This is a follow-up to Part I on the same topic, which you can find here.
Earlier this month I had the opportunity to catch a live presentation by the founder and CEO of Alice.com, Brian Wiegand, at the Consumer Goods conference in Orlando. This was a learning experience on many fronts, as my earlier views were based on partial information.
In a word, the best way to summarize Alice.com is PLATFORM. What Wiegand and team have done is to offer CPG brands the tools and forum with which to sell direct to consumers. Alice takes no ownership of the product, the data or the consumer. They have built a nifty e-commerce platform that allows a brand, and really a community of brands, to easily merchandise themselves to a set of engaged shoppers. Alice does take the burden of financial transaction processing, fulfillment, customer service and data management off the hands of the brands — a welcome proposition for most CPG companies so they can focus on building and marketing their goods. Their fees are based on the services they provide, not how much volume they move.
This business model puts Alice in a unique position. Unlike the first generation of selling consumer packaged goods direct to consumers (Webvan, Netgrocer, etc.), Alice can put their focus on three things: building the platform, ensuring excellent service, and working closely with the brands to mine the data.
So while my earlier analysis concluded that this channel may not move tonnage for many brands, it does offer a quick, easy and value-added way to reach a set of high value consumers…efficiently. And since Alice isn’t directly taking a piece of each transaction, the full retail margin is passed directly to the brand helping to support Alice’s promise of free shipping. But the real potential boon here for CPG brands are the valuable insights that can be gleaned by interacting with and marketing directly to consumers. Alice intends to drive a lot of value with this part of the proposition, and rightfully so.
Will consumers habitually buy and replenish non-perishable food, household cleaning and HBA items online, en masse? That’s the question the founders of Alice.com asked themselves when thinking through their business model. I think the answer is definitely maybe.
It all comes down to assortment, convenience and price. Fulfill these three wishes and a segment of the population will happily work with Alice.com as their go-to source for non-perishables. I honestly can’t see my parents (mid to late 60s) using this service, nor my sister (married w/ 2 kids, but traditional bricks retail shopper) logging onto Alice to reorder some Tide laundry detergent.
But my household (and hundreds of thousands of households like mine) could be all over this. For example, just last weekend we ran out of diapers for our 6 month old. Late on Saturday night we placed an order for Pampers diapers and Pampers Sensitive wipes on Diapers.com. What a pleasant suprise to see the Diapers.com delivery box sitting on our doorstep first thing Monday morning as I left for work. Talk about convenience. And it’s tough to beat the price of diapers on Diapers.com. The assortment of products is good too. The service works well, is cost-effective and allows us to try new items when we want to.
But how can Alice.com support free shipping for relatively low ticket items? That’s where the CPG marketer value proposition comes into play. Reality is that CPGs like P&G aren’t banking on channels like Alice.com to drive big volume today. The real near-term power of this channel is to establish direct connections with consumers and, more importantly, drive a deeper level of shopper insight. Behind the scenes of Alice.com, I’d suspect, is a pretty sophisticated set of shopper behavior engines that mine deep, detailed consumer insights and reports. At scale, these insights could be pretty valuable to big CPG brands to better understand shopper behavior and propensity to buy through a new channel of distribution. For this insight, consumer products manufacturers may happily subsidize the “free shipping” offer that is so attractive on Alice.com
Should be interesting to see how this service does – both in terms of consumer adoption and CPG advertiser support!
Display ads have worked reasonably well for CPG brands to reach an online audience. This ad format loosely emulates traditional TV media, showcases products well and offers great contextual placement. But the online media world has been waiting (somewhat impatiently) for CPG brands to funnel a piece of the ad budget to paid search. It took a few extra years to materialize, but I now see three compelling use cases for CPG brands to invest in the paid search ad format:
1. Generic category search - While display ads, word-of-mouth and in-store are the more common ways for consumers to discover new brands, online search presents its advantages. Here is a search for “frozen pizza”that shows Kashi and Totino’s brands at the top of the paid results.
2. Solution-oriented search - I view this as the killer app for CPG search investment because it’s an opportunity to reach new consumers during a very influential time. Consumers have problems, and brands have answers. For example a search for “quick and easy meals”returns paid results from Campbell Soup, Betty Crocker and Pillsbury. Note that the word “soup”, “brownies” or “cake” weren’t part of the search term, yet the paid results point to brands offering real solutions in those categories. The search results could easily point to a special offer or coupon for that brand to help drive more immediate trial and consumption.
3. Brand name search – There are two real use cases for investing in brand name search. The first is to influence a loyalist to consider trying a competitive brand — pretty much what Catalina is doing through their printed POS offers. In this example, a search for “eggo” returns a single paid search result for Pillsbury Toaster Strudels. The other use case for brand name search is to redirect traffic to a special promotion, event or loyalty program. The best example of this is found in Coca Cola’s successful loyalty program, MyCokeRewards. A search for “coke” returns a paid search listing for the MyCokeRewards program front and center.
Last fall, Brandweek ran a story outlining paid search adoption in the CPG industry. The story drew comments from a few friends and business associates in the space. I really like Kevin Doohan’s comments (note that Kevin recently left ConAgra for Red Bull) about search being akin to “the electricity in your house, it should always be on.” Just a few short years ago that view would have been a tougher sell, but the industry has come a long way fast.