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Innovate or Stagnate

Posted: August 12, 2013, 11:30 a.m. EDT


As more companies enter the pet segment, manufacturers must heed the ever-increasing trend of digital marketing and sales drivers.

By Drew Andersen

The pet industry has fared pretty well over the past 20 years, weathering the economic storm and growing from a $17 billion industry in 1994 to an estimated $56 billion industry in 2013, according to the American Pet Products Association.

But where there is profit, there is competition, and according to industry experts, with more companies entering the market, it takes thoughtful innovation to reach retailers, customers or both.

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Social media, including Facebook, Twitter, Pinterest and Instagram, have become mainstays in the industry, giving manufacturers an opportunity to engage customers on a regular basis. Courtesy of MPF Photography/Shutterstock

The Big Shift
Skycam, a new Los Angeles company that manufactures surveillance webcams accessible via Skype, attempted to raise capital through crowdfunding site Indiegogo in May, but failed to reach its $50,000 goal. It raised less than $5,000 total.

The company plans to market to the pet industry, among others, but founder Roger Yiu is perplexed about how exactly to bring his product to market.

"I don’t know the [U.S.] pet industry,” said Yiu, who is from China and just breaking into the pet market. "I’m just going to call and see what the terms are to get into stores. But there seem to be a lot of stores that are not Petco or PetSmart.”

But Yiu may have some difficulty with his strategy, as retailers have grown savvier over the past two decades and have shifted the advertising burden from themselves to manufacturers, said John Cullen, principal at Bronx, N.Y.-based pet industry marketing firm Bulldog Sales and Marketing.

"As the larger retailers are starting to become more like grocery or mass merchants, they’re starting to realize the demand for products has to fall on [manufacturers], not retailers,” Cullen said. "You have to do marketing now; the retailer is demanding it. You can’t get into Petco and you can’t get into PetSmart without brand awareness.”

And with some of the largest consumer product companies in the world, such as Nestlé, Mars and Procter & Gamble, in the pet product marketplace, new entrants and smaller manufacturers must leverage unique strategies to compete, said Don Tomala, managing partner at Chicago pet industry marketing agency Matrix Partners.

"The way to compete is to innovate,” Tomala said. "It’s as much product driven as marketing driven. If you’re selling a brown, round dog food just like everybody else’s, you’re not going to be successful.”

Medium Movement
Even a novel concept requires some marketing and sales efforts to hail its benefits to retailers and consumers, and while social and digital media are continuing their rise to prominence, the fundamentals of spreading the word have not changed drastically.

"You can talk about social media becoming more popularized, but the building blocks of the basics of marketing are not different,” Cullen said.

Nonetheless, marketing budgets are shifting to the digital environment, Tomala said, with companies allotting around 30 percent of their annual budget toward online efforts. And with the shift, more traditional marketing methods are starting to creep into the online space.

"Digital couponing and digital promotions are becoming really popular,” Tomala said. "You blend a little bit of the old and a lot of the new. Those are basically the trends.”

"You really should put some kind of promotional hook on top [of advertisements]: ‘Buy my treats because you can win a prize,’” Cullen said.

Social media, including Facebook, Twitter, Pinterest and Instagram, have become mainstays in the industry, giving manufacturers an opportunity to engage customers on a regular basis.

"When we have 100,000 to 200,000 people who are fans, it gives us the ability to market on a daily basis,” Tomala said.

But reaching the threshold necessary to make a measurable difference isn’t easy and now requires some advertising spending, Cullen said.

"I’m not a big fan of social media to drive demand,” he said. "It’s more of a social engagement and feedback channel. You need at least 50,000 ‘Likes’ or you’re just talking to yourself, and you have to buy those Likes.”

Meanwhile, traditional media have not lost all of their luster. In fact, thanks in part to the digital media environment, radio is making a comeback.

"More and more people are listening to Internet radio on their digital devices,” Tomala said. "All of a sudden, radio budget is growing again.”

Targeted print advertising remains a relevant medium, Cullen said, including pet-specific publications like Dog Fancy, Cesar’s Way and Dogtime Media. However, general interest is best left to more broad-appealing products.

"People magazine does not index well against pet owners,” Cullen said.

Bypassing the Middleman
The online environment also has made it possible for manufacturers to bypass retailers altogether and target consumers directly.

One company that’s taking this approach is Petbrosia, a Cincinnatti pet food manufacturer launched in March by Keith Johnson, former Procter & Gamble brand manager.

The company sells direct-to-consumer custom-made pet food through its e-commerce website, petbrosia.com.

Customers fill out information about their pet on the website, and Petbrosia uses a series of algorithms to determine the nutritional needs of the pet, factoring in breed, age, weight and allergies, said Johnson, adding that it then delivers the food to the consumer.

As all of Petbrosia’s sales come through its website, the majority of the company’s marketing budget is directed toward online. So far, Petbrosia has stuck to social media and blogs to spread the word.

"In two months we grew from less than 2,000 friends to having 20,000,” Johnson said. "I look at other traditional manufacturer websites, some of which have been around for 10 years and only have 40 to 50,000 Likes, and we are on our way to passing them.”

One of the advantages to Petbrosia’s strategy is having direct access to customer information.

"We know each and every one of our consumers, and it allows us to create a relationship with them,” Johnson said. "We call it relationship marketing. Consumers send us emails when they have questions. We have prioritized the customer, and we’ll get back to them within an hour or less. Many have first-name conversations with people on our team.”

And in another unusual twist, rather than operating behind the scenes in a factory setting, Johnson opened Petbrosia’s offices in a storefront, where he welcomes pet owners to come in and see the product first hand.

"If there’s something we want to test, we invite people in and get their reaction,” he said. "We can get real-time feedback, and it helps people get to know our brand. We don’t sell in stores, so none of [them] will penalize us for being in front of the customer.”

A/B testing of the e-commerce site has helped to boost sales, said Johnson, explaining that this testing is a controlled experiment through which inbound website traffic is segmented randomly into two groups to see different versions of a web page, allowing web developers and marketers to optimize their sites as a means of increasing the instances of a certain goal, i.e., transactions.

"We spent a lot of time updating the site to make the click as simple as possible,” Johnson said. "I’m used to having sites that are filled with information. Now there’s a wave of simpler websites; at least the part where they’re ordering product is not cluttered.”

Just like packaging, the front-facing part of Petbrosia’s website is simple, but consumers can dig deeper to read the "back label” if they so choose.

As for Yiu and Skycam, they might follow Petbrosia’s lead.

"If we’re going to do something more in the future, maybe we will consider doing more of Google AdWords and some more of Facebook, and can actually target people who own pets and push the advertisement,” Yiu said. <HOME>

 



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