Retail isn’t the only industry enduring one of the most disruptive transformations in history.
CPG companies are grappling with eroding customer loyalty, glacial growth rates, and the evolution of retailers that sell their own private label products alongside branded CPG products. Amazon, for instance, operates 41 private labels, and Walmart has countered Amazon with a growing private label business of its own.
CPG companies are responding in a number of ways, including deeper discounting and more creative advertising. But to survive in a new world where consumer expectations are drastically changing, CPG companies need to think beyond making incremental moves. It’s time to be more adaptable in more fundamental ways – by embracing new customer journeys, becoming nimbler in the way they create products, and being more open to harnessing the value of partnerships with those in their distribution network.
And the stakes are high. Only CPG companies that accelerate the pace of adaptability will flourish. Those who rely on methods that worked in 2017 will fall short in 2018 – here are just a few reasons why.
The Encroachment of Convenience
Digital has given consumers more options to buy what they want and how they want it, ranging from pure e-commerce to hybrid models where consumers order online and pick up in the store. What’s really going on is the advent of a new era of convenience. Online ordering and delivery is one form of convenience, but so is online ordering and in-store pick-up when the consumer finds it easier to buy on the go. And fast delivery is table stakes.
Amazon has recognized this shift toward convenience and broadened its channel to make Amazon a one-stop shop in this new consumer journey, ultimately becoming a “life bundle” channel of merchandizing convenience. Recognizing that the “life bundle” now includes grocery shopping – with the advent of food delivery services like Instacart and FreshDirect – Amazon famously expanded into the grocery market through the acquisition of Whole Foods. Amazon’s own grocery delivery capability now solidifies the shift in the way consumers discover and buy food products, which can be at the same time they’re buying a new TV and toilet paper. And with the launch of Amazon GO, the retail giant has come full circle, creating a cashless physical store where consumers don’t even need to order and pay.
CPG Brands Are Squeezed
Grocery is no longer just a once-a-week trip to the store characterized by lengthy periods of in-store browsing, cost comparison, coupon clipping, and review hunting. Consumers are now also supplementing their weekly shopping trips with smaller purchases more often, as they need them.
Since there has a been a significant shift in the way consumers shop, with a lot of them moving online in some capacity, investments in brand differentiation have been eroded in the form of product listing pages and the landscape shifting to a “sea of sameness,” which also gives way to stiff competition from promoted products, and, as previously mentioned, private labels.
In this context of convenience and despite growing competition, CPG brands actually have many options to not only survive but grow.
Customize Your Product on Demand
CPG brands must go beyond shelf placement and nimbly customize products for micro-markets, ensuring fit first. Successful examples include two brands capitalizing on timely demands and needs:
- General Mills producing limited edition Wheaties for regional markets with boxes featuring the faces of sports stars that appeal especially to those cities
- Mondelez allowing consumers to customize the packaging of original Oreos for a limited run in conjunction with the holidays
But, how did General Mills and Mondelez get there? They adapted, they listened, and they provided new channel interactions to learn from.
In order to know how and what to customize, you have to understand what your audience is looking for – and how they’re looking for it. Seems like a no-brainer, right? But I often see brands miss the mark by relying solely on methods of capturing and interpreting data that have worked well over the last few years (social media, search engine optimization, website analytics, etc.). The brands that succeed in this space understand that there’s much to learn from how their audience is searching on voice; why the audience today is going to Amazon for reviews more than any other site; and how important providing those new touchpoints can be to gaining new insights.
Partner with Your Frenemy
It’s no secret that there is serious concern over the challenges many brands have faced with the growth of Amazon and its services – that’s the entire basis of this article. In the face of challenge lies opportunity, though; so, it’s critical for brands to see Amazon as an opportunity for growth, not an impediment.
Partnerships with the likes of Amazon are key to CPG/e-commerce success to harness purchase intent and refocus on customers’ needs. Amazon isn’t necessarily changing the way people shop; they are providing the ability to shop with convenience and serve up relevant products, appropriate recommendations, and have them delivered within hours be part of the experience. Amazon has set the new bar.
For some CPG brands, the opportunity is to go beyond simply listing products on Amazon, and work with Amazon to adapt like it has and will continue to do. For example, brands can work with Amazon to leverage shopper data to more effectively adapt to changing needs. And, by participating in a space like a marketplace, there is a greater opportunity to learn and interpret consumer trends beyond their immediate circle. Amazon’s extensive consumer purchase history combined with shopper analytics allows CPG companies to raise awareness of product offering and respond with more personalized products of their own. For others, the opportunity can start with leveraging mega ecommerce platforms like Magento and Shopify that are enabling integrations with Amazon for their customers.
What to Do Next
We can’t know the future of digital completely, but we do know adaptability can make a brand bullet proof. Adaptability means recognizing that there is a new customer journey. From moment of truth to moment of purchase to moment of enjoyment, today’s consumer journey is drastically different. And that journey is defined – or re-defined, rather – by the age of convenience.
Our new customer is looking beyond price and brand. They’re looking for reviews in micro-moments, two-hour delivery in a pinch, and on-demand results and answers – all while multi-tasking cooking dinner or running to catch the next commuter train. These needs and behaviors are compressing and changing the traditional customer journey all the way from awareness to purchase.
In order to survive, CPG brands must recognize and understand how their customers are searching and discovering products and be present in those moments of decision making (and beyond). Several industry leaders are already doing this well – Mondelez, Kellogg’s, Purina, and Tide, for example – and it’s time to follow suit. It’s time to not only enable your brand in this space of convenience where the “life bundle” is available, but also continuously innovate your offerings and customer touch points.
But how do you get started without causing a disconnect with your audience?
Product ideation approaches, such as design thinking, give brands the tools to stay connected to their audience by targeting and gaining empathy for the user, creating solutions, prototyping, and validating via user testing. Design thinking helps answer questions like, “How will a subset of my customers like a timely limited edition of our product?” – a common question most CPG brands aim to answer.
Design thinking is one of many – but I believe the most effective – ways to achieve customer-centric product development. Design thinking is all about focusing on your customer journey from their perspective, not just what data or history may be telling you. Our team at Moonshot (our innovation outpost) combines design thinking with product development process, known as lean innovation, to help businesses quickly take new products to market and scale them with minimal cost and risk.