5 ways AI will redefine the CPG rules of engagement
Editor's Note: The following is a guest post from Ramiro Amaral, director, strategy and consulting, and Pascoe Craig, senior account director, at SapientRazorfish.
Once a novelty item, voice assistants such as Amazon's Alexa and Google Assistant are getting more traction and becoming an accepted and valued part of the consumer's life. Integrated into everything from countertop speakers to cars, these offerings are helping deliver on the promise of a more intuitive and human-centered way of interacting with technology.
These voice-based interfaces, powered by artificial intelligence (AI) platforms and cloud-based infrastructures, are changing the way consumers perform everyday tasks, from searching and cooking to commuting and communicating and are slowly creating new habits, mental models and expectations around specific categories.
Very soon, the technologies in the connected home will be managing requests, automating preferences and determining the flow of products as our personal assistants. As such, all businesses will need to evolve to meet the changing needs and preferences of the customer and keep pace with the technology that is wholly transforming the world as we know it. Below we discuss the five new imperatives facing CPG companies in light of this emerging behavior:
1.) Shoppers and consumers will be different species
In a very near future, CPG companies must deal with two very different audiences: humans and machines. Devices in the connected home will be tasked with shopping, forever changing the way humans purchase goods and services. Under this model, machines will be doing the vast majority of the decision making and the consumer's role will simply be to confirm the options proposed by personal assistants.
As AI assistants become less of a passive filter and more of an active manager of the household, CPG companies must market to this new customer representative. Customized strategies and operational structures will be needed to address this new audience.
2.) The classic marketing mix will be organized around the consumer experience
In this new era, there will be a redefinition of the classical marketing mix. Promotion, for instance, will be shaped in very different ways to the machines vs. the consumer. Creating brand perceptions and preference will be led by the experience of the consumer instead of the traditional forms of brand building.
It's the definitive era beyond brand image for CPG brands as consumers become less tolerant of products that don't deliver on their value propositions and consumers' expectations. Hence, it's the actual experience that will justify a higher price point by brands — through alignment to consumer trends, specific consumer needs, added services and added value.
3.) Machines will facilitate constant auction trading for CPGs
With machines managing purchase cycles, the battle for relevance will increasingly move behind the scenes to the digital realm of ultra-high-speed marketplaces. The key step change and transformational imperative, from a cultural and organizational point of view, is that companies will have to learn how to influence the machines' algorithms, as opposed to the human brain.
This hyper-competitive accelerated market setting will likely lead to unprecedented pressure on pricing and margins and will favor those who effectively meet the specific needs of consumers. Rather than appealing directly to consumers through branding, advertising and other traditional forms of promotion, CPG firms will have to pass the test of the machines first, addressing the barrier of algorithmically-powered trading.
4.) Products becoming services and platforms, as powered by user data
More product options and immediate access to cheaper-priced products will challenge the market position of traditional brands. CPG companies must become an integral, irreplaceable part of the consumer's life, and forge a direct relationship with the consumer.
Companies will need to create a complete consumer solution — either led by their brands or category portfolio. This will come in different shapes and sizes depending on whether the company can create value out of more consumer engagement or if they will need to win the battle of replenishment, for example. But by creating a platform for consumers, CPG companies can create a stronger and more independent position in relation to the dominant and incumbent retailers connected to the OS of the home, allowing them to take and plug these propositions into different operating systems while keeping their core offering to the consumer.
5.) CPG companies becoming responsive networks of value
Today's landscape necessitates all companies to compete in fundamentally different market conditions. As such, they must explore what assets and levers CPG companies feel are their biggest strengths.
However, as part of the transitional period towards the consolidation of different business models, traditional companies may struggle to leverage the assets they've built over time. These players will need to rethink the shape and focus of their internal and external value networks. Essentially, CPG firms will need to look at what new core competencies and capabilities are needed to successfully 'co-evolve' with the new market changing ecosystem companies, technologies and other competitive and non-competitive players.