Close-Up: Live Issue - Why are FMCGs going below the line?

Falling costs and rising returns on investment means it pays to talk one to one.

Last week, Captain Morgan rum was the latest in a long line of Diageo brands to shift its advertising budget below the line. Baileys, Bells, Guinness and Gordon's all have well-known direct and/or digital campaigns designed to build their relationships with customers.

Part of the incentive for alcohol companies to increase their direct spend comes from the recent crackdown on alcohol advertising by regulators.

But FMCG manufacturers in general are also spending more on digital and direct campaigns: Masterfoods and Nestle have implemented customer relationship management strategies for a number of their brands, including a £15 million loyalty scheme for Nescafe from Joshua. Unilever has already made good use of CRM for brands such as Comfort and Persil, while Hellmann's and Lynx both have a strong presence on the web. And last month, the FMCG giant called a review of its direct and digital rosters under its head of direct communications, the former Sainsbury's marketer Rachel Bristow.

Until now, neither digital nor direct marketing has been popular with FMCG brands because it has been cheaper to reach a mass market with traditional media such as television and press. And the return on investment on a direct campaign for a tin of beans is obviously far smaller than it is for a car. But advances in digital media have enabled significant cost-savings, leading to the growing popularity of the medium as a DM and CRM tool.

Simon Kershaw, a partner at the direct agency Keevil Barton Kershaw, says FMCG brands are going beyond the traditional retailer-customer relationship and, instead, looking to own the relationship with the people who actually buy their goods. DM, he says, is the "great white hope for FMCGs".

Will Collin, a partner at Naked, echoes this sentiment: "One of the key factors is the increasing strength of retailers. It's harder for brands to influence purchasing decisions using advertising because the battle is being lost at the point of purchase."

This means that, because brand owners are not in control of how their brand is represented in the shops, they need to find a way of building loyalty with their products among customers.

Jonathan Stead, the managing partner at Rapier, says: "It's much more sophisticated now, because you can identify people who are relevant - either frequent customers of a rival brand or occasional purchasers of your own brand - and turn them into frequent customers. It works best when consumers have a strong engagement with the brand."

Providing engaging content that encourages people to interact with the brand on a one-to-one basis is crucial in the battle for customers. Both offline and online CRM programmes and digital promotions and microsites can facilitate consumer involvement. Hellmann's is currently running a competition through Agency Republic for consumers to design a sandwich.

The winner bags a share of the profits when the sandwich goes on sale.

According to Steve Barton, a managing partner at Keevil Barton Kershaw, it is consumer involvement with a brand that is key to achieving the mass impact that brand managers are continuously chasing. "You need to invest in people who are going to be brand advocates and encourage brand switching.

When you start getting people involved in advocacy and referrals, then you can start to have a mass effect," he explains.

So far, there's not a lot of evidence of any of the big companies using CRM to cross sell across all their products. But this is likely to change because the aim of the discussions the likes of Unilever and Kraft are having with agencies is to realise this ambition.

Whether or not they are using direct to its full potential, FMCGs are aware that there are possibilities to be exploited.

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CREATIVE - Rory Sutherland, vice-chairman and executive creative director, Ogilvy Group UK

"There are plenty of good reasons for diversifying expenditure on FMCG brands nowadays, not least the fact new media offer targeting and precision that mass media does not yet, at not much more cost per eyeball.

"Just ten years ago, you would have needed an immense increase in sales to justify using expensive one-to-one media for FMCG. Even if your targeting was good enough to justify the activity, the volumes available were often simply too small to be interesting.

"In a digital world, neither of these two problems applies any more. The numbers are there; the opportunities are many and the cost can be minimal."

STRATEGIST - Will Collin, partner, Naked

"FMCGs are turning to DM and CRM to reach over the heads of retailers and talk directly to consumers.

"With DM, you can put the offers or some kind of loyalty bonus in the post, without the retailer charging you a small fortune. It gives the brand more direct access to consumers.

"The only challenge is that it's less clear how a consumer can have a relationship with a tin of beans than a car or a higher value brand.

"It's hard to sustain a relationship if all you're doing is giving them money off. The owners of the best data are the retailers themselves. It's tough, but not impossible."

CLIENT - Hamish Torrie, brand equity champion for Ardbeg, Glenmorangie

"We've launched products and built a brand from nothing to tens of thousands of cases in six years with our CRM programme. It's not just a question of having a nice, fluffy relationship; there's a win for members because they get first access to anything we do, which makes them feel respected by the brand.

"We've given them access to rare and exclusive bottlings. So there's an unspoken contract between us and our customers. It's about having a personal relationship, but you can't fake these things, it's got to be genuine. CRM's a very good way for niche challenger brands to build themselves."

DIGITAL AGENCY CHIEF - Martin Brooks, chief executive, Agency Republic and Zulu

"The web is becoming the facilitation hub for building broader consumer activation campaigns. More and more, the call to action is to go online.

"From a communications planning perspective, it's becoming the anchor hub for whatever the activation programme is. From a strategic perspective, the web offers fantastic opportunities for content provision. It offers a deeper level of engagement and value - it's less of an interruption than TV.

"Websites and a digital presence also offer opportunities for co-creation. The web offers consumers an active involvement in the development of brands that TV or print activity can't provide."

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