the U.S., which is why our research focused on those two policies.

1st Part Data

Some brands taking full ownership of their first (1st) party data and using it to their advantage include Nestlé (an incumbent company), Kopari, E.l.f. Cosmetics, and Califia Farms. Following the outbreak of COVID-19, D2C startup brands like Kopari and Califia Farms are leveraging new “channel[s] to connect” with their customers and promote online shopping.

Nestlé

  • Nestle recently established a DTC channel to get its brands directly into the hands of its consumers. Nestle’s regional globe office in North America is in Saint Louis, Missouri, United States.
  • Nestlé is switching from third-party solutions to a new “audience-first advertising strategy,” and has ramped up its utilization of its database (first-party data) in a manner that has lessened its reliance on third-party data solutions.
  • Rachel Mervis, the programmatic lead of Nestlé’s digital media team, sales, and e-business unit, recently talked on the journey Nestle at a 2020 summit in the United States titled “The Make Possible Summit.” The Make Possible Summit took place in May 2020.
  • To embrace a new digital ecosystem and implement a first-party data solution, Nestlé commenced by eliminating it’s established supply chain. Nestlé is leveraging publishers and DSPs and partnering with local, tier-one publishers to become closer to its consumers without needing third-party data.
  • Nestlé has relied heavily on cookies in the past but is now focusing on building its first-party audiences. Nestle is strategically leveraging data obtained from those individuals who have opted for its communications (first-party data) to reach its consumers (directly).
  • Nestlé is an example of a DTC enterprise. It was founded in 1866 and is the most successful food and beverage company (based on size) and qualifies as an incumbent company. This study considers an incumbent company as a company already well-positioned in a market ahead of entrants or startups.
  • According to Reuters, Nestlé experienced its best quarterly sales growth within five years in 2020. Nestle’s sales growth in 2020 is due to the increasing number of consumers that stockpiled its products in March 2020 and strong momentum within the Americas.

Kopari

  • Kopari is a D2C startup brand leveraging the use of first-party data to promote online shopping among its consumers.
  • The beauty brand uses first-party customer data for A/B testing of different customer experiences. This strategy helps the company to personalize its marketing and ensure that its messaging remains relevant to its target audience. For example, the brand utilizes a call-to-action caption with the wordings, “Get in My Bag,” instead of “Add to Cart” for specific consumers.
  • Kopari recently added “shoppable” features to its blog by utilizing a “Shop the Post” option. This option allows its customers to purchase specific products mentioned in blog posts. Kopari is an excellent example of a D2C brand that has discovered innovative ways to smoothen the customer journey by streamlining the purchase path.
  • Kopari has implemented a change in its “SMS text messaging” role to its consumers following the COVID-19 pandemic. It owns a subscriber database containing information on 40,000 individuals.
  • Kopari has been sending SMS text messages to its subscribers before the COVID-19 outbreak. Kopari produced a unique playlist that it used to message its subscribers on April 17, 2020.
  • Kopari’s sales link on Spotify experienced a 20% higher click-through rate than other messages the company sent within the first quarter of 2020.
  • The text message sent by Kopari on April 17, 2020, also contained a link to the company’s website and accounted for the highest number of orders associated with a quarter. The results outpaced that of promotional emails.

E.l.f. Cosmetics

  • E.l.f. Cosmetics is an established cosmetic brand in the United States. It is a fast-beauty cosmetics company that has become the “favorite” brand among consumers. It is also a D2C e-commerce brand that uses both its website and stores for sales. Third-parties like Walmart also sell E.l.f Cosmetic products.
  • E.l.f. Cosmetics is one of the D2C brands altering their text message strategies due to the coronavirus pandemic.
  • E.l.f. Cosmetics owns a subscriber database of about 140,000 consumers. The company sends a minimum of three messages to every subscriber every month. The content of text messages (SMS) sent by E.l.f is the same as the contents sent via email.
  • E.l.f. Cosmetics recently discovered that SMS sent to its subscribers is negatively affecting the impact of its contents sent via email, as its email click-through rate and open rate for subscribers signed up for SMS and email recently declined by 9%.
  • To optimize the use of its first-party data (subscriber information), the cosmetics company (E.l.f) decided not to send any SMS messages for April 2020 due to sensitivity issues. However, this strategy to cut down on messaging was successful as its customer engagement did not decline but remained stable.
  • E.l.f assumes that customer engagement is measurable via revenue and its website traffic. The company uses revenue and website traffic to quantify its customer engagement.

Califia Farms

  • Califia Farms is a manufacturer of plant-based milk products and uses first-party data obtained from its e-commerce website to optimize and launch new products. It is a leading, privately-owned, plant-based beverage and food company. The farm has a D2C e-commerce website.
  • Califia Farms has sourced essential data related to its customers’ preferences from its D2C channel. It utilizes these insights to identify suitable offerings, optimize its packaging designs, and customize its messages to improve its core audience’s experience.
  • In May 2020, Califia Farms successfully launched two types of vegan butter made from sea salt and avocado oil and olive oil with sea salt. The company uses first-party data to streamline its product development as well as its distribution processes.

Research Strategy

The study has examined several reports, market analysis, and case studies of brands taking full ownership of their first-party data and using it to their advantage. The research focuses on case studies or success recorded and (or) reported after February 2020 (after the COVID-19 pandemic started). The research brief considers success metrics associated with first-party data as increased sales revenue, click-through rate, or engagement rates. It also assumes that maintaining quality results with less marketing efforts by leveraging first-party data indicates a successful strategy.

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