With products that boast small price tags and mass appeal, package-goods marketers have not been a primary target group for emerging interactive media. But given their share of the nation's ad spending, as well as a growing industry desire for one-on-one consumer communication, sooner or later package-goods categories will merit serious attention.
At $3.5 billion in measured spending, packaged foods, for instance, represented the fourth-most advertised product category in 1992, according to Competitive Media Reporting. Add in another $2.4 billion for toiletries and cosmetics, $2.1 billion for drugs, $1.2 billion for candy, snacks and soft drinks, $600 million for soaps and cleaners and the market reaches $9.8 billion.
That's 40% more than the $7 billion for automotive, computers and electronics, all of which have been more commonly associated with interactive media advertising.
But thus far, most package-goods marketing executives are waiting and watching what happens, letting marketers of higher-ticket items foot the bill for testing most interactive opportunities.
"Let's say package-goods marketers will want to look very hard at these kinds of things, but we'll limit our choices on the things we want to get our feet wet with," said Dave Braun, VP-media services for Kraft General Foods and one of the industry's most respected media experts. "With our kinds of products, prices and margins, we can't invest hundreds of thousands of dollars to find the right sandbox."
The attitude is born out of past experience. Package-goods marketers have already been guinea pigs for interactive applications-from VideOcart's interactive shopping carts to home grocery shopping services on Prodigy-that have bombed.
And they still haven't found a more cost-effective way to distribute coupons than free standing inserts, which deliver nine of 10 package-good coupons. While the prospect of an in-home printer spewing out coupons is exciting, it's also many times more expensive.
Package-goods marketers also are jaded by nearly a decade of predictions that home shopping would be the wave of the future for weary consumers seeking to replenish supplies of commodity products. Defying those predictions, consumers so far have been more captivated by bargain-hunting at warehouse clubs, discount drug emporiums and Wal-Mart superstores.
That sentiment isn't the same in Canada, however. Several package-goods marketers, including Quaker Oats Co. and Whitehall-Robins, have signed letters of intent to participate in a two-way interactive TV test from Groupe Videotron, Hearst Corp. and others, starting next year in Quebec. Perhaps because the interactive "hype" is less strong and the opportunities less daunting, Canadian marketing executives seem more eager to try out new interactive applications.
But most U.S. package-goods marketers admit they're trying to keep a toe in the interactive waters.
"We're paying a modest amount of attention to it. I have every belief that the way consumers are reached will change in the next 10 to 15 years due to new technologies-and ultimately our business is about reaching out to consumers through media," said Jerry Noonan, VP-marketing for cookies and crackers at Nabisco Biscuit Co.
"I don't know how much it will really change how we do business in the short run. There isn't yet a dramatic change in the way to reach audiences."
Interactivity "is a very exciting idea and makes for great copy, but it's not going to happen easily for package-goods companies," agreed Greg Lincoln, director of advertising services for Pillsbury Co.
Even companies that are testing interactive applications, like Coors Brewing Co., are cautious because they want to see how consumers react to the emerging technologies.
"Yes, we're trying to learn about what we can do, and have tested some things," said Rob Klugman, VP-corporate development at Coors, which has done several interactive 800-number promotions and sponsored the "Coors Fan Picks Poll" on Prodigy. "But there still are a lot of questions.
"How interactive do consumers want to be? For us, to the extent that these media are investments, not just mass media, they're disproportionately expensive-the CPM and production costs are relatively high," he said.
With product price tags that rarely edge above $5, package-goods marketers have little maneuvering room.
"We can't afford to do something that will raise cost by a significant percentage," Kraft General Foods' Mr. Braun said. "In today's value-conscious community, no one will tolerate that. But if I were Chrysler, I could send someone a videocassette for an expensive car, give that person a firsthand look, and not significantly change the price tag."
Traditionally, that price barrier has been the stumbling block for home shopping and delivery services seeking to expand into supermarket products. But Time Warner will try again, providing ShopperVision home shopping and delivery of supermarket and drugstore products when its planned interactive TV experiment gets up and running in Orlando.
The other overriding issue, Mr. Braun said, is that whatever a public company like Kraft General Foods does "has to deliver value to stockholders and consumers over the next 3 to 12 months. And none of this [interactive media] is going to move our business forward in the next 12 months; it's not in enough houses to do that now.
"We have to be careful; we could spend all our time trying to figure out what's going to happen in 2000, and then we might not be around in the year 2000."
Doug Cox, VP and director-marketing services for SmithKline Beecham, said new technologies-and any media-are of secondary concern to package-goods marketers like himself.
"How to build brand equity is the question of central importance to us today," he said. "We're looking into new media to see where we fit in, but brand equity is the jumping-off point for all our thinking."
There also are some concrete reasons interactive isn't a perfect fit yet for package-goods products.
Said Mr. Braun: "Until we as package-goods marketers figure out better ways to get our products into homes than putting them into stores, we just won't have the same kinds of opportunities higher-ticket items do with interactive."
Martin Nisenholtz, senior VP-director of Ogilvy & Mather Direct's Electronic Marketing Division, said he's not surprised by package-goods marketers' skepticism about interactive media.
"When you have a big-ticket item that is more information-intensive and the margins are significant, it makes more sense," he said. "For the package-goods group to get involved in a real way, there needs to be a pretty big base of users and a significant amount of consumer excitement. It's an attitude based on the reality of the number of people using the technologies."
But that kind of thinking could have a fatal flaw.
"The issue is not so much whether these technologies are going to make package-goods advertising more powerful, it's whether they represent new forms of local distribution," Mr. Nisenholtz said. "When it becomes that, believe me, these guys are going to pay attention."
In-store merchandising, in the meantime, may yield more immediate opportunities for package-goods products than in-home interactivity. Jayne Spittler, VP-director of media research for Leo Burnett Co., says in her presentations to Burnett's package-goods client groups she mentions in-store kiosks, in addition to online services, as places where package-goods marketers can think about interactive opportunities.
"Package-goods marketers need to ask if their current consumers are interacting now, and, if so, how we can enhance that interaction electronically," Ms. Spittler said. "Sure, package-goods marketers need mass media, but there may be niches or subsegments of consumers we can talk to in a more direct, electronic way."
Some of the opportunities interactive media present may be indirect.
"One scenario is where the world divides between haves and have nots among consumers," Pillsbury's Mr. Lincoln said. "The haves will have access to these sorts of new interactive media; the rest of the population will still be a mass-market world, where we're talking $5 CPMs, not $50,000. And I think maybe only one-third of the population will be among the haves in that scenario."
But the good news is that cheaper media might be available to package-goods marketers.
"The technology is very exciting, and it's great to fantasize about what could happen-and a lot of that will happen," said Kraft General Foods' Mr. Braun, who likens the current information superhighway hype to that seen in the early days of cable TV. "But the reason it's going to go slower is that lot of people whose revenue will be counted on to expand it are companies like us, whose principal concern is what it's going to do for me today and this week.
"It's a nice thing to watch, but we have to still spend most of our time worrying about the here and now."
INFO HIGHWAY A CLICHE? THINK AGAIN
The information superhighway continues to be hyped by the press and media executives but is leaving most Americans confused.
According to a poll released earlier this month by Louis Harris & Associates, only one in three respondents had ever seen, heard or read anything about the information superhighway.
And of those who had, only 11% said they understood it "very well."
Another 29% said they understood the superhighway "quite well," while 59% said they understood it "not at all" or "not very well."
"For the majority of the American public, this is still clearly an idea in the making, one that has little or nothing to do with their lives today," said Humphrey Taylor, president-CEO of Louis Harris, in a report on the poll.
Of the 1,255 U.S. adults surveyed, 8% said the information superhighway had mainly to do with entertainment, 5% said it had to do with science and 37% said it had mainly to do with business applications.
Another 25% said it had to do with "something else," while 18% said it had to do with two or more of the previous applications and 7% weren't sure.