"Brand loyalty is no longer guaranteed."- Brian Dunphy
Brain Dunphy, SVP of Catalina, speaks with Allyson and Brett about their mutual love of consumer packaged goods and the emerging trends for this industry.
Join them as Brian shares what excites him most about the CPG industry, how it’s changed over the years, and how data can help CPG marketers get a far deeper understanding of consumer needs, online and offline shopping preferences, and growth drivers.
Allyson Dietz: Welcome to no hype. The podcast about truth, science and the future of marketing. Brought to you by your host, Allyson Dietz.
Brett House: And Brett House.
Allyson Dietz: Today on the podcast, we have Brian Dunphy, a seasoned expert with over 20 years of experience across consumer package goods and mobile and digital media. Brian works for Catalina, who helps tons of companies like RX bar and others understand and reach their shoppers effectively. He joins us today to chat about our mutual love of CPG and some of the emerging trends for this industry. Not to mention along with Brett, a mutual love of all things, punk hard rock and heavy metal. Brian, welcome to the podcast.
Brian Dunphy: Thank you, Allyson. Really great to be here. And Brett.
AD: Before we dive in, we'd love to learn more about your journey from your early days at PricewaterhouseCoopers and Qualcomm to your most recent experience at VERB, GIMO and Catalina. How did each of those experiences lead you to where you are today?
BD: Thanks, Allyson. Yeah, I'll tell you a lot. My journey is not your, the traditional way for getting into CPG marketing. I actually started my career in public accounting as an auditor with PWC. Paul happened to be one of my clients at the time, turns out I'm not really an accountant, but it was a great stepping stone. So they recruited me in to join them in 2000. Then I spent about 14 years leading business development and ecosystem partnership development, including the BMO of ecosystem, which was one of the first global mobile app stores before apple Google entered the space. And I also then ended up bleeding business development at Qualcomm labs, which was incubating several new businesses, including focused on IOT, content distribution, and actually the formation of Qualcomm retail solutions.
At that point, we spun GIMO out, which we had incubated inside of Qualcomm labs. And I was one of the co-founders of GIMO and GIMO was an early pioneer of geo targeting, Bluetooth proximity beacons. I helped get GIMO acquired and then joined VERB mobile in the 2017 timeframe, VERB was focused on location based advertising. And that brought me up a level in understanding how programmatic advertising were and the intricacies of running an ad network. This eventually led me to Catalina, Kevin Hunter, he's our chief operating officer. He was one of my co-founders at GIMO and he had joined Catalina the year before and was helping the company develop a transformation strategy for transitioning the company into an Omni child, CPG marketing company, offering managed programmatic and data services.
BH: That is an interesting winding path to the CPG industry, which I guess Catalina technically is in a CPG company, but you service the CPG industry largely. What do you find most interesting about solving problems for CPG marketers? What attracted you to the industry, the most?
BD: What excites me about CPG is really the breadth and depth of data and sales volume is it's, is just staggering. CPG products touch everyone in our daily lives. But as we walk down the aisle in our local grocery store, there are thousands of products trying to get our attention to bring home. Since 1975, the average grocery chain is increasing CPG in store product assortment mix from 9,000 products to nearly 50,000 different skews that are available. That's a lot of products lined for shopper's attention and CPG brand marketers, they invest a lot of money in understanding who their shoppers are and how to position their products to capture attention. However, today's consumer has so many choices in how they consume content and discover and purchase products and how they react or ignore advertising. That's what eventually drove me to want to work at Catalina, because their access to real time purchase data was unique.
BH: Yeah. It isn't that one of the challenges that CPG brands have had over the last couple of decades, especially as we've gotten more involved in data driven marketing and analytics, is a dearth of data, right? Because you mentioned that there's this access to a ton of data, but they're in a sense being disintermediated by the retail players, right? The big retail players that control the point of sale and the walled gardens and premium publishers that control the audiences and CPG sort of left in the middle, not being able to connect the dots between media and actual purchases. I mean, how do you think CPGs now are thinking about data and how they kind of cover up on some of those gaps?
BD: It's about collaboration, it's about data enrichment. So I think what CPGers are doing is they're going through their mix of what do they know about their consumers and in direct consumer activities they've done as well as now sourcing panel based data, purchase data, location data, sentiment data. And you're seeing a rise of data collaboration environments through clean room type environments where CPGers are working across the ecosystem to try to make sense of that data. Because it requires sophistication in platforms, sophistication in data science, sophistication in staying abreast of the privacy landscape, right? And the challenges that go along with trying to provide targeted marketing and engagement, while still doing it in an anonymized privacy compliant way.
AD: So you've mentioned consumer a few times. I feel like CPGers, CPG people have their own language. It's almost like a secret handshake that says, hey, I know CPG. I spend a lot of time in this space and now obviously I work with a lot of other industries as well. And I find there's three terms that oftentimes people outside of CPG might use interchangeably, but they really have a specific meaning within the walls of the CPG space. So those terms, I would say are customer, consumer and shopper. Can you sort of break down those terms for our listeners?
BD: I view myself more of a mobile tech guy who's lucky enough to be in the company of CPGers and data scientists. Catalina has a rich history of being steeped in CPG industry and helping brand marketers understand who are the shoppers that buy their products and the underlying consumers in the house who are the ones that are actually consuming those products. The shopper is not always the consumer of the product. We tend to look at CPG buying at the household level and that the shopper could be a parent, a grandparent or even a grocery delivery service.
What we focus on is understanding the household that anonymized level, while seeking to understand why certain products are being consumed by the household and what may be the key driver for that purchase decision. We also cease to understand how to best engage those shoppers and consumers on what type of tactics and incentives they're most likely to react to positively for trying new products, buy more quantities of a product or recapturing brand loyalty from lapse buyers. But at the end of the day, it's really trying to get to the science of why people are buying particular products that we're trying to solve and help marketers understand.
AD: You're talking about why people buy. I spent a lot of time in this, why people by space in my career. And I really think part of the reason why a lot of people are attracted to CPG is because it's sort of credited as being the godfather of advertising and the godfather of marketing research as well. P&G in particular is known for creating that soap opera. So that they could communicate with their shopper, who at the time was the stay at home mom, every day via her television. But today, when you think about the way the world is moving and according to e-marketer data, we see digital marketing for CPG as expected to hit 36 billion in 2022. So who is today's CPG shopper?
BD: Well, I mean, it's an interesting history, right? The soap opera started in the 1930s on radio, is a powerful medium for capturing the household shopper's attention to CPG household products, such as soap, 10 game momentum and TV advertising in 1949. TV though remained the dominant medium for CPG advertisers up until the last decade, but a smart devices and streaming services became mainstream content consumption and CPG advertisers needed to shift their marketing spend and mix across different channels. And in addition, today's shoppers and consumers are much more complex in their lifestyle choices, habits and product interests. Brand loyalty is no longer guaranteed by advertising on the programs that people watch on TV. So today's CPG brand markers need to focus on a multitude of different signals to understand consumer interests along that path to purchase, just focus on a household demographic data to target consumers won't hit the mark today.
BH: Clearly the industry's seen a lot of disruption. I mean, there's the data disruption that you just talked about, the media disruption, devices, et cetera. One of the other areas that I think is massively disrupting for the industry is D-to-C. I'm a big dollar shave club user. You've got Coke wrestling with companies like LA Croix. Tyson was thrown for a loop with innovations from companies like Beyond Meat. Not to mention the growth of another area that I'm very interested is the craft beer world, right? The beer industry changed radically with Sierra Nevada, and then this rapid move movement into IPAs and sort of challenging people's assumptions about what beer taste like. So the list goes on and on, this type of disruption has opportunities and it also has challenges. I mean, can you talk a little bit about both the opportunities and challenges of this D-to-C space?
BD: Yeah. I mean, let's talk about the emerging brand first, it's right. Consumers have so many more choices these days that they're much more discerning in how they choose products and shift to category and brand loyalties. Retailers have been and quick, and to start allocating shelf space to emerging products, as they tap into lifestyle choices as their consumers like, I don't think this is necessarily going to mean the death of the big brands, it's driving acquisition strategies by big brands to grab onto rising emerging brands, such as the craft beer industry you were hitting out, right? It's also forcing them to keep abreast of consumer [inaudible] shifts, to ensure their products are in line with consumer lifestyle changes and priorities, which is why we're seeing so many companies starting to now have calorie free, non sweet and soft drinks to combat the LA Croix households that are getting rid of all sugared sodas that's coming out.
BH: And doesn't it also give them a data advantage. I mean, aren't they back to that concept or that notion of a data gap and being disintermediated by both retail and the premium and Walled Garden Publishers, doesn't the D-to-C sort of fill that gap, right? Because you're going direct to consumer, you're getting authenticated or first party data from consumers that are buying directly from you and you're disintermediating the retailer.
BD: It is in a style, right? I think direct to consumer it's a heavy investment to make. And yes, you see a lot of brands that are moving in that direction, home delivery service, subscription based services, but I'll tell you, we see data all the time. 90% of CPG products are still bought inside the four walls of a retailer. And the retailers are getting into the mix now too, with realizing that you've got offline and online purchase activity. So you see the increase of retail media networks now really, really starting to become a priority across these retailers and the investments that they're looking to make.
But all these folks, what they need is the data to help them understand what's happening at the household level. Because it's shifting so fast. Once again, it's get away from just looking at a demographic based targeting and household. We're all different, we're all unique in the stages of life that we're in. And how do we adjust to make sure that we're putting the right content, the right creative, the right message in front of that household that's going to capture that the attention of the brand attributes and what's most important to that consumer.
AD: So, Brian, you were talking about how the majority of purchases still happen inside of the four walls of a store, but at the same time, you just listed out a ton of industry trends that started out small. One trend in particular is the rise of Amazon, which has got a lot of people reeling in the CPG space. But it's not just Amazon, there's also obviously the D-to-C space. So, while it's small, what does this mean for traditional know retail and traditional grocery chains in the industry? How should brands and retailers think or rethink the shopper experience for CPG?
BD: It's about that choice, right? The pandemic certainly increased the acceleration of e-commerce shopping for CPG. And Amazon was definitely a beneficiary of that, but so is Walmart, right? Walmart introduced Walmart Plus into to tap into the shift in consumer purchasing. We also see the increase in home delivery platforms like Instacart and Gopuff. I've also been beneficiaries of that CPG shopping phenomenon. But as restrictions started to subside, consumers started getting back out, right? You can't take away from the need for fresh and the need for going in and seeing the meat, the fish, the produce that is there. The strategy has got to be providing choice and optionality of those consumers, retail was by providing home delivery, click and collect type solutions. But it's still going to, it's not going to take away from the fact that I got to run down the store to pick up the half and half that I'm at a creamer.
BH: Yeah. Yeah. And I think it depends on the type of category of product that you're buying. We're actually putting out a report, haven't seen all the insights yet, but it's basically a marketing mix modeling report that looks at European country trends, eCommerce to retail, and how that's changed over the pandemic, right? In terms of shift in places like Spain, where there's a far less of a shift to e-commerce versus countries like Germany, where there's a far greater shift to e-commerce. I found that my behavior has shifted permanently, where I probably order online 50% more than I did at any other point in my life, primarily started because of the pandemic, right? Because it was convenient, you didn't have to go and be in a store when there was a ton of uncertainty around the disease. Has your data shown trends that are really pointing towards either on a country by country basis or in the US specifically, towards like a permanent increase in eCommerce, in delivery purchases from consumers or is it smaller than I think it might be?
BD: No, no, there's definitely an increase. And what we're seeing is certainly the one, the constant consumable products that you're going to buy every single month, your detergents, right? Your cleaners-
AD: Shelf stable, shelf stable stuff.
BD: Those shelf stable stuff, it's much easier to go, just shipped up to the house because hey, cuts down the weight of the bag that you have to carry in and out of there, you-
BH: Subscribe and save.
BD: Yeah. Subscribe and save and you don't have to worry about the fact that is that product going to be on the shelf? It's going to come regularly. So we're certainly seeing an increase there. It's still not the vast majority, but it's a trend that is important, that you need to address and there's still, while people are going to have the subscriptions, brand markers still need to get trial, right? And just because you have that trial, the most important way of getting trial is still in store where you've got the opportunity to be to capture and discover new products that are there a new detergent or new hair wash.
So it is important for the brand marketer now and the retailer to look at this and realize, yep, we can capture and get a reoccurring revenue stream, which is important. But at the same time, how do you disrupt tho those consumers in saying that there's alternative choices here that you should be tapping into. So you scrub that in store, you can scrub that online with promotion. So, all of this just adds to that complexity for these marketers now and how, and where can we, these consumers and how to shift and change behavior.
AD: So what questions should CPG brands be asking like, what should they be thinking about to better prepare for the future?
BD: First of all it's, who are my brand loyals, right? Who's buying, who's buying the products, who are the lapse buyers? Why are they buying this product? What medium do I need to reach these concerns at? And how do I minimize waste on delivering impressions to households that have already bought the product, right? I think one of the challenges that all these marketers are having right now is the need for ROI. We're seeing it across the industry now that everything must be measurable. Everything must generate and improve, that it's generating a return on ad spend. And if you can't answer the questions of who's buying my product, do I need to put a promotion in front of them? Do I need to deliver 10 impressions to the house, or can I try and minimize the frequency of impressions to the people that I know have bought and double down on the households that haven't.
BH: Do you think that at CPG brands generally are limited in terms of the data they have about shopper, respect to some of the earlier questions that I had in terms of delivering those insights. And I think what I want to get at with this question is, is really it comes down to ROI, but what type of ROI are we talking about, right? Are we talking about incremental purchases being made based on a specific channel or a specific tactic, versus demand that was already there, and all you're doing is just showing them another impression which might be unnecessary.
BD: Incrementality is probably one of the biggest questions that we get from our brand marketers, right? They're looking to grow and drive growth. And especially if you're delivering promotions, right? Coupons, incentives, council, they love to provide an incentive to somebody that's already going to buy the product, you're wasting money there. So we constantly get the question of, can you tell us who the incremental new buyer is, as well as the brand [inaudible], how do we get them to buy more of that particular product and increase the basket size, or expand out to the rest of the product portfolio. And stay loyal to that brand, and really kind of get a halo effect from the advertising that's gone to a particular brand that is now uplifting other complimentary brands in that brand portfolio.
AD: You mentioned brand loyalists, you mentioned new buyers. There's this age old debate in the industry about how do you grow your brand? Is it through new buyers? Is it through getting existing buyers to buy more? There's so much debate about what's the right way to grow your brand. And you're almost describing a situation that requires both, but there are other approaches to targeting users and particularly other data sources that might add value and round out your understanding of the consumer. So, how should CPG brands really think about all of the different data sources that exist and versus building data sets and building first party data themselves, can they even do that? Is that even possible?
BD: I mean, the beauty of today is that, now with, brands can leverage different data sets in an anonymized privacy supply way to build highly scaled shopper profiles and target, engage, and measure and their advertising promotion campaigns. So, as I mentioned data, clean room environments really have been increasing in adoption by our top brand customers. And there's a variety of leading platforms that are out there. We're excited about the NewStar data marketplace and what we can, what our clients are going to be able to do with that clean room environment. Because it gives them the opportunity to take their first party data sets and bring in third party data sets without exposing PII and develop very hyper targeted consumer segments and robust insights about that.
BH: But if you get two hyper segmented, right? And P&G had this issue a while back with Facebook spend quite a few years ago, where they had shifted a large percentage of their media to kind of hyper targeted advertising across Facebook, and then realized that the size of their pie had shrunk considerably, because they were being too hyper targeted versus their traditional mass reach mechanisms, television, et cetera. It's kind of like when you try to sell a house, you bring in as many potential buyers, whether or not they're going to buy or not, is sort of irrelevant into the top of the funnel so that you can have a bunch of competing offers. With P&G, I think the idea was, hey, we're losing out on potential customers because we're actually doing more targeted advertising. And what would you think about that and some of the drawbacks of hyper targeting versus mass reach?
BD: The key to hyper targeting is you need more real time signals to be able to optimize and to be able to make changes in flight. I mentioned, just delivering TV ads to the household based on demographics, right? That's how they've always done it. But now with the ability to take purchase data, location data, all the data sets I mentioned a moment ago and to be able to inform the creative, the thing about real time data in flight is it gives the marketer the ability to see what's working, what's not working and shift. Should they change the audience, should they expand the audience? Should they change out the creative element while the campaign is in flight? Or should they shift their media buying, especially moving to digital.
BH: So this is all precision marketing. Do you find that this is driving, with this access to data, Catalina data, et cetera, especially purchase, in-store purchase data or e-commerce purchased data. Do you find that there's a shift away from kind of the traditional in-store incentive based in caps, et cetera, that the industry was so reliant on? I think that, one of the numbers that I heard in the past that was 75 cents to every dollar was spent on in-store, some people call it the white glove mafia that was hardly trackable yet 25 cents was left over for the entire media buy of a CPG brand. That includes television, includes digital radio, out of home, et cetera. And so everybody's fighting over this 25 cents. Do you find that there's been a shift in that industry where in CPG, where people are leaning more towards media, as opposed to the in-store experience due to DTC and eCommerce and enhanced data availability?
BD: It's a blend. And I'd say there was certainly shifting in that direction and the retailers saw, right? And that's why you see the investment by all the big retailers in retail media networks. You see the expansion too, of markets that traditionally were not part of the retail in store experience, like add home advertising. You see a plethora of digital display screens that are happening in store and in front of store and near store, that are now connecting that last moment of your consumers walking in the store and they see this large display unit that might be from a screen order like Starlight. And that captures your attention as to particular brand that's there, you can add product information with QR code scanning and ability to pull a promotion off that.
And all of that can be connected back to what other advertising that consumer and that households been presented with. You can do retargeting because now you take the idea of location data, and you can actually say, we know these people were in front of the screen and we know they went into the store. We know they didn't buy the product, let's go re-target these people. So I think you're seeing, you see the retailers increase their properties from their websites to mobile apps, tapping into out of home advertising, moving into programmatic as well. And you see the brands expanding.
I think there's always still going to be the need for national dollar spend, while you've got the that are going to capture a good portion of the shopper marketing dollars that are there. These brands still need to reach across the entire nation and that's where, having a blended strategy of focusing on your. But then making sure that every other dollar you're spending in, call 25%, call it more, but every single dollar now needs to be measurable and prove and justify that ROI because it can, because everything is connected now digitally to smart devices. And you have all these other signals, right? To bring in, smart marketers and data scientists can now connect dots and help answer those questions that the CMOs are asking right now.
AD: So I love your description of how the in-store experience is evolving. And I think it ties back to the concept that's become really popular, I think, in the last year or two around customer experience. And I think customer experience kind of grew out of popularity in other industries, but I think it's still, the shopper experience, the customer experience is really still very important to CPG brands. What are some ideas that you've seen that have worked really well, that you think CPG brands can be doing to improve the shopper experience and how can they get closer to their customers really, so they can provide that better experience?
BD: So I think it really, it pours the brand to start to tap back into that why. Why are the households buying particular products and how can they be more useful to understanding that consumer sentiment. If nutritional elements are what are driving the households, how do they bring that up and really kind of drive home the marketing as to how keto friendly diets can still use their products and ingredients into recipes that I'm cooking at home and now changing my lifestyle towards. It's tapping into usefulness on the product information, through apps, through tapping into social influencers, really following the content and understanding where, what their interests these households. Not only on the purchase activity, but on the media consumption and being able to tap into that really, as you take these data signals and bring them all together, really we find out just the way a brand marketer can change, can tell their story. Really gets back to understanding their lifestyle and how your product can be useful to their lifestyle and how it be integrated into their daily lives. And recipes is one example.
BH: Yeah, no, that's a good example. And I think at the end of the day, the experience is what's going to drive the end behavior. And that's what you're really looking to do. And we know that CPG companies are under enormous pressure to deliver returns, to demonstrate growth, right? I think I read, a McKenzie article recently, that's said 80% of CEOs in the CPG space are looking for marketing to drive that growth. So how have you seen CPG brands leverage measurement and analytics to really prove out and justify the spend across all of the channels that we've talked about?
BD: Well, I'll tell you, this is what excites me, really, the most about this Catalina and NewStar partnership. Is collectively, we can help these CPG advertisements measure and attribute advertising effectiveness across all these media channels by leveraging multi-path identity resolution, right? I think one of the key things is you've got to be able to anonymously link up households to devices, right? And this is where the NewStar [inaudible] trans unions, strong suit really bring to the table. Their deterministic real time purchase data combined with all outlet shop repellent data combined with mobile location data and engagement and sentiment data, all matched to media exposure data.
This is where Catalina and NewStar are able to provide CPG advertisers with across channel measurement and multi-touch attribution services that justify that media spend and enable the ability to optimize spend while in flight. And the tools are there. The capabilities are there. The marketers are demanding it, so to me, the time is, has never been more perfect for this intersection of the connected world with the variety of data sets, with the variety of anonymized clean room environments to put this jigsaw puzzle together.
BH: Yeah. And some data scientists to figure out all the complicated math to make all of this make sense from a data perspective.
AD: Well, Brian, thank you so much for joining us today. I really wish I would've gotten the memo about the t-shirts. I love that you both are supporting your favorite bands. And I think it's pretty funny that you guys both showed up like this. You didn't plan it, did you?
BD: Yeah, I think I had the [crosstalk].
BH: Brian's like, are we wearing our concert tee's?
BD: Yeah, I don't remember out. I got my guitar. I think he's got his guitar in the background. I thought we were going to have a gig.
BH: Yeah. And just for the audience, Brian's got two rocking guitars on his wall. He's got a Sabbath volume four shirt for those Sabbath deep cuts. I mean, one of the great bands that had their first four albums, maybe even their first five were just absolutely phenomenal with Ozzie. And I've got an Iron Maiden shirt, right? One of my favorite heavy metal bands of all time.
BD: Number of the beast.
BH: Number of the beast.
AD: And I'm lame wearing a sweater here. So I'm really disappointed. And I did not know though, this was like a, there was a costume that was required for this interview, but thank you for joining us and for having a little fun. And it's been a great chat with you. So thanks, Brian.
BD: Thank you.