Taking package goods to the net

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Package-goods marketers couldn't wait for interactive advertising to get started in 1994, when former Procter & Gamble Co. Chairman-CEO Ed Artzt warned ad agencies to gird for an interactive future or risk irrelevance. This was months before Netscape emerged as the first Web browser.

But more than a decade later, post bubble and bust, package-goods marketers are largely on the sidelines watching others take part in online advertising's rebound. Why they're not bouncing back with everyone else and how to get them to are mysteries that are still confounding online publishers. But several signs point to changing attitudes that could soon drive more package-goods dollars online.

To be sure, several millions-strong online relationship programs already abound in package goods-having survived boom and bust. But they're supported mainly by offline advertising in an industry that places Internet advertising among its lowest priorities.

P&G spent only $12.2 million of its $2.7 billion media budget on online advertising last year, according to TNS Media Intelligence, well less than it spends just redeeming coupons from one of its 10 annual BrandSaver newspaper inserts. Most of its competitors have relegated Internet advertising to equally low status, along with outdoor, radio and ROP newspaper advertising pushed aside by TV.

The easy explanation is that package-goods brands inhabit that low-involvement ring of online-marketing hell where consumers rarely click on ads, do research or buy. Eager to test interactive advertising, it didn't take package-goods advertisers long in the 1990s to figure out consumers generally didn't want to interact with their ads. So they gravitated toward added-value utilities to connect consumers to brands, like online newsletters, games and reference sources.


"The vast majority of package-goods purchases fall into the impulse-buy or rote-buy categories," which are notably poor drivers of online research, said Mark Schar, who led P&G's interactive advertising ventures at the end of the bubble period before leaving in 2001 and is now chief marketing officer of software-maker Intuit. Passion and price differentials are what drive consumers to do a search on a brand or product category, he said-and package goods have little of either.

Another impediment is that package-goods brands aren't sold much online. Amazon and Drugstore.com have been trying to raise their profiles as beauty-product marketers, Mr. Schar said, "but that hasn't been a huge success. ... I think consumers have voted that there's not enough benefit to buying there to drive them to those purchase channels."

The fact that P&G recently shuttered its Reflect.com customized beauty site-even though it ranked around the top 10 beauty sites on the Web last year-is another sign online is unlikely to be a major retail channel for package goods, he said. "It's an example of online cosmetics purchases not meeting an economic hurdle."

But none of these things explains why CPG marketers won't now give the Internet its due as the mass medium it has become, particularly for young entry-level consumers of package-goods brands. Those reasons go deeper emotionally and historically to missteps on both sides of the bargaining table, leaving an aftertaste that could take gallons of mouthwash to eradicate.

"In the early days there was a lot of hubris," said Rishad Tobaccowala, CEO of Publicis Groupe's Starcom IP. The irrelevance threat Mr. Artzt wielded before traditional ad agencies was played back to CPG marketers by online media many times over. Online media "came in selling through threats that if you don't do this, you'll be dinosaurs. You'll be road kill," Mr. Tobaccowala said. Then, when the bubble burst, he said, "the people at many of these companies realized the dinosaurs were the people selling to them."

Of course, before that happened, the digital-marketing divisions of the some of the big CPG players had signed on for millions of dollars worth of online media buys that either went unused or amounted to forced sales on skeptical brand managers who nevertheless had to cough up funds from their budgets. Millions more went to build and support brand Web sites that were lightly visited.

"There was a lot of resentment around these [digital] divisions," Mr. Tobaccowala said. "When the digital division lost lots of money or built Web sites nobody went to and the crash came, two things happened. Half of the digital people were laid off, and the other half were basically slapped on the wrist and told, `Now you report to the dinosaurs."'

Indeed, the central corporate interactive unit at P&G ultimately dwindled to a staff of none by 2003, with interactive duties now generally handled at the brand level and periodically bouncing between oversight by brand-management and information-technology staff. P&G in 2002 also ended its interactive-media-buying account with Grey Global Group's Beyond Interactive, and continues to buy interactive media on a brand-by-brand basis through its interactive agencies.

Unilever's interactive staff similarly waned and scattered, ultimately taking on duties for other emerging areas such as the consumer call center and in-store marketing. Even before the bubble burst, Unilever consolidated its online media buying within its overall media buying and planning account with WPP Group's MindShare, New York.

The problem-and the opportunity-is that once the Internet began re-emerging as a credible ad medium, CPG players had to go through "a re-education process," Mr. Tobaccowala said. The 20- and 30-something assistant brand managers handling interactive projects in the industry today, "come to it not by technological capability, but from being consumers, from having iPods," he said. But that's actually a good thing for online media in one sense.

"We're now beginning to see CPG folks, especially the middle management, internalize the Web as part of their regular media behavior," Mr. Tobaccowala said. "And as they do, they start to think, `Hey, I should use this."'

Some headhunters saw a sense of digital payback in the post-bubble job market, as key players in online marketing had trouble getting interviews or jobs when they came looking in the "old economy." But such hires as John Hommeyer, former chief marketing officer of Pets.com and Hotwire, by Clorox Co., former Amazon executive Carl Gish by Unilever and former Reflect.com CEO Richard Gerstein as CMO at Alberto-Culver, indicate bygones are bygones-not to mention that online marketing capability is coming back into the industry.


For now, however, online media is clearly a role player in the media mix for package-goods brands. And, as athletes know, that means sitting on the bench most of the time. But at least it has a role-one that may be on the verge of growing.

Unilever more than tripled its online spending from a fairly small base last year to $17.6 million, with online components playing a key role in integrated campaigns for two of its biggest and strongest brands-Axe and Dove. At 3% of its measured media budget, that's still not much, but it's more than at most package-goods players.

"There's a very specific role in the marketing mix that online can deliver," said Brad Simmons, VP-North American media, Unilever. "For some brands, it can mean generating awareness behind a sweepstakes or certain kind of promotion. It may be delivering a more in-depth brand experience. But it's things that you can best get through that online medium that TV doesn't deliver quite as well, at least at this point."

For its part, P&G sees online marketing somewhat similarly as "a permission-based way to offer consumers more information about a product than can be shared in a typical 30-second television or radio spot," a spokesman said. "It opens a two-way exchange where we can better educate consumers about our products."

TNS data, the spokesman added, doesn't accurately reflect interactive activity for CPG companies such as P&G, he said, though he declined to provide an overall interactive spending level. Suffice it to say, with estimates of Web-site maintenance of around $1 million per site and with P&G operating dozens of highly active relationship-oriented sites in the U.S. alone, that its unmeasured spending easily tops the $12.2 million in measured outlays.

What you don't hear from package-goods marketers is much talk of the Internet being a reach medium. But that's what it will take to get major financial commitments, and some people see signs it's about to happen.


Package-goods brands have, since their earliest days, been built around media strategies based on reach. "You need to reach large amounts of people inexpensively because of the economics of the business," Mr. Tobaccowala said.

Online's reputation as a medium best suited to targeting and direct response, combined with its lack of streaming-video capability for most users, limited its reach potential in the past, he said. But with the rapidly growing penetration of broadband and widespread acceptance of online media in the everyday lives of consumers, Mr. Tobaccowala expects package-goods players will start seeing the medium in a new light.

Norm Lehoullier, managing director of WPP Group's Grey Interactive, agrees. "Two years ago, the big marketers would say the Internet is a very good relationship-marketing tool but it's not a mass medium," he said. "And increasingly when I talk to them they're saying it's evolving into a mass medium."

At least for male-oriented-product launches, some package-goods marketers have made online advertising an important part of the reach equation. L'Oreal, long a heavy print and TV advertiser, has advertised extensively on sports Web sites behind this year's launch of L'Oreal Men's Expert-a big change for a company that spent a mere $3.3 million on online ads last year on all its brands, according to TNS.

The trouble, according to Mr. Schar, is that online publishers aren't quite willing to accept their role within the mass-media universe, either-at least not the role some package-goods marketers see for it as an alternative to print.

"It looks like the Internet is turning out to be an online magazine," he said, "and it will price and look a lot more like print media than anything else. ... Of course there's great customization and experimentation in rich media. But it's still nowhere near the kind of motion and persuasiveness that television has."

Another hindrance to package-goods players using online ads may also be close to disappearing, Mr. Lehoullier said.

Product launches drive most of the industry's ad spending, and few products get launched without simulated consumer testing using such tools as VNU's ACNielsen BASES. Before brand managers can get clearance on launches, they generally need a BASES volume forecast indicating it will hit the necessary hurdles. And among key factors that have gone into those forecasts are TV gross ratings points.

"Many of the tools used within the industry haven't evolved fast enough to accommodate the fragmented media universe," Mr. Lehoullier said. "That is changing rapidly, but it hasn't changed yet."

Even if package goods still aren't making a big impact economically in interactive advertising, it has started making an impact creatively. Ironically, when the Cyber jury handed out two Grand Prix awards for the first time at this year's International Advertising Festival, both went to package-goods brands, including Henkel Adhesives in Brazil and fledgling design-focused U.S. home-care brand Method.

Method VP-Marketing Ritch Viola doesn't recall online advertising being much of a factor when he was at Clorox. "Online has to be a bigger part of our budget," Mr. Viola said. "If we tried to do print or TV, we'd get nowhere." With a far smaller budget than its big competitors, Method, using Crispin Porter & Bogusky, Miami, has also used such low-budget, high-buzz vehicles as pop-up retail stores in San Francisco and a "People Against Dirty" catalog inserted into magazines.

In Method's online campaign, users type in a "sin" they've committed, which appears on a hand and gets washed away with Method soap. While it was a creative success, it also helped demonstrate some of the limitations of online advertising for package-goods players.

Though Method advertised Comeclean.com on The Onion and a handful of other Web sites, more of the traffic may have come from a viral e-mail started with 5,000 friends and acquaintances of company and Crispin employees. Though the site invited people to buy holiday gift packs of hand soap, those sales proved disappointing, he acknowledged. "But it was definitely successful in building brand awareness and getting people talking ," he said. "And we're sure it helped sales in [offline] stores."

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