Conference report: 10th Belgian Consumer Goods Conference
The 10th Belgian Consumer Goods Conference, organized by Vlerick Leuven Gent Management School, yearly tackles the latest trends and challenges of the Consumer Goods industry. This year, the main topic was “Innovation beyond the product”: the focus of innovation should be centered around the consumer and not the product, something we already know for ages at InSites… Next to very interesting talks of Pieter Goiris of Boondoggle (who used figures of Steven Van Belleghem’s Social Media Study in his presentation “How Smart Ideas can help fast movers in this digital era”) and Sabine De Veilder of Pepsico (about the co-creation tactic used for Lays’ ‘Maak je smaak’). Also our own GenY-guru Joeri Van den Bergh gave an overwhelming presentation on “How cool FMCG brands stay hot” which inspired Eugenio Mendez to prove how Bacardi brings this into practice.
However, the keynote session of prof. Niraj Dawar from Ivey Business School really sounded very InSites familiar. He presented how history proves that consumers took over the role of marketers: it all started in the 80’s with the remote control and VCR and became more important nowadays with the internet and social media. But what will be next? For prof. Dawar, the battle of the future is understanding and serving the end consumer by focusing on the HOW instead of the what.
In the past, manufacturers focused too much on the what, i.e., the product and creating transactions with the consumer. This “upstream activity” dominated business for over 250 years and still many managers are wedded to their factory, instead of to their consumers. However, the consumer related HOW becomes more and more important and can create more value than the what. This HOW-value focuses on the cycle of purchase with questions about how consumers obtain information, how they evaluate attributes of products, how they arrive at a choice, how they carry products home, how they unpack, use/consume and dispose of their products.
Costs, customer value and competitive advantage shift more and more towards the downstream consumer-focused part of the chain. First, costs of customer retention, satisfaction, after-sales, etc. increase, while costs of upstream product related elements decrease because of the economies of scale. Second, customer value is not in the upstream anymore: Consumers perceive products often as similar to competitors which lead to low margins. The real high margins can be found downstream by analyzing touchpoints and consumer interactions to find real insights competitors have not yet spotted.
However, innovation management at companies is often still locked in the what: new product development wants to create better features or products focusing on that product. This should shift towards how-related innovation. Finally, downstream value offers a much more sustainable revenue stream. Examples of this are ample: just think on how iTunes tackled the how of buying music (not the music as such was important, the consumption of music was), or Nespresso developing understanding of the how by not selling through mass retailers, but selling directly to their club members creating purchase history used to recommend cross-selling which would not have been possible through retail. A solid price premium of 500% is their result.
It was clear to me that prof. Dawar was completely into the InSites philosophy focusing on the consumer (downstream) instead of the product (upstream) being the way to go for the future J. It’s up to us to convince the managers of this as well.