The Ultimate Handbook to CPG Terminology: A Comprehensive Guide & Key Definitions

Understanding the terminology used in Consumer Packaged Goods (CPG) marketing is not just a matter of industry jargon; it’s a fundamental aspect of effective communication and strategy for marketers. In the fast-paced world of retail, where products fly off shelves, and consumer behavior shapes market trends, mastering the language of the trade is crucial. This understanding enhances internal communication within marketing teams and plays a pivotal role in establishing credibility with clients, especially those who distribute their products through retail locations.

Regarding CPG marketing, navigating the labyrinth of terms and acronyms can be overwhelming. From the intricacies of product placement to the nuances of customer segmentation, the retail landscape is filled with specialized language. This article will dive into the essential terminology every CPG marketer should be well-versed in. Let’s break down these complex concepts!

What are Consumer Packaged Goods?

Consumer Packaged Goods (CPG) refer to products consumed daily by the average consumer. These items are relatively inexpensive and are replaced frequently. CPG can include many products, such as food and beverages, personal care products, cleaning supplies, and over-the-counter medications.

These goods are typically sold in packaging designed to protect the product and attract consumers’ attention on store shelves. CPG items are a significant part of the retail industry. They are available in various stores, including grocery stores, convenience stores, and supermarkets.

CPG companies often invest in marketing and advertising to create brand awareness and influence consumers’ purchasing decisions. They also focus on supply chain management to ensure products are readily available to meet consumer demand. Examples of CPG brands include Coca-Cola, Procter & Gamble, and Unilever.

Key CPG Marketing Terminology

Let’s demystify some key CPG terms with this comprehensive resource to enhance your industry knowledge and professional capabilities. Whether you’re a seasoned marketing professional or an aspiring newcomer to the field, mastering these terms is your gateway to navigating the intricate world of retail marketing successfully.

Average Price: Reflects the mean amount consumers pay for a product, calculated by dividing the total dollars spent by the total volume sold.

Benchmark: A reference point against which promotional or sales activities can be assessed and evaluated. It serves as a comparison tool, allowing retailers and manufacturers to measure the effectiveness and success of their marketing efforts.

BOGO (Buy One, Get One): A popular price promotion strategy where consumers can buy one product and get a second one for free or at a reduced price.

Brand Equity: Represents the intangible value of a brand, determined by customer attitudes, perceptions, and loyalty towards the brand. It reflects the brand’s reputation, recognition, and overall influence in the market, contributing to its commercial worth.

Buy Online, Pickup In-Store (BOPIS): Refers to a last-mile fulfillment method where consumers place online orders, which are then prepared by the retailer for in-store or curbside pickup.

Buying Habits: Refers to purchasing tendencies and behaviors exhibited by consumer audiences, providing valuable insights for marketing strategies.

Customer Acquisition Cost (CAC): The cost associated with convincing a potential customer to buy a product or service.

Cart Abandonment: When a customer adds products to their online shopping cart but exits without completing the purchase.

Category Share: Represents the percentage of all products in a specific category that a particular brand sells. It is calculated by dividing a brand’s sales within the category by the total category sales.

Characteristic: Also known as an attribute, denotes the unique features and qualities that distinguish one product from its competitors. These characteristics can include visual aspects, specifications, functionalities, and other distinctive traits that contribute to the product’s identity and market positioning.

Click-Through Rate (CTR): Measures the frequency with which viewers of an ad click on it. It is calculated by dividing the number of clicks by the total impressions served.

Contextual Commerce: Aligns commerce-enabled advertising with relevant content. For example, a shoppable ad for a specific brand of chicken within online recipes that call for chicken. By integrating commerce-enabled ads within relevant contexts, such as recipes, brands can enhance engagement and facilitate direct interactions with consumers.

Convenience Channel (C-Stores): Represents retail outlets like gas stations, standalone stores, and bodegas that offer a limited selection of products, catering to on-the-go consumers’ needs.

Conversion: Occurs when a customer accomplishes a desired goal, often equating to a sale in shopper marketing contexts.

Cost of Goods Sold (COGS): Refers to the total expenses incurred by a company in the production, manufacturing, promotion, and distribution of CPGs. It includes all costs directly associated with producing and delivering the products to consumers.

Cost Per Action (CPA): Represents the average cost of an action, such as a purchase, form submission, or completed booking. It is calculated by dividing the total cost by the total number of conversions.

Coupon: A discount offer provided by manufacturers or retailers, allowing consumers to redeem savings on specific products.

Cross-Merchandising: Involves displaying related products together, such as placing pancake mix and syrup on the same shelves.. This enhances the shopping experience and encourages complementary purchases.

Customer Acquisition Cost (CAC): The cost associated with acquiring a new customer. It is calculated by dividing the total costs spent on acquiring new customers by the number of customers acquired.

Customer Journey: The complete sum of experiences that customers go through when interacting with a brand or retailer.

Customer Relationship Management (CRM): Involves managing interactions with active, new, and lapsed shoppers. CRM systems aggregate customer data to create shopper insights, personalize the purchasing experience, and enhance engagement.

Customer Segmentation: Dividing a customer base into groups of individuals with similar characteristics or behaviors.

Display: Refers to a temporary secondary location for a product, apart from its regular shelf placement. Displays are often placed on endcaps or within aisles to attract customer attention and boost sales.

Electronic Retailing (E-Tailing): Refers to the sale of products and services through online commerce websites and applications on the Internet. This offers a convenient shopping experience to consumers.

Facing: Refers to the rows of products stocked on store shelves or displays, positioned to face the consumer. Brands with high sales volume often have more facings, maximizing their visibility and accessibility to shoppers. Adequate facing ensures that products remain well-stocked and easily accessible to customers.

FDM (Food/Drug/Mass-Merchandise): Represents a market segment encompassing retail channels specializing in food, beverages, medicines, and general household products. FDM retailers offer a diverse range of consumer packaged goods, catering to everyday essentials and consumer needs.

Feature: Also known as a flyer, a printed advertising material distributed by retailers weekly through newspapers, direct mail, or in-store displays, informing customers about current promotions and offerings.

Foot Traffic: The number of people passing through a particular retail space.

Frequent Shopper Program: Enables customers to create profiles and receive discounts at a retailer through scan cards or loyalty programs. This enhances customer engagement and loyalty.

Generic Brand (Product): Refers to a product sold without a specific brand name, often identified by the store’s own labeling.

High-Low Pricing: A marketing technique where a product maintains a high regular retail price but is frequently offered at a special discounted price. This creates a sense of urgency and encouraging purchases.

Impulse Buy: A purchase made spontaneously, without prior planning, often due to retail placement or promotion.

Key Performance Indicator (KPI): A measurable value that demonstrates how effectively a retailer achieves key objectives. Common KPIs include ROAS (Return on Advertising Spend), COS (Cost of Sale), CPL (Cost Per Lead), and CPV (Cost Per View).

Lift: Refers to the percentage increase in sales attributable to a specific promotion or marketing campaign. It is calculated by dividing incremental sales by base sales and multiplying the result by one hundred. This provides insights into the promotion’s effectiveness.

Line Extension: Occurs when a brand expands its product offerings to diversify product options for consumers. This can be by introducing new flavors, formulations, scents, sizes, or packaging shapes within an existing product line.

List Price (Base Price): Represents the standard dollar amount at which an item is sold. This serves as the reference price for customers.

Market Share: Measures a product’s performance relative to competitors within a specific category. This is calculated by dividing a brand’s sales by the total category sales, providing insights into market dominance.

Merchandising: The practice of displaying and promoting products in a retail setting to encourage sales.

National Distribution: Occurs when products are made available for sale across all major retail stores and regions within a country’s grocery network. It involves strategic planning and logistics to ensure consistent product availability to consumers nationwide.

Native Ads: Advertisements designed to seamlessly blend into surrounding content. This enhances the consumer experience by integrating ads with the content backdrop. Platforms like Pinterest utilize native ads, such as Promoted Pins.

Natural Channel (Organic Channel): Consists of specialty retailers primarily selling natural and organic products to consumers. This caters to health-conscious and environmentally aware shoppers.

New Shoppers: Households that have not purchased any target or promoted products within a specified period, like the last 52 weeks at the beginning of a campaign. A new shopper can also refer to a former customer who has not made a purchase within a specific timeframe.

Nielsen Company: An auditing service that collects point-of-sale scanner data from retailers. It offers comprehensive data and insights for market analysis and research purposes.

Omni-Channel: A multi-channel approach to sales that seeks to provide customers with a seamless shopping experience, whether they’re shopping online or in-store.

On-Pack Promotion: Refers to a coupon or incentive attached to a product’s packaging. This entices customers with immediate savings or benefits upon purchase, and enhances the product’s value proposition.

Out of Stock (OOS): Occurs when a product is temporarily unavailable for sale in retail stores. This situation can result from higher-than-expected sales, supply chain disruptions, or delays between manufacturers and distributors.

Pay Directs: Coupons refunded directly to a retailer, ensuring seamless reimbursement for promotional discounts provided to customers.

Penetration: Represents the percentage of households or consumers who have purchased a specific product or shopped at a particular retail channel, indicating market reach and consumer adoption.

Percent Change (% Change): A numerical measure used to compare the performance of a particular metric, such as sales or revenue, between two periods. It is expressed as a percentage and indicates the percentage increase or decrease in the metric over time.

Point of Purchase (POP): Refers to the location within retail stores where consumer transactions occur – the checkout area. This is a crucial spot for marketing and promotional displays, encouraging last-minute purchases and impulse buying.

Price Decrease: Occurs when retailers temporarily reduce the price of a product by at least 5%. It is a promotional tactic designed to attract customers by offering discounted prices for a limited time. If price decreases extend beyond seven weeks, they may become the new standard price.

Programmatic Advertising: An automated form of advertising where ad placements are bought and sold through software and computers, streamlining the process.

Promo Codes: Special codes that offer a discount or special offer when entered at checkout.

Promotion: Encompasses various marketing activities and strategies designed to encourage consumer purchases. Within retail, promotions often include temporary price reductions, special offers, and marketing campaigns to attract customers and increase sales.

Purchase Frequency: Measures how often a product is bought by the average household within a certain period. It indicates the regularity of consumer purchases, providing valuable insights into product demand and customer loyalty.

Purchase Size: Represents the average number of times a product is purchased by a single household during one shopping trip. It reflects the quantity of the product bought in a single transaction, aiding retailers in inventory management and stock replenishment.

Reach: Indicates the portion of a marketer’s audience exposed to at least one ad, reflecting the campaign’s outreach and potential impact.

Real-Time Bidding (RTB): Refers to the purchase of ads through real-time auctions, allowing advertisers to bid on available ad impressions as they occur.

Rebate: Involves the return of part of the original payment made by customers for a product or goods. To redeem the rebate, customers typically need to submit an online or paper form, allowing them to receive a partial refund after purchase.

Retail Media: The buying and selling of advertising within retailer websites and apps. Sponsored product ads, commonly displayed in search results, categories, and product detail pages, are a prevalent ad format within retail media.

Return on Investment (ROI): Measures the monetary gain or loss experienced by a business concerning a specific investment. It calculates the profitability of an investment by comparing the earnings generated from the investment to the cost of the investment itself.

Return/Lapsed Shoppers: Households whose last purchase of target or promoted products occurred over a specified period, such as more than 26 weeks ago at the start of a campaign. After a certain duration without a purchase, a previous shopper, even if they had previously bought a brand’s product, is considered a new shopper again.

Seasonality: Refers to the fluctuations in product sales that occur at specific points throughout the year. It recognizes the influence of changing seasons, holidays, or weather patterns on consumer behavior and purchasing decisions.

Shelf Life: Represents the duration a product can be displayed in-store before it spoils or deteriorates. It defines the period when a product maintains its quality, safety, and usability. Shelf life is a crucial consideration for retailers to ensure they offer fresh and safe products to customers.

Shrinkage: The inventory loss due to theft, damage, or accounting errors.

Stock Keeping Unit (SKU): An internal inventory management system that enables brands to track specific products in their inventory.

Store Brand: Products that are marketed under a specific retail channel’s brand name. These products are exclusively available in stores owned or affiliated with the retail channel. Store brands provide retailers with a competitive advantage and allow them to offer unique, branded products to customers.

Suggested Retail Price (SRP): The price recommended by manufacturers for a product when sold in-store. It serves as a guideline for retailers, helping them set consistent pricing across different outlets. SRP ensures uniform pricing for consumers and maintains brand image and value perception.

Supply-Side Platform (SSP): Allows publishers to automate the sale of their ad inventory. It is connected to ad exchanges and enables publishers to set floor prices and bundle inventory for private marketplaces, enhancing control over ad sales.

Sweepstakes: A promotional event where consumers have the opportunity to win prizes through a random drawing or contest. Sweepstakes are designed to engage customers and create excitement around a product or brand, encouraging participation and brand loyalty.

Temporary Price Reduction (TPR): Signifies a short-duration price discount, often facilitated by a product manufacturer’s trade promotion funds, creating a temporary “on-sale” pricing period.

Unit Sales: Represent the physical volume of products sold at retail, expressed in packages or individual items. It quantifies the number of products sold, providing valuable insights into consumer demand and market trends.

Universal Product Code (UPC): A scannable barcode on product labels, allowing retailers to track inventory movement efficiently.

Warehouse: A distribution outlet where retailers collaborate to order, store, and ship merchandise. It serves as a central hub for inventory storage and management, ensuring products are readily available for order fulfillment and distribution to retail locations.

Wholesaler: A business entity that purchases products directly from manufacturers in large quantities. Wholesalers distribute these products to retailers, providing a convenient and cost-effective way for retailers to source diverse product offerings.

xAOC: xAOC, short for eXtended All Outlet Combined, is a Nielsen term referring to market measurement. It includes all retail channels except convenience stores, providing comprehensive data on consumer purchasing behavior and market trends.

Year to Date (YTD): Refers to the period starting from the beginning of the current calendar year up to the present date. It is often used in financial reporting to provide an overview of an organization’s performance, including revenues, expenses, profits, or other key metrics within the specified timeframe. YTD figures offer insights into the company’s progress and financial health throughout the year.

Zoning: The systematic organization of products within a retail store to align with the current planogram. It entails arranging products based on categories, brands, or promotional themes, ensuring a logical and visually appealing layout. Proper zoning enhances customer experience, facilitates easy navigation, and maximizes product visibility, ultimately leading to improved sales and customer satisfaction.

Conclusion: Mastering the Language of CPG Marketing

Having a firm grasp of the extensive vocabulary of Consumer Packaged Goods (CPG) marketing is the cornerstone of success in the ever-evolving retail landscape. By immersing yourself in the key definitions and concepts explored in this ultimate handbook, you’ve taken a crucial step toward becoming a more informed, effective, and confident CPG marketer.

As you embark on your marketing endeavors, remember that knowledge is power. Each term demystified in this guide equips you with the insights needed to make strategic decisions, enhance collaboration within your team, and foster meaningful relationships with clients and partners. With this comprehensive understanding, you’re better prepared to navigate the complexities of the industry, positioning yourself as a valuable asset in the competitive world of CPG marketing.

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