Most consumer packaged goods brands still reach customers through traditional retail channels, but brands are dissolving, and brand identities are becoming blurred. The emerging economies which have propped up CPG revenue growth over the past five years have slowed, and mass markets are reaching saturation. So, how will CPG companies reinvent themselves in a digital age when individual consumer insight is one step removed? Some CPG companies have adopted direct-to-consumer e-commerce models, but the tightrope between directly meeting customer demand and alienating the huge base of retailers who stock and sell their products makes this a very tricky business model to get right.
For these reasons, consumer brands must figure out how to build awareness and relevance at a time when their traditional push model has been disrupted. Although CPG companies have made efforts to increase their digital presence by offering multiple brand websites, become highly visible on social media channels, and have created some awesome smartphone apps to raise their digital bar, brand managers still need to move even further to connect with today’s fluid consumer.
Back to the Future
As part of wider digital transformation – and to connect directly with consumers – CPG companies are now focusing on Digital Brand Platforms to enable indirect consumers to leverage greater value from the brands for themselves, and for the companies through digitally-powered connections. LVMH is one of the brands pioneering the concept and building a pilot in the space. But while Digital Brand Platforms might sound new, the concept is fairly old in that some large brands like Target and Lowes introduced the earlier iteration of a brand platform under the theme of a "marketplace," which went a little way to create network effects and the introduction of third parties, but missed some of the other benefits of a brand platform. Regardless of the evolutions of the concept, the goal of these digitally powered connections is to increase customer loyalty so that shoppers come back and make repeat purchases. Each interaction on the platform generates information that benefits all parties, including:
- Connected products or services: Smart products that gather data and modify their own behavior accordingly
- Peer communities: Users benefitting from direct exchange on the platform
- Interactive services: Engages users and personalizes the experience—greater interactivity among connected services leads to greater benefits for users
Adopting a brand platform also achieves one fundamental objective – engaging consumers. Today’s consumers have taken control of the path to purchase—they research products online, they discuss them on social media, they share brand preferences with friends, and they want to influence product design and co-innovate with brands. Operating as a brand platform, CPG companies will be able to capture shopper attention and build strong connections with consumers.
Digital Brand Platforms: Solutions That Extend the Brand Beyond the Product
Furthermore, consumers today have “liquid expectations.” They have set a high bar for experiences that seep across industries. By connecting to the broader ecosystem, CPG companies can provide solutions that extend the brand beyond the product, to a service and to enhanced experience. Enhanced experiences lead to higher engagement among consumers, and higher usage of core assets associated with the brand will strengthen and lengthen consumer relationships. CPG companies also have greater opportunities to create value by harnessing and monetizing ecosystem interactions.
One of the most important benefits of harnessing ecosystem interactions is the network effect: the more connections the ecosystem offers, the more those connections are used, the more data is generated and the greater the value to consumers and for the CPG company. With greater data sharing, consumers notice that the brand begins to understand them. In turn, brands gather data from which they gain insight, which sparks innovation and hence improves the platform. As a result, brand platforms can create customer loyalty and make today’s fluid consumers less restless.
The pathway for CPG companies to become a platform business is to understand the complete ecosystem of activities and touch points that shape the overall experience for a consumer. In this ecosystem, the ability to dynamically understand who the consumer is, what she/he wants, and to provide services that exceed the consumer’s expectations requires brands to have a unified Customer Identity Management strategy and supporting technology that can uniquely identify the consumer across all digital touch points and continuously verify and validate their needs and wants.
So what exactly might a Digital Brand Platform look like? The New York Times published a piece on LVMH recently that provides a solid overview. I’m confident that we’re likely to see a lot more news about this emerging approach over the coming months.
Doug Norton-Bilsby is Global Vice President, Retail and Consumer Products, at ForgeRock.