Paid advertising is an important piece of the marketing strategy for many companies that sell CPG (Consumer Packaged Goods) such as food, household items, personal care products, and more. It can be used to create awareness of the product, increase engagement with the brand, and drive sales. Typically, the ultimate goal is a positive return on investment.
The payback period for CPG ad spend will vary depending on a number of factors, such as the product category, target audience, advertising medium, and effectiveness of the campaign’s creative. Some products and companies may have a shorter payback period than others, depending on the level of competition, consumer demand, the perceived value of the product, and how established the seller is with its target audience. Mindgruve has worked with both established CPG companies as well as start-ups; helping to manage client expectations as far as ROI and improve results over time.
Scenarios
A loyal customer may quickly purchase a new product from a familiar brand. Because of the existing customer/ brand relationship, the payback period for the ad spend could be relatively short, as the product has a strong value proposition and appeals to a specific consumer need or desire.
On the other hand, a more competitive product (ie skincare, cleaning products, etc) for an unfamiliar brand, may require a longer payback period before advertising has a significant impact on sales, as newer brands have a critical task on their hands to build awareness and create enough intrigue. These products may have a higher level of competition and a larger, more diverse target audience, which makes it more challenging to achieve a positive return on ad spend (ROAS). Demanding sales overnight while building a brand over time is not feasible, and expectations must be managed.
The Media Channel Factor
One key factor that impacts the payback period for CPG advertising is the advertising channel. Each tactic has its own strengths and weaknesses, and the efficiency of the ad spend depends on factors such as size of target audience, message relevance, reach and frequency of the ads, and the ability to track and measure results. Mindgruve finds success leveraging a combination of paid search, social media, and dynamic retargeting for clients most focused on immediate return. These channels allow a more targeted and measurable execution, enabling Mindgruve to track sales and consumer engagement, and adjust client budgets in real-time.
The Brand Messaging Factor
Effective CPG advertising campaigns typically have a clear and compelling message, a strong call-to-action, and a consistent brand identity across all channels and touchpoints. They also leverage consumer insights and data to target the right audience, at the right time, with the right message. To best refine and learn the right mix, Mindgruve tries to reserve 10% of a client’s budget for testing.
Even if a company doesn’t achieve immediate positive ROI, CPG advertising can have a long-term impact on brand awareness, customer loyalty, and other factors that contribute to the overall success of a brand. For example, a successful advertising campaign can help establish a brand as a leader in its category, build trust and credibility with consumers, and create a sense of emotional connection and loyalty among customers.
Conclusion
It’s important to note that measuring the ROI of advertising spend can be complex and requires careful tracking and analysis of sales data, marketing expenses, and other relevant metrics. The Mindgruve analytics team works hand-in-hand with clients to develop custom attribution models that allow a deep understanding of the impact of all media spend. It’s also important to consider the long-term impact of advertising on brand awareness and customer loyalty; which is typically woven into our analytics framework for CPG clients.
The payback period for CPG ad spend can vary depending on many factors, including the product, target audience, advertising channel, and the effectiveness of the advertising campaign. While it can take several months or even years for advertising to pay back, a well-executed campaign that resonates with the target audience can generate more immediate sales and lead to long-term brand success.
