digitization of fast moving consumer goods
TRANSCRIPT
Digitization of Fast Moving Consumer Goods Squared group 25
Executive Summary
Trends
• A consistent, multi-channel experience is needed to engage customers & encourage purchase of FMCG.• Technological advances have taken the idea of a digital shopping experience in a new direction.• Implementing good CRM will enable hyper-personalised, real-time, acquisition & loyalty programs.• There is a huge opportunity to use Big Data & CRM systems to record information about what customers are
engaging with online and trigger the delivery of content that is specific to them.• Machine learning can fuel more predictive marketing as well as efficiencies in production and sales.• Using the predictive power of machine learning, management can start asking smart questions from their
data.
FMCG Consumer Behaviour
Fast moving consumer goods have inherently been affected by the changes in consumer behaviour, especially the rise of digital. The pathway to purchase in FMCG is different for everyone5, whether the purchase is completed online or offline. The advent of mobile has greatly impacted the way people shop, with 55% of shoppers actually researching products on their device while in store1. This exemplifies the importance of different touch points, which can be recognised in the move towards multi channel personalisation. This instantaneous need for information comes with the need to save money. Suppliers need to be present online and also offer discounts such as online vouchers through social media (ie. Snapchat)3. The majority in the FMCG sector (79%)4 have also already developed mobile optimised sites.
Digitization & the Multi-channel customer journey
The FMCG industry has been embracing digitisation and mobile, creating consistent and engaging experiences across multiple channels to encourage customers to try their products. Gartner has predicted that by 2017, 89% of marketing leaders expect customer experience to be their primary basis for competitive differentiation6. There are many reasons why digitisation is at the top of the corporate agenda for big manufacturing, retail and consumer goods companies. Key drivers include increased sales, cost savings, optimised processes and systems, and happy customers.
1. https://econsultancy.com/blog/66279-12-stupefying-stats-from-around-the-digital-world2. https://econsultancy.com/blog/66822-10-fascinating-digital-marketing-stats-from-this-week3. https://econsultancy.com/blog/67257-15-reasons-your-brand-should-be-on-snapchat/4.https://econsultancy.com/blog/62015-10-interesting-digital-marketing-stats-we-ve-seen-this-week-33/5. https://www.youtube.com/watch?v=xGOPD140iEc
Recent Innovations
Mobile Payments – the portable solution to fast and hassle free consumerism.
Consumer industries are embracing mobile technology in order to reduce checkout time and increase potential purchasing. QR codes can now be used to retrieve information and Paypal’s mobile app is used by millions all over the world. This scanning concept has progressed to a ‘tap and pay’ technology that has now been incorporated into ‘Apple Pay’.
iBeacons – the ability to direct real-time, location based information to a shopper.
Through the use of in-store wireless sensors and information about the shopper’s purchase behavior, FMCG retailers and brands can offer highly personalised and relevant offers, direct to smartphone devices. Macy’s and Shopkick are already letting shoppers know about offers as they walk into their stores, along with reminders of items that they liked during past visits.
6 http://www.techradar.com/news/world-of-tech/key-trends-for-retail-technology-in-2015-the-rise-of-hyper-personalisation-12811567 UK retail trade body IMRG and Capgemini (the m-Retail Sales Index)8 http://blog.egrovesys.com/mobile-application/mobile-app-influence-on-fast-moving-consumer-goods-market9 https://www.marketingweek.com/2015/11/10/personalisation-a-short-term-fad-or-long-term-engagement-strategy/10 http://www.adweek.com/news/advertising-branding/cpg-marketers-are-going-digital-loyalty-programs-15914111 https://www.pgeveryday.com12 http://coupon-wizards.com/pg-everyday-shopper-card/13 http://www.retail-week.com/sectors/grocery/sainsburys-to-launch-scan-and-go-smartphone-shopping-app/5073990.fullarticle
With more smartphones in circulation globally than people, the use of mobile has revolutionised the way people shop with their preferred brands. A recent study indicates that 52%7 of web traffic to retail sites currently comes through smartphones and tablets. And more than a third (36%)8 of UK online sales are on a mobile. Mobile content allows FMCG brands to engage with shoppers directly and supermarket chains like Tesco & Waitrose have created their own apps to increase engagement and sales.
Figure: How engagement is changing over time (Source: Ernst & Young research)
Intelligent Shelves – taking the shop shelf into a data filled digital world.
Technological advances have taken the idea of a digital shopping experience in a new direction. Intelligent shelves could soon hit our stores with the ability to detect low stock levels and connect with consumers’ personal devices. These will allow needs and wants to be recognised on an individual level, resulting in tailored marketing - the interactive experience could be furthered with the use of Artificial Intelligence, however this is a very new concept and it is difficult to predict how this could be truly adapted.
Gaps and Opportunities
Personalisation
“Personalisation isn’t about calling consumers by their name, but rather about brands making an emotional connection with them as individuals that transcends labels and packaging.”9
There is a huge opportunity to use Big Data & CRM systems to record information about what customers are engaging with online and trigger the delivery of content that is specific to them. In this way the industry will move away from broad-brush segmentation to hyper personalisation.
Loyalty
Information that’s served based on consumer needs and interests can encourage brand loyalty & repeat purchase. Heinz owned brand, Smart Ones, is using this approach through a coupon platform called Saving Star. The idea is to boost coupon redemptions according to purchase behaviour.10 P&G is one of the biggest FCMG companies and they are promoting the Everyday11 shopper card member benefit scheme which is a allowing customers to have coupons at their fingertips to be downloaded12 right onto their card. The convenience to the customer is furthered with associations with a series of other retail partners.
Where Loyalty will meet Personalisation
Sainsbury’s have already trialled a “Scan & Go” App that allows shoppers to scan barcodes of items they need while at home and add them to a shopping list13. Customers will be able to see the cost of their shop, thanks to live pricing updates from their local store. Once they get into the store the app will bring up a map showing them where their items are stocked. Customers then need to scan their goods with the app & once they’ve finished shopping payment is made by simply taking a picture of their card.
Predictive marketing
Coca-Cola has focused its marketing strategy around the three Ps – Personalised, Predictive & Partnerships – which will allow them to use their data to “join the dots” in their on and offline communications with UK consumers. They are already testing emerging technologies with start-up partners around major events such as the Rugby World Cup.14
Predictive marketing is a “massive” opportunity for the brand. According to Miles, predictive marketing will help bolster their personalised messaging further, and could help them to tie in their strategy with internet-of-things (IoT) opportunities.
“We’re starting to think of how we can join the dots on the data we have to predict what they [customers] do,”
Coca Cola Enterprises digital director Simon Miles.
Gaps and Opportunities
Conclusion / recommendations
Loss of control over the customer relationship
As customers gain more power to choose where and how they interact with brands, they will begin to choose a smaller number of organisations with which to maintain primary relationships. They are likely to choose collaborative organisations that engage with their values. Other organisations thereby risk becoming mere suppliers. The digital world has thrown FMCG organisations into a very relationship and reputation management intensive environment.
Increased competition and the risk of commoditisation
Digital channels lower barriers to entry and increase globalisation, leading to a spiral of intensifying competition and commoditisation. Innovative organisations are taking the opportunity to diversify, bringing cross-industry convergence and blurring of the boundaries between industries. Previously physically distinct products and sectors now compete with one another over less clearly defined customer bases. In this way, there is an extension of ‘superbrands’, such as Tesco, Google or Virgin. 16
Amazon is a great example of this. It has completed a deal with British supermarket Morrisons to deliver fresh and frozen goods to customers in under one hour in many places. This will enable the online retail giant to compete with both Britain’s biggest supermarket stores and smallest convenience stores, and opens up another front in Amazon’s assault on the £178 billion ($247 billion) British grocery market.
Machine Learning vs traditional analytics and business intelligence
The unique characteristics of FMCG include having very large volumes of transactions and data, as well as a large number of data sources that influence projections. These characteristics mean that traditional analytics technologies struggle with the volume and complexity of the data, making the FMCG industry the ideal candidate for Machine Learning. 15
Using the predictive power of machine learning, management can start asking smart questions from their data. Questions such as:
What is the optimal marketing campaign to increase market awareness for product X? How many of product Y should we produce to reduce oversupply next winter season? What sales rep should I use to manage our new customer to maximise potential profit?
There is no excuse to delay digitisation. FMCG firms and retailers are facing an increasingly complex and fragmented business environment with their customer’s nonlinear purchase journeys. Brands are re-imagining the retail experience. It’s no longer simply about selling products but redefining customer journeys and creating an integrated and personalised experience. Selling to customers across devices while making it easier for them to share their feedback is key. It is important to respond to the trends identified in this paper by engaging with emerging technologies to use big data, enhancing the customer experience and using predictive marketing strategies. In doing so companies in the FMCG sector can be confident that they will be successful in a digitised market.
14 http://www.thedrum.com/news/2015/01/12/coca-cola-enterprises-focus-marketing-plans-personalised-predictive-and-partnerships15 https://www.linkedin.com/pulse/machine-learning-fmcg-industry-guido-tapia16 Ernst & Young Report the digitisation of everything