Scaling Profitably and Sustainably: A New Perspective on How Success is Measured in CPG
The pandemic has brought changes to CPG brands, and we are seeing them across the board. Especially in relation to determining how success is measured. Consumer packaged goods (CPG) is one of the largest industries in the nation. In the US, CPGs have a market size of nearly 2 trillion.
But the CPG industry is a competitive arena. Start-ups trying to secure their footing in the market are up against legacy brands and a shifting market. Post-pandemic conditions carry more challenges than ever for the CPG industry.
Some of the roadblocks to success you may be encountering include
Market volatility
The ever-increasing e-commerce market
Wavering consumer loyalty
So, what needs to happen? Pivoting your ideas to match new trends is necessary. Finding new ways of scaling processes to pave the way for success is the key. The measurement of success is not what it once was, so a mindset shift is necessary.
You can find success with your brand by scaling profitably and sustainably. Here's how it works!
How success is measured in CPG: Then and now
Out with the old, in with the new! The “old school” method of defining success is no longer relevant in the current market. Traditionally, success was measured by velocity scale. The more locations you sold at, the more successful your brand was.
With a velocity scale mentality, CPG brands relied on how well the product moved off the shelf and into the consumer’s hands. But, velocity scale is a dying measurement of success, and new trends are emerging.
New trends for CPG brands
Focus is shifting to maintaining current partnerships versus establishing new ones. There is no longer a race to increase the number of stores brands want to sell in. Being laser-focused on gaining more sales from shelves you currently dominate is a huge factor in scaling processes.
What does this measurement of success shift rely on? Your relationship with your consumers and retailers.
Determine projection of sales more accurately
Predictive growth has never been more imperative. Understanding the next normal impacts your projection of sales in our post-pandemic market. To predict margins, CPG brands must consider the following:
Basing analytics on the most up-to-date understanding of consumer behaviors.
Harnessing a wide range of data sources to create an up-to-date snapshot of brand and competitive dynamics.
Translating insights into scenarios that help provide direction to the unknown.
Due to the pandemic, many CPG brands were in a reactionary state, throwing strategy to the wind. If you want to scale profitably and sustainably in this market, you need to do two things: determine your projection of sales and develop a sound strategy.
Achieve lower customer acquisition costs
Lowering customer acquisition costs is essential to maintaining a presence in today’s retail world. High business acquisition costs and low customer lifetime value is a recipe for disaster.
Achieving lower CAC (customer acquisition cost) is possible. It requires careful planning and implementation of strategies. Some ways you can leverage a lower CAC are to:
Focus on your target audience
Retarget your current customer base
Improve customer repeat rate
Introduce affiliate programs
Improve your sales funnels
Introduce marketing automation
Bottom line: staying in front of your customers and being a leading voice and vision in your CPG brand will scale your business. As your customer retention rate grows, so will your profit and sustainability margins.
Better profit margins
Limiting your expansion into more retail space will result in better profit margins. Most retail stores require promos and bulk pricing so that they can turn a profit on your products. Putting your product into more stores means your cash flow will get tighter with every retail location you acquire. With this method, you are losing profit on all sides.
Profit margins are already so thin that scaling into new businesses is costly for your brand. Again, this is why measuring on a velocity scale isn’t the most profitable option.
A shift of focus on developing more authentic retail relationships.
The consumer relationship is shaky at best for CPG brands. Retailers are gaining greater control of consumer relations, which means your retail relationships are more important than ever.
Utilizing consumer data, CPG brands can better position themselves to connect directly with their audience through personalized products and prioritizing customer needs. Achieve this quickly by working with fewer locations and prioritizing those relationships.
CPG brands need a strong e-commerce presence to succeed
Another area where your brand can scale profitably and sustainably is the D2C sector. Right now, e-commerce is the fastest-growing hot spot for CPG brands.
The challenge? D2C requires an entirely different approach that is more marketing-based and less sales-based. During the pandemic, there was a significant rise in online shopping. The growth potential is there for brands willing to build up that consumer rapport. Adjusting to meet e-commerce demands is crucial in a market where consumers want products now.
However, the e-commerce environment is constantly shifting. Your business will have to update sales strategies frequently. Also, you will need to determine what pricing strategy is most profitable on an ongoing basis to meet your sales projections.
CPG businesses that are not leveraging these scaling processes will fall behind.
Scale profitably and sustainably with systems that promote quality over quantity
CPG Brands can no longer ignore the growing demand for quality over quantity. As you maintain your presence in current storefronts, rely on these new metrics for how success is measured.
Scaling profitably and sustainably is a mindset shift. Are you feeling overwhelmed with the pressure of establishing an e-commerce presence? Are you stuck in the "old school" mindset? Understanding the latest trends for CPG brands is what I do best! Let me help ease your frustrations.
Smooth out your current operations with my monthly management services. Utilizing these new success measurements, I will build a powerful presence for your brand. Are you ready to let go of the “old school” ways and leap into the future with your CPG business? Schedule your call with me today!
Let's leverage a smarter way for your brand to scale successfully and sustainably.