The State of Consumer Products
For decades, the consumer products industry has enjoyed a prolonged period of relatively stable maturity. Business processes, technology capabilities and success measures have all served as a strong foundation for operating principles, retailer interaction and consumer marketing.
Today, however, a confluence of forces has come together to fundamentally redefine the way CP companies conduct business. This relatively sudden and major shift has left companies with the realization that a complete change in mindset is critical to outpace competitors. Given the speed of innovation and the continuous introduction of new players in today’s dynamic marketplace, it’s important for businesses to acknowledge that incremental improvement is no longer a sufficient strategy to stay ahead.
Forces to Be Reckoned With
In order to succeed, it’s helpful to understand the key forces driving the bulk of marketplace change: “always on” consumers, a shift in demand from products to outcomes, and new value drivers. Combined, these forces have created a paradigm shift that is challenging how companies measure success and, perhaps more importantly, how they define themselves.
The impact of each force can play an important role in helping companies move forward with redefining their value proposition and the way they measure success:
Always-On Consumers: Today’s consumers are always connected to the internet, each other and, increasingly, to “things” in their environment via their mobile devices. They can get what they want, when they want and wherever they happen to be. This level of always-on connectivity only continues to grow and accelerate.
Shift from Product to Outcome: Today’s consumers no longer want simply to buy something. They want to achieve something. So the objective has evolved from selling consumers a finished good to helping them achieve an outcome — wellness, security, control, confidence, joy, etc. Consumers want to feel like CP companies understand their needs and preferences and are poised to help them by providing helpful, contextual, relevant and differentiating experiences designed to help them achieve outcomes directly in moments of need.
New Value Drivers: Finally, value is shifting from transactions to consumer engagements, and the data and insights companies can glean from those engagements are becoming valuable in and of themselves. These data and insights are enabling companies to identify partnership opportunities to expand their consumer value proposition, enable new data-driven business models to drive incremental revenue streams, and further improve consumer insights to enable even more personalized interactions in the future.
This confluence of forces is redefining the nature of competition and enabling new entrants to reach consumers in ways that we may not define in traditional terms as CP or even retail.
A good example is Stitch Fix, a company that created a hybrid subscription model for apparel shopping. Stitch Fix customers register for the service and provide baseline information about the clothing they’d like to buy — for example occasion, style, color preferences and price range. The company “curates” clothing options based on those personal responses, then mails a package of items and accessories directly to the customer.
Consumers try on the items in the privacy of their own homes, pick what they’d like and return what they don’t — providing additional feedback on why they chose what they did. Stitch Fix uses the data gathered from these interactions to tailor future recommendations even further, providing customers with a deepening personalized experience.
By reaching and serving consumers directly in their homes, Stitch Fix has created an entirely new channel for apparel brands, and as a result provides value to retailers and brands in a number of ways. Among them are being able to serve individuals who are busy but looking for new and up-to-date wardrobe options, and assisting shoppers hoping to cultivate a definitive sense of personal style (contributing to growing self-confidence).
Stitch Fix has transformed the shopping experience from buying clothes off the rack in a store environment to personalized trial of items selected “just for them.” In doing this, the company leverages consumer interactions to gain an even deeper understanding of consumer preferences and deliver increasingly tailored experiences. As a result, Stitch Fix is able to improve the likelihood that customers will buy the company's recommended items with each successive interaction, all without ever going through traditional retail channels.
Going beyond the traditional transaction model to embody a more creative mindset will set the tone for CP companies over the next several years. Companies can adjust their efforts to focus on helping consumers achieve high-value outcomes.
While there are many viable paths on the journey to digital transformation, CP companies can leverage outcome-focused models to help them reach, engage and serve today’s new digitally enabled consumers.