CPG Marketers Plan Digital Transformation to Engage Consumers

A Forrester Consulting
Thought Leadership Paper
Commissioned By Accenture
September 2014
CPG Marketers Plan To
Seize The Digital
Disruption Opportunity
A Guide To CPG Consumer
Engagement In A Digital World

Table Of Contents
Executive Summary ....................................................................................... 1
Digital Capabilities Disrupt CPG Marketing ................................................. 2
CPG Marketing Has Started Its Digital Transformation With
Increased Use Of Online Channels ............................................................... 3
CPG Marketing Identifies Barriers To Overcome To Achieve Digital
Transformation Benefits ................................................................................ 4
CPG Marketing Leaders Anticipate Huge Digital Transformation
Benefits ........................................................................................................... 6
Accelerate Your Analog To Digital Transformation ..................................... 8
Appendix A: Methodology ............................................................................. 9
Appendix B: Demographics .......................................................................... 9
Appendix C: Endnotes ................................................................................. 11
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1
Executive Summary
Global consumer packaged goods (CPG) firms face a world
in which their accumulated brand value is threatened by the
relative decline of the importance of mature markets
serviced by “modern trade.” These firms are faced with
relative decline in Europe and American markets, pressure
to accelerate new product introductions (NPIs), and
competitors’ exploitation of direct-to-consumer marketing
and fulfillment. CPG brands need to transform from the
analog marketing and sales model that served them so well
in developing and consolidating modern trade to a new
combination of direct marketing, digitally enabled product
innovation, and multichannel selling. Direct-to-consumer
initiatives will help them improve margins and loyalty,
accelerate NPI, fully service the vast developing market
opportunity, and more effectively win and serve a new wave
of digital consumers in developed markets.
In May 2014, Accenture commissioned Forrester Consulting
to evaluate the opportunity for CPG marketing leaders to
market and sell directly to consumers. Forrester developed
a quantitative survey to test the assertion that brands
cannot deliver a relevant, effective consumer experience
without also leveraging digital channels. They will have to
engage consumers in a dialogue, serve up customized
content and offers, and blur the distinction between
marketing, sales, service, supply chain, and R&D in order to
become consistently relevant and earn consumer loyalty.
Results from in-depth surveys with 35 CPG marketing
leaders at the C-level or VP level, and with 95 at the brand
manager level, show that marketers are keenly aware of the
threats and opportunities offered by digital transformation.
While they have begun their transformation and anticipate
accelerated innovation, along with increases in both
consumer lifetime value and average order value (AOV),
they perceive local cultural, legislation, and logistical
barriers to the digital transformation of consumer
engagement.
KEY FINDINGS
Forrester’s study yielded four key findings:
› CPG marketing professionals anticipate significant
investment in digital marketing, multichannel integration,
and digitally enabled innovation to target global consumer
market segments, increasing consumer lifetime value and
the number of “blockbuster” products.
› CPG marketing professionals expect proportionately more
growth in sales through their own digital channels than
through those of eRetailers.
› CPG marketing professionals believe that digital
transformation faces challenges from local legislation and
from limited digital support for new product introduction.
› Marketing and sales do not agree about impediments to
direct-to-consumer selling. Marketing does not see the
lack of internal integration across key functions or
departments as an issue in the same way that sales does.
Digital engagement complements the
traditional sales channel, media, and trade
spend, enabling firms to market directly to
consumers, engaging them in their chosen
channels, shortening the time and path to
purchase, and simplifying fulfillment and
consumer service.

2
Digital Capabilities Disrupt CPG
Marketing
Data from the study showed that C-level marketing leaders
and CPG brand managers are acutely aware of changes in
the commercial environment that present both opportunities
and challenges related to digital transformation. We asked
them about the factors that favor adoption of digital
channels for increased consumer engagement and loyalty:
› Accelerated new product introduction. CPGs
participating in our study had a median of 90 product lines
that are currently being brought to market, and more than
half said that more than 10% of these were introduced in
the past year. Two-thirds of our survey respondents, 66%,
expect the rate of new product introduction to accelerate
significantly.
› Anticipated restructuring of marketing to global
market segment focus. As savvy marketers, our
respondents recognize that the relative importance of
country/regional segmentation will decline in the face of
new consumers from developing markets swelling the
ranks of digitally addressable global market segments
with (some) common behaviors, values, and brand
attitudes (see Figure 1).
› Anticipated changes in channel mix. Respondents
recognize that the vast bulk of sales today are still through
retailers and distributors (see Figure 2). They anticipate
the continued importance of trade spend, estimating that it
accounts for more than 27% of promotional funds now,
with two-thirds expecting a significant increase in the next
five years across all channels. Particularly, they expect to
increase their trade spend through digital channels, as
they expect proportionately more growth in sales through
their own digital channels than through those of
eRetailers. Seventy-five percentage of CPG marketers
believe that eRetailers sales account for 6% or more of
revenue today, with 85% of CPG marketers expecting
eRetailers sales to account for 6% or more revenue in the
next 5 years. While 60% of CPG marketers believe that
sales from their own digital channels account for 6% or
more of revenue today, with 86% expecting sales from
their own digital channels to account for 6% or more
revenue in the next 5 years.
FIGURE 1
CPG Marketing Anticipates A Shift To Global Market Segments
“Please indicate how your firm is organized
to market to consumers.”
“How do you expect your marketing organization to
change in the next five years?”
14%
29%
17%
9%
3%
23%
Major account
Country
Region
Global market segment
Matrix
Some categories are
organized regionally and
some globally
Base: 35 marketing decision-makers at global CPG organizations
Source: A commissioned study conducted by Forrester Consulting on behalf of Accenture, May 2014
29%
11%
9%
43%
0%
9%
Marketing will be organized
by major account
Marketing will be
organized by country
Marketing will be
organized by region
Marketing will be organized
by global market segment
Marketing will be
organized by matrix
Marketing will organize some
categories regionally and
some globally

3
FIGURE 2
Marketing Leaders Expect Most Sales In Traditional Channels
CPG Marketing Has Started Its
Digital Transformation With
Increased Use Of Online Channels
Our survey respondents agreed that adopting digital direct-to-
consumer marketing and sales offered attractive
advantages. They have already started to invest more in
digital marketing, selling directly through digital channels
and measuring the impact of early direct-to-consumer digital
initiatives. Brand managers and heads of marketing told us
that:
› More and more marketing spend will be committed to
digital channels. Surveyed marketers reported that 28%
of marketing spend is now devoted to digital channels and
media. None of the respondents in our survey expected to
decrease the digital share of marketing funds, and 66%
expected to significantly increase investment in digital
marketing.
› Most brand managers sell through digital channels.
Forty-three percent of brand managers declared that
between 6% and 10% of global revenues are attributed to
their brand, with 37% claiming 11% to 50% of their
brand’s revenue is through digital channels (both their
own online channel and through eRetailers). Furthermore,
brand managers, in contrast to marketing leaders, believe
that in five years’ time revenues from their own
eCommerce or eRetailers will exceed revenues from
sales in stores.
› Heads of marketing anticipate an increase in sales
through both their own online channel and eRetailers.
Of heads of marketing surveyed, 46% have 11% or more
of sales through eRetailers and 54% expect these digital
partners to account for 11% or more of revenue in five
years’ time. While only 37% claim that 11% or more of
their revenues are from their own digital channels today,
49% expect that 11% or more of their revenues will be
from their own digital channels in five years’ time.
› Personal social networks are the most adopted and
actionable social medium. Most heads of marketing
(83%) claimed to use personal social networks and
corporate blogs as marketing tools (see Figure 3), with
microblogging sites as a close second. Twenty-five of the
29 firms that use Facebook think that it is the most
actionable social media insight, with a further 21 firms that
use corporate blogs finding them to generate actionable
insight.
“What proportion of your global gross revenue is
through brick-and-mortar retailer websites
or eRetailers’ Internet channels?
“What proportion of your global gross revenue is
through brick-and-mortar retailers
or distributors?”
3%
0%
23%
29%
46%
3%
0%
11%
31%
54%
None
Less than 1%
2% to 5%
6% to 10%
11% or more
3%
3%
14%
26%
54%
3%
0%
3%
26%
69%
None
Less than 1%
2% to 5%
6% to 10%
11% or more
Today
Next five years
Today
Next five years

4
“Which of the following social assets are currently in
use anywhere in your organization for marketing/
consumer engagement?”
Personal social networks 83%
Corporate blog 83%
Microblog 80%
Public community 29%
Listening platform 20%
Ratings/reviews 17%
Private community 14%
Ideation site 14%
“For each of the following social assets you use, how
actionable are the insights from each social asset?”
(Respondents who answered “extremely actionable”)
Personal social networks
(N = 29) 86%
Microblog (N = 28) 79%
Corporate blog (N = 29) 72%
› Consumers in traditional channels promise highest
lifetime value. Brand managers offered estimates of the
lifetime value of consumers buying through the brand’s
own online channel, through online partners, or through
the best performing conventional channel such as a
broker or retailer. As expected, given the heavy emphasis
on trade funds, brand managers believe that consumers
shopping through traditional retail promise higher lifetime
value. The lifetime value of consumers in CPG firms’ own
digital channels is the next most important and higher
than consumers in eRetailers’ channels (see Figure 4).
“What is the estimated lifetime value of a consumer
by channel?”
$5,690.26
$4,841.25
$4,052.41
$7,495.61
Own online channel
Partner online channel
Own mobile channel
Best performingretail
distributor/broker channel
CPG Marketing Identifies Barriers To
Overcome To Achieve Digital
Transformation Benefits
Marketing executives and brand managers are acutely
aware of the threats and opportunities of digital disruption
for their brands and markets and have started to shift their
focus to digital channels, digital media, and direct-to-consumer
selling. They anticipate further benefits from
further investment but also perceive barriers to overcome.
Our survey respondents identified barriers to digital
transformation in terms of:
› Limited adoption of digital technologies in new
product introduction. Surveyed marketers reported a
mixed level of digital technology adoption, with 91% using
virtual designs during the “ideation” phase of new product
introduction but only 23% sharing digital product images
online with retail distribution partners (see Figure 5).
FIGURE 3
Personal Social Networks Are The Most Adopted,
Most Actionable Social Medium
Source: A commissioned study conducted by Forrester Consulting on
behalf of Accenture, May 2014
FIGURE 4
CPG eCommerce Platforms Offer Greater
Consumer Lifetime Value Than eRetailers
Base: 95 brand manager marketing decision-makers at global CPG
organizations

5
“How much of the ideation-to-launch process
is digitized today?”
We use virtual product
design during ideation
to mock up products
91%
We simulate physical
characteristics 51%
We bring consumers into
virtual stores to look at virtual
products on virtual shelves
49%
We digitally assist the
package prototyping
process
46%
We digitally assist recipe and
formulation trials 37%
We share digital images
with retail partners online
23%
› Local cultural, legislation, and logistical challenges.
Of our respondents, 94% agreed or strongly agreed that
local culture presents a challenge to CPG brands selling
directly to consumers through online channels (see Figure
6). Ninety-one percent agreed or strongly agreed that
local privacy and consumer promotion legislation
challenges the adoption of digital direct-to-consumer
initiatives.
“What do you see as the main obstacles to digital
transformation of direct-to-consumer engagement,
digital consumer sales, and directly facilitating
a purchase in one to two clicks?”
60%
57%
57%
57%
34%
34%
31%
29%
Strongly agree Agree
Cultural attitude to online
purchasing makes selling directly
through digital channels
challenging
Local privacy and direct-to-consumer
promotion legislation
makes selling directly to
consumers through digital
channels challenging
Logistical challenges to selling
directly to consumers through
digital channels
Restrictions around selling online
in certain markets is an obstacle
to selling directly to consumers
through digital channels
› Path-to-purchase contextual challenges. Our survey
respondents strongly agreed that their internal
organizations’ sales, marketing, and consumer service
functions are highly integrated with common goals and
well-aligned measures of performance (see Figure 7).
However, in a parallel survey of account managers and
VPs of sales, Forrester found that sales leaders believe
more strongly than marketing leaders that responding to
the threats and opportunities of digital disruption requires
greater organizational integration across functions.1
› Less than half (49%) of CPG marketing leaders strongly
agreed that content and offers are sensitive to a
consumer’s current social context. In order to meet
consumers’ expectations and rise above the competition,
brands need to orchestrate consumer intelligence, custom
content, and multichannel touchpoints to deliver the
shortest, simplest, and most compelling path to purchase.
FIGURE 5
Limited Digitization Of Current NPI Processes
FIGURE 6
Local Cultural, Legislation, And Logistical
Challenges

6
“How well integrated are your consumer
experiences today?”
(Respondents who answered “strongly agree”)
Our internal organization is highly
integrated across marketing,
sales, and consumer service
66%
Our products encourage or
require digital interactions
63%
We collect and analyze consumer
behavior across channels to
inform our digital relationship
63%
We provide a consistent
consumer experience across
multiple touchpoints/channels
57%
We provide a personalized
consumer experience
57%
Our digital relationship is
sensitive to physical context
51%
Our digital relationship is
sensitive to social context
49%
CPG Marketing Leaders Anticipate
Huge Digital Transformation
Benefits
Our respondents showed acute awareness of digital
disruption in CPG markets. They described their aspirations
to undertake wholesale transformation of the processes that
they use to bring to market and sell their products and
services and described in detail the barriers they must
overcome. They told us that they expect to reap the benefits
of digital transformation to:
› Accelerate innovation. A significant majority (89%) of
heads of marketing strongly agreed that digital direct-to-consumer
engagement, enabling brands to directly
facilitate purchases and introduce/retire product lines
more quickly, would increase the rate of innovation (see
Figure 8).
› Boost consumer lifetime value. Most CPG heads of
marketing (77%) believe that digital transformation will
boost consumer lifetime value.
› Lift average order value. Almost three-quarters of heads
of marketing (74%) believe that direct-to-consumer
initiatives will increase average order value, using digital
channels to upsell consumers with whom the brand
develops a relationship.
“How strongly would you agree or disagree with
each of the following statements? If my organization
could directly facilitate a purchase with consumers
and introduce/retire products more
quickly, it would . . . ”
89%
77%
74%
71%
Improve rate of innovation
Increase consumer
lifetime value
Increase average
order value
Increase consumer brand
engagement
› Increase wallet share. Most CPG heads of marketing
(77%) believe that digital transformation will offer the
opportunity to engage consumers in a mutually productive
dialogue, enabling brands to cross-sell and meet
additional needs of consumers they already serve (see
Figure 9). They believe the transition from analog
marketing and sales to direct-to-consumer digital
channels will deliver the degree of consumer intimacy
required to deliver consistently relevant experiences
across channels, increasing margin and loyalty.
› Deliver more blockbuster new products. Almost three-quarters
(74%) of CPG heads of marketing expect to use
digital store simulations to test new product impact on
consumers (see Figure 10). More than two-thirds (69%)
expect to accelerate new packaging development with
FIGURE 7
The Integration Challenge Is External (Context) Not
Internal (Organization)
FIGURE 8
Digital Transformation Offers Revenue And Margin
Growth
Note: Please note that the remaining percentage of respondents
disagreed with the statements above.

7
digital technologies, reducing innovation risk and
increasing the likelihood of successful new product
introductions.
FIGURE 9
Digital Transformation Offers Accelerated
Innovation, Increased Share Of Wallet
“To what extent do you agree with the following
statements regarding the main benefits
to your firm of increasing the proportion
of sales through a digital channel?”
77%
71%
66%
66%
66%
Increasing sales through digital
channels will increase wallet share
Digital engagement will increase
the rate of innovation
Selling to consumers through digital
channels will attract consumers
from other brands
Selling through digital channels will
increase the rate of new
consumer acquisition
Shifting some sales to digital
channels will increase revenue and
margin and reduce selling and
operating expenses
FIGURE 10
Digital Will Deliver Blockbusters
“To what extent do you agree with the following
statements about how much of the ideation-to-launch
process will be ‘digitized’ in five years’ time?”
We will bring consumers into virtual
stores to look at virtual products
on virtual shelves
74%
We will digitally assist the
package prototyping process 69%
63%
We share digital images with
retail partners online
We will use virtual product design
during ideation to mock
up products
60%
We will digitally assist recipe
and formulation trials 57%
We will simulate physical
characteristics
49%

8
Accelerate Your Analog To Digital Transformation
Forrester’s survey of marketing executives in CPG enterprises showed that marketing leaders sense that market
drivers — such as globalization, consumer demand for customization, emerging market growth, and anytime/anywhere
shopping — are prompting a shift from the importance of managing modern trade and selling through traditional retail
chains toward more digital consumer engagement and selling. In order to increase consumer relevance and loyalty,
CPG marketing leaders should evolve from analog marketing and sales to digital consumer engagement by:
› Shortening the path to purchase. Consumer brands need to re-engineer processes to minimize the jump from
browsing, enabling buying in one to two clicks. Perhaps start by helping them buy online or on a mobile device
and collect in-store, or use online eCoupons to drive consumers to stores. Or drive consumer engagement that
encourages the right channels for each interaction — for example, web, chat, and email for consumer care
services, rather than using a call center. Increasingly, brand managers will participate in forums and social media
to engage in a dialogue and help consumers solve their own problems and find new applications for brands.
› Stepping up to consumers’ personalization expectations. Consumers expect the brands with which they do
business to provide a consumer’s own device with contextually relevant content, based on the consumer’s
(mobile) location, most recent interactions, and sentiments. Marketing leaders need to capitalize on opportunities
to engage in personalized, context-aware interactions in real time before their audiences lose interest and tune
them out. In particular, firms should take account of insights from consumer behavior across channels and across
business functions like consumer service, NPI, and in-store merchandizing.
› Adapting marketing, sales, and fulfillment channels to align with consumer behavior. Consumers demand
the ability to shop at any time in any place using a device of their choice. Consumers are becoming increasingly
impatient and value near instantaneous fulfillment. They expect consistent pricing across channels and a choice
of delivery options, including prompt home delivery or a choice of pickup location. This is challenging CPG
manufacturers that have fragmented channel-specific organizations, metrics, and application portfolios.
› Building support for direct-to-consumer marketing and selling throughout the wider enterprise. The
business case for direct-to-consumer marketing and selling investments rests on increasing revenues and
margins. Recruit enthusiastic sponsors including brand managers and account directors who have revenue and
margin targets and are responsible for achieving the business case. Direct-to-consumer marketing and selling
rely on the vital collaboration of all the partners in the value chain — retailers, distributors, and logistics specialists
— but will also expose enterprise data and place incremental pressure on the IT infrastructure, so early
recruitment of senior IT leadership is essential to a successful outcome.

9
Appendix A: Methodology
In this study, Forrester surveyed a total of 35 heads of marketing at VP or CMO level and 95 brand managers with
responsibility for marketing and digital marketing strategy in CPG firms around the world. Our survey respondents were
drawn mostly from firms with headquarters predominately in the US and the UK, as well as the firms in China, Germany,
Canada, Australia, and Malaysia, with most of them operating in between five and nine countries. The study began in April
2014 and was completed in May 2014.
Appendix B: Demographics
FIGURE 11
Survey Demographics — Marketing Leaders
“Where are the headquarters of your
company located?”
43%
34%
23%
US
UK
China
“In how many countries do you currently operate?”
40%
37%
23%
Between five and nine countries
Between 10 and 19 countries
20 countries or more
“For the past financial year, which of the following
most closely describes your company’s
total annual revenue?”
23%
40%
37%
$5 billion to $19 billion
$20 billion to $49 billion
$50 billion or more

10
FIGURE 12
Survey Demographics — Brand Managers
“Where are the headquarters of your
company located?”
“For the past financial year, which of the following
most closely describes your company’s
total annual revenue?”
58%
18%
13%
5%
4%
1%
1%
US
UK
China
Australia
Germany
Malaysia
Canada
“In how many countries do you currently operate in?”
Between five and nine countries 48%
Between 10 and 19 countries 24%
20 countries or more 27%
$4.9 billion or less 17%
$5 billion to $19 billion 33%
$20 billion to $49 billion 18%
$50 billion or more 33%
Base: 95 brand manager decision-makers at global CPG organizations

11
Appendix C: Endnotes
1 Forrester surveyed 56 heads of sales at VP or CSO level and 75 account directors with responsibility for sales strategy and
execution in global CPG manufacturers around the world. Our survey respondents were from firms with headquarters in the
US, the UK, Canada, China, and Germany, with most of them operating in between five and nine countries. The study began
in April 2014 and was completed in May 2014.

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