In my last blog, Consumer-Driven Digital Enterprise: The Digital Future of Consumer Products, I highlighted the need for consumer product companies to create direct consumer experiences. This is perhaps the most important but often overlooked topic for consumer products businesses right now.
To an extent, this is understandable. Think of a bathroom tissue manufacturer that is juggling the production of myriad consumer packaged goods (CPG) products and dominating the market. Investing to know who its customers are in order to create personalized experiences may seem out of proportion with the amount of money customers spend on the product.
The problem with this mindset is that other market players are collecting all they can about consumers. If they personalize the consumer experience, they can wrangle that customer away by, for example, offering discount household item bundles that contain another bathroom tissue brand.
Take Amazon’s Prime Pantry as an illustration. The service ships groceries and household products in everyday package sizes (for example, a single box of cereal) to its Prime members for free when the user buys five qualifying products. With Prime Pantry, Amazon can expand its selection and offer thousands of items to Prime Members that would be cost-prohibitive to individually ship for free.
The changing market landscape: Implications for CPG market leaders
Traditionally most retailers seek to maximize revenues while protecting margins. From supply chain, to marketing and merchandising, to omnichannel customer experience, the entire retailing organization is geared towards selling a lot of the leading brands in any category. This is great, as it typically aligns with the objectives of CPG market leaders.
But take the case of Amazon. Its goal is different. Amazon wants a bigger share of the household budget for everything. It cares more about being a sales leader than whether a brand is a category leader. This changes the game for consumer products companies. No longer can market leaders rest in the knowledge that the partners they work with are actively maximizing their sales.
The acceleration in e-commerce will only compound this issue. We have been discussing bathroom tissue, part of a product category that five years ago was the least researched and purchased online.
Source: 2012 McKinsey iConsumer Survey; McKinsey Analysis
For this category, the threat of not directly engaging consumers was considerably less compared to other categories that were already moving to the digital battlefield. However, even household products sales have soared online. Laundry detergent sales grew as much as 85% and toothpaste was hot on its heels at 75% in 2015. This trend is set to gather speed.
With more brands investing to capture more consumer information and preferences online, CPG market leaders simply cannot afford to be complacent.
While brands still hold the dominant market position, they need to look at how they can make the most of it. Questions such as who is buying my product, what is their profile, what other products in my range do my customers buy, and what are they interested in now are all pertinent areas consumer products market leaders must address now.
Leading companies pave the way in understanding customers
I previously shared some examples of successful companies that do this well. Another example worth mentioning is Nespresso, an operating unit of the Nestlé Group. Recognizing that a strong relationship with consumers is what will enable it to cement its position in the premium coffee business and grow, Nespresso set out to better understand who its customers are and what they want. This led to Nespresso’s multichannel commerce business transformation that allowed it to not only create a direct customer experience, but also personalize and unify the end-user experience across all channels.
The front-end customer experience includes a Nespresso app designed to truly interact with consumers, not just enable product purchases. According to Nespresso, this transformation will facilitate its growth from $4 billion to $20 billion in sales in 10 years. The transformation also allows Nespresso to benefit from streamlined and consistent technology and processes across the 41 countries in which it operates.
The need to start now
Setting out to understand who your customers are and what they want is the first step. As brands get that aspect right, they can accelerate time-to-market with products that consumers want – when and how consumers want them. And then they can set themselves apart with the consumer experience they deliver.
Ultimately, we are talking about engaging with consumers in a phenomenally different way – creating in-the-moment consumer experiences, capitalizing on moments of opportunity to ensure better outcomes and drive sustainable growth. Because in the digital economy interactions happen in an instant, decisions are made in the here and now.
To get there, consumer products companies need to create the direct customer experience.
See how you can put consumers in the center of your consumer products business and secure the loyalty of even the savviest shoppers with innovative solutions now.