About half a decade ago, “75% of non-CPG manufacturers said they’re already selling directly — versus just 18% of CPG respondents. ” But the Direct to Consumer (DTC) wave has been well underway in the CPG industry for a while now, and the COVID-19 pandemic disruption acted as a catalyst. Reportedly, one in three executives in the industry are of the opinion that their “companies are shifting their focus to DTC channels,” and furthermore, of companies that are allocating budgets for investments, “80% are allocating resources to improving their e-commerce and shopping platforms, including a full 60% investing in their digital DTC channels. ”
For DTC set-ups to thrive, CPG companies must market their products efficiently. There are a plethora of DTC marketing strategies that companies leverage, such as coming up with viral marketing campaigns (like this personal grooming care products company’s wacky marketing campaign ), setting up offline marketing strategies (like this leading beverage company's taste test campaign ), etc. Among the many DTC marketing tactics is leveraging user-generated content (UGC).
There are multiple brands, across industries that leverage UGC into creative marketing campaigns. A premier audio streaming provider for instance, featured weird and bizarre user generated playlists on billboards and memes and even got celebrities involved on the same. Singer Alessia Cara reacted to her song Wild Things, being used in a user playlist titled "Global Warming is Real... Let's Dance."
In the CPG space, a popular cookie brand aimed to highlight unconventional consumer recipes, games and art, featuring their signature cookie. The brand then reposted the responses from consumers onto their social media platforms. The campaign resulted in 249 million impressions & 29 million video views, the brand shared over 15 UGC recipes featuring the cookie and just on Facebook, the posts had a reported cumulative organic reach of 400k people.
To put it simply, UGC refers to any content created by consumers. Not only does UGC automatically increase reach and brand awareness, but it also improves brand perception. Furthermore, it opens a variety of opportunities into understanding consumer persona and helps companies to stay ahead of the curve.
Through the course of this article, we find out how CPG brands can derive optimum value from UGC, to not only improve customer relations but also to bolster the quality of their services and offerings.
• Consumers are more likely to purchase products that have associated UGC. “79% of people say UGC highly impacts their purchasing decisions.” Consumers are “2.4x more likely to say user-generated content is authentic compared to brand-created content.  ”
• Furthermore, UGC also translates into high sales conversion rates – in fact, studies have shown that, UGC have the potential to boost conversion rates by “6.4% for clothing, 2.4x for jewelry, 1.7x for footwear and 1.6x for products in beauty and consumer electronics verticals, ” and “if consumers see UGC while shopping, conversion rate goes up 4.6%. When they interact with user-generated content, conversion rate increases 9.6%.”
The aforementioned examples of brands employing UGC prove that this is an important resource that has cross-functional benefits for CPG companies ranging from marketing to product innovation and customer relations. Here are the ways in which CPG companies can derive data-driven value from UGC:
1. UGC helps you build a holistic relationship with your customer. Content generated from consumers can be leveraged to form consumer personas and gain customer 360, i.e., a 360-degree understanding of the customer, their preferences, feedback, etc. This will not only fuel better consumer relations, and boost consumer loyalty, but also fundamentally help companies sell more products.
In this regard, CPG companies can:
• Use Natural Language Processing to pick out market trends, classify consumer feedback into positive and negative, understand changing consumer needs and so on and so forth. The more data captured ensures improved relevance to consumers as well as helps train and update existing ML models that help gauge consumer responses.
• Use Image processing/ video analytics of pictorial consumer content from vlogs, videos, picture posts to form a consumer content repository, understand consumer usage of products, identify types of product defects/complaints, identify products prone to fragility, etc.
• Leverage sentiment analysis to identify any discrepancies in feedback – at times, five-star reviews also contain negative feedback and two-star reviews also contain positive feedback - and upon identification, feedback can be correctly mapped to content repositories. Consumer content can be classified in terms of positive/negative, and in terms of the product feature spoken about, or product delivery processes addressed, etc. through identification of key phrases and further classification on the basis of topics/themes.
• Create a repository of well-defined buyer personas with user generated content. This can help define product branding, give insights into consumer's demographic, purchase behavior, decision making processes.
• Identify UGC that is generating most value for consumers and boosting conversion rates for the company
• Collate content from consumers via automation of email or messages through companies’ official social media platforms. This process can be automated and ML models can be leveraged to swiftly collate consumer feedback and classify the content.
2. The trends analyzed from UGC can fuel product innovation and product improvement. Leveraging insights from UGC collation efforts can aid extreme experimentation of products to quickly align with user needs.
A popular chips brand's conducted a Do Us a Flavor contest , where consumers were able to vote on the flavor of chips that would go into production in the long term. A leading confectionary brand conducted an inventor competition, where consumers came up with ideas for limited edition variants of their classic chocolate bar, three entries were shortlisted, the finalists got the create their bar at the firm’s innovation kitchen and consumers voted on their favorite . These activities helped engage consumers, improve products based on consumer feedback, built consumer loyalty, created brand awareness, and exemplified the possibility of cost-effective experimentation.
The data collated from these activities can also fuel a rich repository of consumer likes/dislikes, help understand target audiences and run simulations on success of future experimentations/product launches.
3. Designing and strategizing successful campaigns are fundamental for generating maximum marketing ROI and with UGC, marketers can gain unconventional and unique perspectives and spark off interesting ideas for newer campaigns. It ensures that brands remain relevant, keep existing customers engaged and provides incentives for potential customers.
The content collated can also prove to be a learning repository of customer perception of past campaigns. The analyses of historical campaigns can be utilized to optimize future campaigns or target specific segments of your target audience.
UGC marketing successes can also fuel sales initiatives and prove to be a great opportunity for other consumers to discover new projects. In fact, studies revealed that 48% of consumers believe that UGC is a great way for them to discover new products, services, etc. 
The UGC repository will also help determine the ideal marketing mix. Through understanding perception of content on various channels, companies can decide which areas to invest more money into, and also accurately personalize ads for consumers based on the pre-determined customer personas.
The value that CPG companies can derive from UGC is immensely significant and when leveraged efficiently, it can make marketing efforts more efficient and prove to be a valuable source of consumer feedback. The only major qualm in utilizing UGC is ensuring that the content is authentic and ensuring that the companies get prior permission before sharing it on their platforms. 57% companies said that copyright was the biggest hurdle when it came to UGC marketing initiatives but setting up regulated practices to obtain consumer permission before re-sharing content is easy to achieve, can be scaled up easily and improves brand engagement by 9 times  !
With the help of AI-powered automated systems, the time taken to respond to and collate UGC can be sped up further and improve customer relations and catalyze grievance redressal.
Needless to say, while challenges exist, the advantages of UGC for CPG companies are far too many to be ignored. And as the DTC wave continues to takeover the CPG space, companies that actively engage in conversation with their users stand to gain a much coveted competitive edge.
Lekha MB has over 6 years of experience in the data science and analytics world. She is specifically experienced in building in-house analytics teams, developing core ML, NLP and OCR solutions, and in deploying cloud solutions. When not at work, Lekha loves to take the time out to trek, work out and read.