PepsiCo is preparing the international rollout of an in-house media optimization tool called ROI Engine, an initiative that has helped trim millions of dollars of waste from its online media spend in the U.S.
The CPG giant started the initiative in North America 14 months ago to measure digital ad campaigns across all of its brand and marketing channels. Next year, the company plans to bring ROI Engine to its top 20 markets globally and hire talent in its European and Asian hubs.
“Our objective, across this entire exercise, is through this data, how do we build more transparency into our buying and execution process,” Shyam Venugopal, vp of global media and consumer data at PepsiCo said.
Cost savings
Given the fragmentation of both media consumption and distribution channels, the goal of bringing measurement in-house is to make marketing more transparent and efficient while also increasing sales performance.
PepsiCo’s total U.S. annual ad spend reportedly exceeds $1.7 billion, and although the CPG brand declined to share details of the exact savings generated by ROI Engine, a spokesperson said it has reduced expenditures by several million dollars. This has been achieved by using ROI Engine’s generated insights to improve the accuracy of its targeting and reallocating spend from lower-performing media to higher-performing outlets.
“We don’t need 100% accuracy to have large effect, right? We just have to know certain things are having a bigger or smaller impact than other things to be able to see the big business returns,” Michal Geller, PepsiCo’s svp of global ecommerce marketing, said.
Building an in-house measurement unit is an expensive task that requires heavy investments in engineering and mostly, people. Cosmetics brand Coty tried taking media buying in-house after its earlier purchase of digital outfit Beamly, but had to reverse course after four years. Simply put, the gulf in cultures and priorities between the cosmetics giant and the digital outfit was too vast at the time.
Given PepsiCo’s previous investments in ecommerce, the company is transitioning to a point where there are interesting career paths in technology and data science, according to Geller.
“What we’re finding is … what [employees] really like about PepsiCo is the scale, that the problems that they’re working on are really massive and have a massive impact, and that’s been a great way to both attract and retain that type of talent,” he said.
The PepsiCo spokesperson said the current team for ROI Engine in North America is small, but final global head count is expected to be in the dozens.
More data means more agile campaigns
Brands are putting more value on data, especially as they invest more in programmatic tools that often obfuscate their digital investments. A May report from ISBA and PricewaterhouseCoopers found that publishers only receive 51% of digital ad spend, and 15% of that spend gets lost as it passes through ad tech’s middlemen.
Data is also becoming more important as the coronavirus pandemic puts an emphasis on flexibility and agility. Marketers now want to quickly optimize campaigns and reallocate spend based on shifting consumer habits and other market forces.
“The old measurement techniques were primarily running either at a national level, or across a handful of brands, or maybe about once a year … which essentially meant you had more than a couple of quarters lag to decisions that you were learning from and making,” Venugopal said. “The big emphasis was, ‘How do we reduce the lag time around decision making?’”
While PepsiCo has taken measurement in-house, it still works with external media agencies. The company has shrunk its list of partners over the years, but the drinks giant has OMD as its lead U.S. agency, along with agencies in other regions, to help with data collection and execute media buys. The data modeling and engineering, though, is all done in-house.
“We always need the ecosystem of partners [and] collaborators, and our agencies are definitely part of those who continuously push us to try new things and to try new ideas, so they are part of our strategic planning process,” Venugopal said.
Taking measurement in-house gives brands access to data from every platform their campaigns touch, such as the walled gardens of Google and Facebook, supply- and demand-side platforms, ad servers and ad verification vendors. This cuts out the need for agencies to develop reports from aggregated data sets.
Ruben Schreurs, CEO of Digital Decisions, a consultancy that worked with PepsiCo to develop its in-house products in Europe, said large brands are demanding full access to data as they take charge of campaign planning, forcing agencies to focus more on flexible ad operations and high-level strategic consulting to inform brands of new technologies or business opportunities, instead of supporting large end-to-end teams.
“Large brands are much more hands-on involved with the actual strategy of which inventory sources [they] are activating,” Schreurs said. “Also, because technology has largely [been] commoditized, anyone can operate a DSP or anyone can understand how you run a campaign on Facebook. It’s not that opaque or new anymore. So there is no real competitive edge for agencies there, and brands know that.”
Shifting media
One area of increased investment since the pandemic began is retail media. Since March, more than four in five U.S. adults say they have ordered goods for pickup from restaurants, grocery stores and other retailers, according to mobile ordering and pickup technology company Rakuten Ready.
While the rate of buying groceries over the web was increasing prior to the pandemic, the behavior has “accelerated an astonishing amount over the past few months,” Alisha Kapur, food and grocery industry consultant at SimilarWeb, said.
Figures from the market intelligence company show that September traffic to websites for grocers such as Meijer, H-E-B and Aldi are much higher than they were during the same month last year.
The potential to advertise on sites where consumers increasingly purchase groceries is huge, and the fact that visits to such sites are growing only enhances the possible influence that comes with placing a sponsored post in the search results.
Geller said “almost all of our business” is done through retail partners, so that’s where PepsiCo will gather “the vast majority” of its consumer data.
“It’s an exciting time in this whole ecosystem because it’s still a very nascent set of platforms,” he said. “There’s a tremendous amount of work being done by retailers big and small in this area, so I’d expect a lot of changes, disruption, new things coming out in the next few years, which will be interesting to watch, interesting to participate in.”
In May, PepsiCo debuted two direct-to-consumer websites, Snacks.com and PantryShop.com, where shoppers can find everything from Ruffles potato chips to Cap’n Crunch cereal to Tropicana fruit juice. Although the company hopes to generate revenue through the new platforms, it also aims to collect data and cultivate a better understanding of its customers through testing and experimentation.
“The quality, fidelity and speed at which we get consumer feedback is just changed by having this direct touchpoint with the consumer,” PepsiCo’s former head of ecommerce, Gibu Thomas, told Adweek at the time.
ROI Engine currently tracks the returns of PepsiCo’s marketing initiatives, but the unit’s scope will eventually expand to cover all of the company’s in-market decisions, including product pricing and distribution.
