Over the last 2 decades, the FMCG sector has undergone an unfathomable amount of change.
FMCG brands have welcomed data to the heart of their operations, flipping business models entirely from a manufacturing ‘push’ to ‘pull’ strategy.
Whereas brands used to ‘push’ products into the marketplace they believed would appeal most to consumers, today, FMCG manufacturers rely on consumers ‘pulling’ products through supply chains themselves.
And to gain an understanding of the kind of products that will do best, and how they can be sold, data is at the core of the FMCG industry. Jim Stengel caught up with Hot Topics to discuss the opportunities that come with the increased proliferation of data to the industry.
What is the opportunity for FMCG brands with digital and data?
There are a couple of different elements to this.
The first is that they can way better understand their business today than they could a few years ago. One huge opportunity is just understanding what is driving your business.
There’s been such an explosion in computing power, internet of things, sensors, analytics and marketing science. All of these things have come together to create a perfect storm.
I’m an adviser to a company called MarketShare in Santa Monica, which has had explosive growth in predictive analytics, so you can just be far more knowledgeable about your resource allocation, your speed of decision making and your effectiveness in how your spending money, than you could have when I was growing up.
FMCG is well positioned for this because all the purchases are captured, so all of the data is there.
This sounds simple and intuitive but obviously it demands culture changes, capability changes and process changes, so it’s not like it’s all nice and neat right now. I think we’re still in an era of experimentation and adoption but that is pillar number one and a huge opportunity that some are taking advantage of.
The second opportunity for brands is how they can communicate with people important for them. That is way more open, free and interesting than it ever has been but it is a disrupting how companies plan, buy and analyze media.
There is a lot of talk about the content revolution at the moment and there are a lot of brands doing a great job in this area. One that stands out for me though is Lowe’s, the $55 billion dollar home improvement company, primarily in the US. The way they use Pinterest is unbelievable.
They have 3.5 million followers, they have some pins that get 200,000 repins, and they can get a lot of consumer data from that. They can see where all the interest and energy is from their consumers and they are helping people with all sorts of ideas.
This would have been completely unfathomable 10 years ago, even 5 years ago. This opportunity to be of service to people, to help them, to be there when they need them to be there, to truly be always on, is the potential we now have because of how we can communicate.
Now, again, not everything is neat and tidy with this either. It demands different skillsets and processes and changes how people need to do budgeting.
All these things have to fall into place and not to mention the brands need to understand all of this better.
I still talk to a lot of CMOs who are mystified about how it all works today, they don’t know. That gap has to be closed, and frankly a lot of the agencies don’t know either.
I would say that at least half of today’s CMOs don’t have the capabilities needed to win today. That obviously has to shift and it will shift.
The other big opportunity is media buying. The way we do financial services, is primarily digital, the way we do music is obviously digital, the way we have bought and sold media is not digital.
That is happening as we speak. The programmatic and adtech explosion is real, it’s shifting very quickly and that is going to be a very different way of creating and delivering advertising and than we’ve historically seen.
That ball is rolling and we will get to a point some day where nearly every pound, dollar or euro of media will be delivered automatically by machines, based on a strategy and knowledge.
FMCG is going to benefit tremendously, because a high percentage of media still is not done that way. We’re just going to have much more efficiency when it does.
Given the issues about customer preference and distribution, how will e-commerce play out for FMCG brands?
I love Jeff Bezos’ stance on this. I heard him say this at a conference once: “It’s not a god given right for people to get in a car, drive to a parking lot, go out and go into a building, and buy the things they need.”
It’s just the way it has evolved and we are seeing that change very quickly and there is a tremendous amount of innovation in that area.
Google is looking at delivering groceries, and Amazon is looking at hot delivery. I think it is only a matter of time before a huge percentage of the FMCG business is direct delivered.
How is data allowing FMCG brands to improve their customer experience?
It is allowing FMCG brands to understand traffic and where people like to buy things. They’re getting customer feedback way more quickly and so it’s really rich.
The difference between success and failure in this is whether organizations can take advantage of what’s at their finger tips and whether they act on it.
Retailers have been pretty quick on this and there is a big shift in power going on in that sector. We’re seeing the rise of the likes of Aldi and Lidl and the likes of Tesco struggle.
The reason Aldi and Lidl are growing is because they’ve made the customer experience better. It’s not so shameful anymore to go and shop there, it’s actually pretty good.
If you look at the big US retailer Target, which has had its troubles in the last few years, and had a real issue with consumer trust. It’s now rebooting itself, growing like crazy, the stock price is rising rapidly and it’s basically saying it is going to focus on a few areas and make the customer experience way better.
The reality for FMCG brands, is that all the data is there, it’s just a matter of leveraging it, making decisions on it and moving forward.
How has the way data is gathered changed since you were CMO of P&G?
The market research groups that do a good job today are the ones really out there looking for what’s new, what the new capabilities available are, what startups are doing, what’s innovation really like in cognitive and behavioral science and what are the resources available to us now?
To me, market research now is much more about being the navigator. Big companies need more navigators and explorers out there looking for the most promising, new companies and ideas to address their business challenges.
That’s how marketing research is shifting. They’re becoming more strategic, more external and exploratory.
We can now understand things much more deeply than we could 10 years ago and now it’s a matter of acting on it.
I met with Mondolez this summer and they are working on this fabulous project focused on the shopper of the future. They’re looking at how shopping is changing, how consumers are changing, looking for startups in this area and they’re investing in the capability which is more important than ever.
Is social media a threat or an opportunity for FMCG brands and how can they cope with the volume of immediate customer response and feedback?
Brands have to be set up for this and it’s not a choice anymore. You have to challenge how your functions are designed, how your departments are designed and what people work on.
There used to be a criteria for success, which was to reduce your non-working marketing dollars which is the people you put into people and production and you want to maximize your working dollars, which is generally your promotional dollars and your advertising dollars.
You can’t use that anymore. A lot of the non-working in the old sense is actually people who are responding to customers, who are reacting to things that are happening in the culture of the business, who are pushing out content and are sharing promotions at the right time.
In a way, it’s got more people intensive.
You can get a lot more earned media today than you could 10 years ago but you need people to do that work, and to respond and react to it.
There are a lot of brands who are doing this pretty well. GoPro is one that comes to mind.
They are great at taking all the response that comes in from their users, they create and share great content, they monitize it and they have millions of subscribers on YouTube.
I spoke to the guys at Twitter earlier this year and it is amazing to me that of all the tweets that have a brand name in them, only 2% are responded to.
Maybe we will never get to 100% response rate, but couldn’t we at least be at 20 or 30%?
You can’t just be open from 9-5 anymore, that’s not how people work. Especially if you’re in a category where education and service is important.
And that is almost everything now.
What learnings have you taken from the startups you have been working with that you wish you knew 10 years ago?
There’s a lot. We’re actually working on a book around this topic and the working title is ‘Young bloods and grey heads’.
If I look back to my time at P&G and think about what I wish I knew, there would be a number of points. They may seem obvious but it is about acting on them and not just talking about them.
The first one is speed. The speed in which startups make decisions and get stuff into users hands or into the market is way better than big companies.
The smart, big companies like Mondolez, GE and Lockheed Martin are bringing a lot of startups into their companies, and really challenging how they make decisions and the accountability behind them.
When you make decisions quickly, it doesn’t mean you act carelessly, it just means you act with urgency. I love a quote from the CEO of Dentsu Aegis’ operations in Americas and EMEA, Nigel Morris, who said, “today you’re either a startup or a turnaround, there is nothing in between.”
I think there should be more of that mentality across the board.
A second point is about people and recruiting. I come from a company in P&G, that values people and spends a lot in recruiting and has a lot of science behind how they recruit, and does a great job but I’ve been with a lot of startups who do it even more intensively.
The amount of time that top management spends on recruiting and talent and the focus they put on cultural fit is astounding. The principle exists that there can’t be one bad hire.
One bad hire can start to change things for the worst so I wish I would have been even more personally involved in recruiting talent than I was.
The third point is that, in the great startups, there is a maniacal focus on the quality of the product or service.
I spoke to the founder of Pinterest, Ben Silbermann, about a year ago and I asked him how he spent his time.
He said, that he didn’t like going to sales calls and conferences. He said he just liked working on the product and the people. Over and out.
I think this crazy focus on product and service in startups is something that bigger companies could learn more from.
In bigger companies, I think it is generally true, that people are more selfish. They’re more worried about their career, their salary, their title and who got promoted before them.
If you go into a startup, you don’t have that conversation.
They’re talking more about whether the product is good enough, are we disappointing people, can we make this faster and it’s just a different vibe.
I think bigger companies need to get more of that.
If you could make a big company behave more like the successful, energetic startups, there is only an upside.
In a time where corporates and startups are beginning to find ways of working together more closely, what is the future for a business like P&G?
P&G, Unilever, Toyota, General Electric or any global, multi-category iconic business still, even with recent stock market shake down we’ve seen lately have incredible brands, reach and intelligence.
They have great cash flow and generally have premium products in great categories.
We would be silly to write them off.
Their success and survival as we look forward will be more about embracing the lessons that are there to be learnt from startups and investing in capabilities for the future.
Initiatives like Mondolez’s ‘shopper of the future’ and Unilever’s Foundry, they’re making a statement about what kind of things they’re going to need in the future.
That is really healthy and I think will drive really good returns.
These businesses are operating from a real position of strength but the issue will be whether they will be as quick to embrace the new capabilities and leave behind the old ones.
If you look at General Electric, they’re probably doing it as dramatically as anyone. They’re betting big on the internet of things and they’re shedding stuff which has made up a lot of the company for the past 50 years.
I’m optimistic for those companies who are restless and are behaving like a turnaround and a startup.
What are the core areas of innovation within marketing that you are particularly excited by?
I’m excited by the explosion in very helpful analytics. I think that will lead to better resource allocation, and frankly better growth.
The second one is more philosophical. I do think that having a higher, more ambitious purpose or a higher ideal or answering the question of why we are in business and why do we make a difference, I think that is a sweeping trend and the way that management will be done in this century.
If you go to any conference around the world and look at the stories that are transformational and growing, and the companies that have fabulous momentum, they are activating something very deep and special about their category.
I’m optimistic that’s happening and it is true of big and small companies.
It’s not necessarily a technology related point but activating a higher purpose or ideal is enhanced by the technology available to us.
We spend a lot of time with companies on this topic and I think it is very optimistic for the future.
The third one I guess is about media innovation. If you look at the amount of money invested in this area and the number of startups that have great ideas around media, communication and service, I think that’s going to be fun to watch.
What is the truth about data for you?
I was on the AOL board before we sold to Verizon and one of the board members was Rick Dalzell who was the CIO at Walmart and Amazon.
We had a lot of discussion around this topic and if you run your company in a way that tries to seek truth in the data and a deep sense of empathy that is a really powerful combination.
We can learn about anything now, almost immediately, and that is what we have to embrace, whilst having an incredible sense of empathy for the people we are serving or selling to.
I think a lot of the leaders that get beaten up because they’re harsh are hard done by. Steve Jobs, for example, sought truth in the data and had no tolerance for disappointing consumers.
I’ve worked with leaders who had that same conviction. They weren’t going to compromise, they weren’t going to disappoint anyone and they used data and information to help them achieve that.
Those are the great leaders.