Part 6 of the “Digitally Transforming Industries” series.
Small and midsize companies in the consumer products space sometimes emerge in the most unexpected ways. Some get their start as a personalized service that delivers curated boxes to their subscribers’ doorstep every month to remove the confusion of shopping for clothes, jewelry, cosmetics, and a host of other products. Others may target a niche market that is ignored by the mass market. And a remaining few decide to put their spin on traditional goods by innovating new delivery mechanisms or packaging that are exciting to consumers.
Some products endure for decades with a steady stream of sales; but for most offerings, success is short-lived. The IDC industry brief, “Consumer Products: Small and Midsize Consumer Products Firms Are Using Technology to Sharpen Business Practices and Improve Customer Engagement,” revealed that most consumer products companies realize half of their annual revenue from products that were introduced within the past three years. And as we get closer to 2020, this percentage is expected to rise as high as 70%.
Lacking the deep pockets and even deeper resource pools of their larger rivals, small and midsize firms may find it challenging to innovate continuously while optimizing operational efficiency and profitability. However, they do have an advantage over larger competitors: The ability to respond to market dynamics with speed, flexibility, and nimbleness while maintaining a close relationship with the consumer.
A growing consumer audience calls for a consumer-first mindset
Although the IDC report revealed that small and midsize players in the consumer product industry cite revenue growth (83.4%), cash-flow improvement (81.6%), and cost reduction (76.3%) as top priorities, a focus on consumer experiences can also deliver significant opportunities for growth building.
Never before has the consumer products space seen such a close link between revenue generation and the ability to respond to customer behavior, habits, and needs. Modern consumers are much more empowered and informed, dictating everything from product features to brand interactions. They value expertise and outcomes over attention-grabbing packaging, advertising, or brand personality. They are receptive to the experiences and opinions of their peers. And more important, their purchase decision is nearly complete before they arrive at the physical or online store.
Small and midsize businesses in the consumer products industry can no longer compete only on product, price, place, and promotion. Today, it’s all about serving a digitally savvy, ever-evolving consumer audience with content, context, convenience, and consistency across all channels of consumer interaction. And as consumer behaviors and preferences change, firms must remain alert to those dynamics and stand ready to move in lock-step with every phase.
To do this well, companies must align their business model with what matters most to their consumers. Focusing on the entire buying journey, not individual touchpoints, enables firms to identify common frustrations and rethink the scope of their products and services to address them. By linking that insight with operational performance, consumer products firms can strike a balance between long-term revenue and costs while consistently providing the interactions consumers want and differentiating the business from all competitors, large and small.
To learn how your business can better prepare for the digital economy, check out IDC’s industry brief, sponsored by SAP, “Consumer Products: Small and Midsize Consumer Products Firms Are Using Technology to Sharpen Business Practices and Improve Customer Engagement.” Be sure to check every Tuesday for new installments to our blog series “Digitally Transforming Industries” to explore the various leadership roles in today’s growing small and midsize companies.