What is CPG advertising? There are a lot of acronyms in the advertising world, and it can be hard to keep up with what they all mean. Which one is most important for your business?
We’re going to break down some of the most common acronyms you might hear when working with a marketing agency or media company. We’ll explain how each acronym works and give an example of how you might use them. So let’s get started!
What is CPG advertising?
CPG stands for Consumer Packaged Goods. According to Wikipedia, it’s “the marketing of consumable products not thought of as distinguishing in terms of the product range, i.e., goods that are largely indistinguishable from competing brands or offering little reason for consumers to prefer one brand over another”.
CPG advertising is consumer-focused because the goal of CPG companies is to get consumers to purchase their products. Ads can be seen in multiple places, including billboards, magazines, newspapers, television commercials, online banner ads and pop-ups, radio ads , etc.
The benefits of CPG advertising
A marketing campaign for a product generally consists of three parts: 1) identifying the target customer group, 2) determining what customers want from the product and how to market it to them, and 3) executing the advertising. Given all of this work that goes into a marketing strategy, it is natural for marketers to ask if their efforts are worth the cost.
For this reason, marketers must carefully weigh the pros and cons associated with different types of advertising.
CPG (consumer packaged goods) ads are often compared to other forms of advertisement because they tend to be the most popular among the three main categories of ad media: print, broadcast, and internet.
Consumer packaged goods also have direct competitors and must deal with marketing and advertising-related issues such as: how to advertise the product, what is the right approach for pay per click marketing, and whether social media ads are beneficial.
Perhaps one of the most common questions that marketers ask about CPG ads is if they really work. Since there are so many other forms of advertisement that are available, marketers typically wonder why they should spend their money on ads that have lower rates of return.
The following information will discuss the advantages and disadvantages of CPG advertising in terms of how it is executed, what the customer wants from the product, and how it fits into a marketing campaign with other forms of advertisement.
Why is CPG advertising online important?
Everywhere you look, there’s an advertisement for some kind of consumer packaged goods. McDonald’s has billboards on the side of highways promising cheap tacos if you turn at the upcoming exit, while your grocery store offers coupons to use on your next trip.
Even the magazine in your doctor’s office probably has drug advertisements plastered all over the page. CPG advertising is everywhere you look, and for good reason: these companies need to get their foot in the door with as many people as possible.
With the prevalence of online media today, it should be no surprise that a large portion of this advertising is now happening online.
What are the current CPG advertising trends?
CPG advertising is a vital element in the success of a product. In 2010, total U.S. CPG retail sales were $1.57 trillion, and manufacturers spent over $500 billion on marketing those products.
In 2012 the United States Census Bureau reported that almost 70% of Americans drink at least one cup/glass of soda per day, and in 2013 the Bureau of Labor Statistics reported the average household expenditure on soft drinks was $2.34 per week.
With so much invested in CPG advertising and marketing, it is important for marketers to be aware of current trends among all demographics, including Millennials (born 1980-2000), an age group that has been greatly influencing many of the current CPG advertising trends.
Where do CPG companies spend their CPG advertising dollars?
As can be seen from the pie chart above, over 78% of CPG companies’ advertising spend is on television ads. In second place is digital with 9%, followed by print at 7%. Radio and out of home each account for less than 1% of CPG ad dollars.
In terms of spending trends, we have been noticing that out-of-home (OOH) spend has been increasing over the past year, while TV and print have remained relatively flat.
Who spends the most on advertising CPG?
It should come as no surprise that big retail brands like Procter & Gamble, Unilever and L’Oreal spend billions of dollars on advertising their consumer goods.
What is surprising, however, is just how much they spend in comparison to their peers. Indeed, these three top-spending companies spent nearly one billion more than runner-up, Johnson & Johnson, and approximately $14 billion more than the 4th and 5th place spenders (Nestle and Colgate-Palmolive) combined.
What percent of sales do CPG companies spend on advertising?
For CPG companies, advertising represents a big portion of total expenses (estimated at around 20% or more). Some examples:
- Periodicals: A study by the Interactive Advertising Bureau and PricewaterhouseCoopers found that in 2016 U.S. publications got 23% of their revenue from advertisements; this number has remained stable since 2007.
- TV: A study by the Television Bureau of Advertising (TBA) found that in 2016 TV advertising represented 41% of total broadcast revenue; this is around $17 billion (not counting online ads).
- Radio: A 2016 estimate by BIA Advisory Services suggests radio ad sales will be worth $1.5 billion in 2017.
- Digital: In 2015, advertisers spent $59.6 billion on internet ads (source: Interactive Advertising Bureau and PricewaterhouseCoopers).
How much should you spend on CPG advertising?
How much should you spend on CPG advertising? As with any marketing activity, there is no one-size-fits all answer. But let’s break it down, so you can see the trends and how they might apply to your business.
While the ad spend per capita varies greatly between countries (US $167.38 in the US, €44.88 in Germany and just €2.51 in Spain), the average CPG ad spend is pretty consistent at around 0.5% of total revenue.
In contrast to other marketing channels, there’s actually a strong positive correlation between social media spend and overall revenue – companies that spend more on social media spend more on other channels too.
And while you might think that big brands spend disproportionately on advertising, this isn’t true – they actually put more effort into product research and development to make sure their products remain competitive. It’s the smaller companies that tend to rely on ad spend as their main growth driver.
What is a CPG advertiser?
A CPG (Consumer Packaged Goods) advertiser is a company that manufactures and markets goods directly to the end user, with most of their sales coming from large retailers such as grocery stores. Types of CPG advertisers include: food companies, beverage companies, pharmaceuticals , household product manufacturers and companies who advertise grooming and hygiene products.
CPG advertisers typically create their own advertisements and marketing campaigns, although agencies may be hired to assist with creative and media buying.
Their budgets tend to be larger than most other types of advertisers because they seek national exposure through ad placements in major broadcast and print media outlets.
What is a CPG in marketing?
A CPG, or consumer packaged goods company, are just that – they are companies that sell consumer packaged goods. These are products that are most often purchased off of store shelves and can be found in most homes today.
Most commonly, these products include foods , drinks , cleaning supplies , snacks , health care products , and beauty products. Other CPG companies include restaurants, apparel, mobile communications providers (i.e., mobile phones), pharmaceutical companies, etc.
What is the difference between CPG and retail?
CPG stands for “consumer packaged goods” retailing, and is the modern day’s version of traditional distribution. CPG companies are involved in all aspects of consumer goods, from product creation to distribution to retailing, whereas traditional retailers typically only involve themselves with the final stage of that equation.
The first step for a manufacturer or supplier is to make a product and package it. This means creating the item, designing its packaging, producing it, and placing it in inventory if necessary.
If the manufacturer or supplier is an independent business, this whole process can be completed in-house. However, many manufacturers are now contracting with other companies to manage one or more of these steps on their behalf.
Once the product is manufactured and packaged, it must be distributed to commodities brokers. One large company can have dozens of separate distribution centers across the country.
These brokers take possession of the goods and usually store them in a warehouse until a retailer or distributor requests a shipment. Commodities brokers communicate with each other by means of an electronic network that tracks shipments and inventories.
The network is constantly updated to ensure that brokers have the most accurate information about available supplies, product types, quantities in storage, shipping schedules, etc.
