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To pick up where we left off in part one of this commentary, when challenged to explain why they are unable to more effectively maximize customer lifetime value at a brand level, marketers are quick to point out that they often have little access to the end customer, let alone the requisite data and ability to take action. I would agree that brand marketers are challenged; even Kroger works in promotion cycles that coincide with only some customers’ regular purchasing activity.
But that is changing. While big brand manufacturers fixate on shopper marketing initiatives at the largest retailers, or expand digital coupon initiatives (which make purchase subsidization even easier), a quiet revolution is occurring in the hinterlands of supermarket retailing.
Time for Revolution?
In a growing number of regional chains, often given little consideration by big brands, the capabilities I am referring to are being put in place, and ongoing digital engagement with a growing number of shoppers is taking hold. To be fair, many of these retailers do not yet fully realize the power of the platform they have deployed, but this, too, is changing quickly.
Consider this scenario: A retailer has ongoing digital engagement with a growing portion of its customer base. It is able to leverage all digital channels – web, email, text, mobile, even the receipt at checkout – to communicate a customer-specific promotion for the individual customer. Behind all of this stands big-data customer intelligence: an understanding of purchase history, brand scores, discount propensity, purchase frequency, seasonality, what items are on the shopping list, what items have been searched for, typical shopping days, time in the store, typical path through the store, time spent in different areas of the store, and more. On top of this, big data foundation is a system that leverages AI and machine learning to suggest the best promotion for a specific customer at that moment designed to maximize customer lifetime value.
This retailer now has the ability to market to Joe as we described earlier: the right promotion at the right time in the right place, in the right amount, just for Joe. And because the platform is using cognitive computing, the retailer has the ability to do this for each and every customer, all in real-time.
Imagine, as a brand marketer, the sales gain and marketing efficiency that could be achieved by partnering with this retailer and aligning promotional activity across all your product categories to the purchase cycle and discount propensity of each individual customer. Or think of the competitive disadvantage created if other brands move first.
This capability is disruptive to traditional CPG marketing. Automating strategically driven promotion targeting combined with ongoing, pervasive digital customer engagement supports synchronizing brand promotional activity to each customer’s purchasing cadence. This customer-intelligent approach makes trade promotion, and even shopper marketing, the equivalent of bringing a knife to a gunfight. Customer-of-one retailing fires a broadside into established industry marketing practices.
In presentations I’ve delivered recently at retail conferences and Georgetown University’s McDonough School of Business, I speak of a growing innovation-implementation gap. Companies are increasingly unable to keep pace with implementing new innovation, opening the door to competitors leaping ahead by employing new capabilities or new competitors coming in from outside the industry.
Big CPG brands are very much at risk. Embedded processes, complex organizational structures and compensation plans tied to old measures, make the largest CPG manufacturers resistant to fundamental change. Burdened by their size, big CPG brands many times have an inability or unwillingness to devote resources to new innovation that does not immediately move the needle. Yet at the same time, many of these same large companies have launched technology accelerators and incubators. These large brand manufacturers are innovation-schizophrenic; their entrenched bureaucracies impede change in the market while management seeks solace in exposure to nascent innovation.
Meanwhile, retailers with customer-of-one marketing capabilities are finding fast-growing interest and participation from tier-two brands, as well as regional and local manufacturers. Smaller brands are positioned to take advantage of the market opening, having been largely precluded from the shopper marketing movement. These companies are hungry, and the era of true customer-specific marketing is tailor made for them.
Think this can’t happen? The capabilities I’m describing are already in place and being used by an increasing number of customers at Niemann Foods’ County Market stores, Coborn's, Woodman's Markets, FoodTown and a growing number of other regional retailers. Each is experiencing increasing participation from regional and local brands salivating over access to industry-leading digital marketing capabilities, while larger-brand brethren are having yet another agency review in search of the next insight.
Like the retail industry itself, marketing is in flux today, as new channels and new capabilities for reaching consumers appear daily. Shopper marketing’s original goal of influencing the shopper along the path to purchase is outdated when the paths to purchase have multiplied exponentially. The very notion of a path to purchase itself is being obliterated, since a consumer can become a customer within seconds, enabled the ability to transact nearly anywhere at any time. Through all this marketplace chaos, one truth remains: Marketing must be relevant to the individual customer.
Clayton Christensen, author of the Innovator’s Dilemma, speaks of the need, and the challenge, for large companies to disrupt themselves if they wish to continue success. It's time for big CPG manufacturers to reassess the marketplace and transform their traditional marketing practices.