The following is the first installment of "Serving Tomorrow's Consumer," a new blog series in which industry thought leader Michael Forhez of Oracle will examine the key marketplace changes and business challenges confronting and confounding the consumer goods industry in a world in which consumers have control.
This first installment is a transcript of comments that Forhez made recently during a panel discussion held in conjunction with CGT's "Sales & Marketing Report 2017."
CGT: For consumer goods companies, technology is playing an increasingly greater role in both customer (retailer) and consumer engagement. But what are the watch-outs? How much can companies rely on algorithmic software and automated marketing tools without sacrificing true consumer intimacy?
Forhez: Today’s business environment requires the simultaneous rethinking of business strategy and business operations. Companies must not only weigh the cost of doing something, but also the cost of not doing something — with the recognition that, if your organization doesn’t do it, others will.
Organizations need to accept that they must replace the familiar spectacles of mass production and mass marketing with lenses that look not at the commonality across all consumers, but at the uniqueness that exists in each and every segment, household or individual.
The trick is to learn how to efficiently serve uniquely and in a more personal manner. Therefore, the next-generation retailer or brand will no longer simply be a maker or seller of things. The brand or retailer can no longer make or sell what it wants to make or sell; it must make or sell what its consumers want to buy.
The enterprise must begin to sense and respond more quickly to changing market needs while focusing on doing the things that create value for customers. That means that business today and tomorrow will need to include a robust information network replete with keen insights about individual consumers or unique segments that will, in turn, drive strategy and operations.
Algorithms and data technology can leverage awareness, interest, transactions and loyalty. Algorithms have allowed brands and retailers to move from merely connecting buyers and sellers to engaging the way consumers search and transact by integrating marketing, omnichannel distribution channels, and supply chain functions.
Automated marketing solutions need not just focus on customizing the product. Often, customizing the information about the product can in itself create tremendous customer intimacy. And let’s not forget that these marketing solutions, using artificial intelligence, will only get better with time.
The big "watch outs" all of us need to keep an eye on regard the issues of data security, data privacy and data used without consent. In the last two years, we've seen a number of breaches for which the costs have been staggering. Companies are beefing up on securing their systems, but hacking (for fun, profit or other nefarious goals) is now an international fact of life and is only going to get more sophisticated. Similarly, the use of personal data for customer service vs. other purposes must be clearly spelled out to consumers with simple opt-in/out mechanisms. Companies that are not fully transparent in dealing effectively with these matters will put the good will of their brands at risk and even leave themselves open to civil and/or legal jeopardy.
CGT: Are there any aspects of traditional sales and marketing strategy that simply need to be abandoned, or is it more a question of adapting them to meet changes in the marketplace?
Forhez: Innovation begins with abandonment. We might start by recognizing that there is no mass market any longer — perhaps there never was. The myth of a mass market endured because we lacked the tools and conceptual framework to break down mass into more sophisticated, accurate, manageable and profitable segments. New technologies make it possible to pare this presumed mass market down to a micro-majority, or even to a single individual. Building an authentic relationship is now more important than creating a series of transactions.
CGT: What aspects of traditional retailer-manufacturer collaboration need to change?
Forhez: Cooperation is required for collaboration. Collaboration is requisite, but today, with brands –both retail and supplier– under siege, we must not see collaboration as a panacea for saving the industry. Rather we should mutually acknowledge that transformation is now underway and where trading partners might work in harmony, get to work.
CGT: What do you think Amazon's acquisition of Whole Foods means to the future of brick-and-mortar stores?
Forhez: It's simple. Consider the three basic reasons consumers go to retail stores: To obtain information they need to make a purchase decision, to pay for the product, and to take possession of the product.
Thanks to the very same information-based technologies that make visual information, learning relationships and last-mile logistics possible, consumers — increasingly — will not have to visit stores for any of those reasons. The question to ask, then, is what exactly will be their reason to go? The answer lies in the customer experience — in curating products, providing hands-on learning, offering expert advice and guidance, creating an atmosphere. The era of the self-service store is over.
CGT: On the product manufacturer side, do you expect to see more deals like the Unilever's acquisition of Dollar Shave Club?
Forhez: Yes. Brands — both product and service providers — have to go where their consumers are. It’s going to be fascinating to see what get’s invented.
CGT: Can you give us some examples of consumer goods companies that are ahead of the game in terms of adapting to the new marketplace? Who is on the all-star team in your estimation?
Forhez: Procter & Gamble, the great inventor of brand management. Unilever, a global juggernaut. And, the cosmetics giants, because they have always been invested in the promise of beauty.
CGT: What about direct to consumer sales? How important will this be to consumer goods companies in the coming years?
Forhez: Consumers will not be looking for brands; brands will have to look for consumers. Let me repeat the answer to a previous question: Consider the three basic reasons consumers go to retail stores: to obtain information they need to make a purchase decision, to pay for the product, and to take possession of the product. Thanks to the very same information-based technologies that make visual information, learning relationships and last-mile logistics possible, consumers increasingly will not have to visit stores for any of those reasons.
In today’s fractured and fracturing marketplace, historically tried and true marketing techniques from the past no longer work for many products. In case after case, the old, established brands have been supplanted by the rise of ‘others’ — private label or niche brands. Marketing has to move beyond the ‘illusion’ of personal engagement to the truth of managing a more authentic relationship. CGs must demonstrate that they can serve their customers better than anyone else can.
CGT: What's next? Do we currently have a clear vision of the future, or is there a chance that the entire landscape will change again in 10 years or even five years?
Forhez: Change happens! Peter Drucker said, 'The best way to predict the future is to create it.’ But to change, we have to change twice. We have to change the way we see things before we can actually change these things.
If a company decides that it can and should develop learning relationships with consumers, it needs to think about four components:
- An information strategy, to create consumer dialogues and "remember" preferences.
- A product delivery strategy with the ability to fulfill what its consumers want.
- An organizational strategy, to manage consumers, product and distribution capabilities.
- And an assessment strategy, to evaluate performance — every day, every hour, every minute.