A day in the life of an agency managing a major CPG customer.
In the past two years, the way consumers shop has dramatically changed. According to Statista, in 2021, eCommerce retail sales accounted for $4.9 trillion worldwide. And that number is forecasted to grow over 50% by 2025, reaching an estimated $7.4 trillion. Digital eCommerce disruptors like giants Amazon and Walmart have pushed more traditional brick-and-mortar retailers to transform their business models. This trend has caused Consumer Packaged Goods (CPG) brands to continuously evolve with the industry, developing organigrams to better support transformative media and sales activities, rethink media support and their influence to grow share and profit, and better ascertain investment value, beyond on-site media sales.
If you’re an eCommerce lead at an agency or brand managing a CPG business, then this article is for you. We will cover the importance of Paid Search to eCommerce growth, the metrics that can propel your business, and the steps your team could take today to drive those metrics.
The Importance of Paid Search in eCommerce
For many CPG brands, eCommerce represents an area for profitable growth with potential for a positive contribution to the category. In the omni space, your retail media investment is unique in that the connectivity to a brick-and-mortar store undoubtedly correlates to an increased level of sales volume, so your online paid search spend has an outsized impact on overall revenue. This makes investments in those channels for agencies managing major CPG brands that much more important. The net impact that it has on their overall relationships from a sales standpoint makes it that much more important in terms of eCommerce overall.
The CPG category in eCommerce will only continue growing in the future; however, skyrocketing inflation is causing more shoppers to prioritize value over name recognition by opting for private label brands instead. While CPG brands are looking to boost their appeal without lowering prices, these companies are adopting several tactics to protect their margins, including the importance of paid search as one mechanism to maintain market share.
What’s the Role of a Managing Director Overseeing a Major CPG Brand’s Day-to-Day Work Like?
Managing directors of search commerce oversee the retail strategy, which entails everything from investment strategy to tactical optimization approaches, to determining how the media they put into market supports the overall business objectives. They also need to ensure that the items they’re promoting with media have a healthy Advertising Cost of Sales (ACoS), as well as take care of SKUs that are at risk. It’s important to deliver on a 360-degree connected consumer view on how not only retail supports national media objectives, but how the retail data feeds everything they do from a national perspective. Much of their job is to ensure the connectivity of that data.
With the help of eCommerce advertising software with an omni-retailer view, Managing Directors and their teams can look at category-level information to determine influx points for their own brand, as well as competitors. Ad tech empowers them to know when they need to make optimizations based on competitive insights and to determine what brands are on a schedule. For example, competitive insights can help identify when throughout the calendar year a competitor brand is likely to roll out Sponsored Products campaigns for their products. These teams will then be able to proactively hone in on their targeting efforts to compete for market share with their competitors. Their Search Teams examine keyword search term reports and category intelligence, then cross-reference with Google trends to know exactly when competing brands are running national media campaigns. Competitive intelligence then allows Search and eCommerce Teams to plan their media budgets and conquest advertising strategies accordingly.
But there's another percent of the budget dedicated to completely unbiased consumers, and retail media is one effective way to influence them. For instance, when this type of consumer is searching a non-branded term, you have an opportunity to overtake your competitors by placing bids on those terms, especially when a competitor is running a national media campaign that is driving a lot of category traffic. In terms of budget, this means that your agency needs to be aware of when consumer searches are likely to pulse and be ready with a plan of action with the right tools in place to stay competitive and maintain your market share.
The Top Metrics to Care About Most
Grow Market Share
Market share is undoubtedly one of the top metrics most eCommerce teams are going to care about, as almost all media plans get planned against it. It is what the larger organization is held accountable to, as well as marketing teams and even President and VP-level executives. In many cases, it's even how bonuses get paid, not to mention how budgets get justified.
eCommerce teams must figure out how to prioritize incremental sales with their advertising strategy by making optimizations that gain visibility across both paid and organic listings for their brand. These teams are using ad tech tools like Share of Voice reporting to discover which keywords their competitors are ranking for that they’re not, and then take action on uncovering gaps in your competitors’ strategies. An omnichannel tactic that teams can leverage is using keyword performance from Amazon to build out their keyword list on other retailers, such as Walmart.
Share of Voice also helps to notify these teams when their products drop off page one in search ranking, to measure data across targeting and ad types, and to know when their competitors start bidding on new terms. Staying focused on knowing their market share and developing strategies to gain market share helps with understanding where their media dollars are working the best for their brand.
The second most important metric for most Managing Directors at holding agencies overseeing major CPG brands is profitability. Looking at the basis points (BPS) difference in profits in shipped units versus a period before, or a set period like the previous year, is key to knowing just how profitable a brand’s product is.
No matter the retailer, if profitability is too low, then an easy first option to take is pausing those poorly performing ASINs. For instance, on Amazon, if a product’s profitability is too low, then that ASIN's eligibility for advertising is in jeopardy. If the ASIN’s profitability drops too low, Amazon can actually revoke an ASIN's ad eligibility or cease to order your products. Ecommerce teams can act by pausing the ASIN in advertising and proactively redistribute their budget towards an ASIN that’s less likely to encounter eligibility issues and more likely to remain profitable. One easy way to maintain profits is to leverage intelligent marketplace management software, to make optimizations that increase sales while lowering costs.
Achieve Media Efficiency
The third top metric at top of mind for most teams overseeing major CPG brands across several retailers are media efficacy and efficiency, which essentially means how can they best utilize those media dollars to keep a healthy ACoS and increase ROAS.
Too often, eCommerce teams make the mistake of placing all their eggs in one basket, meaning they have no idea how to plan for or what to expect from individual channels in terms of omni search investments. If you have $30 million in your budget, then it’s likely that search is going to be $10 million, but how are you further allocating search spend? It’s always important to know what to expect from your search and display efforts in terms of driving penetration, especially if it’s driving new-to-brand sales.
In many instances, some percentage of the media budget will be flexible. With the overall goal of market share, it's important that everybody's moving in that same direction, completely independent of media via your marketing teams, your retail teams, your sales teams, whatever the case may be. Every team member must move in that same direction when budgeting or planning for it. You're not simply going to plan based on a market share goal. While everybody is responsible for that goal, each team is going to plan based on their expected percentage contribution to that goal, which is the biggest opportunity for eCommerce teams.
“The nice thing about Pacvue is that it puts all that data sort of at your fingertips, and you're able to look at it and make strategic decisions as to not only how you should be optimizing your accounts, but from a KPI perspective, what you need to do to back into your larger goal in this case market share.” -Managing Director at a holding agency of a major CPG brand.
Are you leading an advertising team at an agency and currently managing a major CPG brand? Pacvue Advertising can help you leverage customized retailer and channel strategies, as well as intelligent bidding logic automation to fit any agency model. Contact us today and we’ll show you how to manage your clients' ad campaigns efficiently and prove your impact!