Inflation is rising at its fastest pace in three decades, driving up the cost of food and fuel, and subsequently the prices of a range of consumer products – from clothing and footwear to furniture, household goods, electronics and more. To secure margin and stay afloat, many retailers are doing a major overhaul of their product ranges, rationalising their product portfolio to remove the long tail while simplifying promotion strategies.
The rising cost of living crisis has meant that the average consumer has no choice but to be more selective about how they spend their money, resulting in new and different purchasing habits. But with consumer confidence in the UK at its lowest ever score since records began in 1974, the question remains whether they will continue to spend at the same rate as they did pre-pandemic. With consumer spending behaviour becoming ever more difficult to predict, how can consumer packaged goods (CPG) companies address this while still positioning the customer front and centre?
To navigate the macro challenges facing them, CPG brands should channel their efforts into three key directions: providing unrivalled customer experience (CX), maintaining high sustainability credentials, and ensuring resilient value chains.
Create Winning Customer Experiences
Today’s consumers value experience when they shop or interact with a brand more than ever. They are much more selective about how and who they spend their money with. The modern consumer purchases with a great emphasis on responsible consumption and health and wellbeing while demanding more personalised outcomes from brands. The stakes of getting the experience wrong are high, as 71% of UK consumers haven’t gone back to a brand after vowing to never shop there again.
Successful CPG companies are those that can provide a personalised experience where and when customers want it. They can do this by leveraging AI and data analytics to create dynamic consumer profiles that enable them to personalise campaigns in real-time, adapt to consumer context and needs while also helping to ensure data security and consumer privacy. Using cloud-based, AI-powered analytics, brands can gain a richer understanding of each customer in the moment and bring valuable insights into product development.
Offer High Sustainability Credentials
Customers have become increasingly aware of how and where a product has been made. The use of raw materials, worker treatment, packaging and delivery have all become top of mind when choosing what products to buy, and this influences their buying decisions. In fact, according to Accenture, two-thirds (66%) of consumers will now make more ethical and sustainable choices when shopping. Responsible businesses not only attract more customers but drive financial success. This is because customers pay attention to the sustainability credentials of companies and will often boycott ones with negative values.
There are several ways that CPG brands can become more sustainable – from measuring their carbon footprint to reducing plastic packaging and introducing circularity as an integral part of their business model. And this is all achievable with the right technology. For example, AI technology can help CPG brands guide customers through a pain-free returns experience while automating the disposition process. Furthermore, the ability to make a product’s sustainability credentials easily accessible to consumers with QR codes can provide CPG companies with a competitive advantage.
Resilient, Intelligent Value Chains to Navigate an Uncertain Future
The ongoing customer demand for quality products – as seen in the past few months, contributing to supply volatility, has become a new reality that is here to stay. Being agile in reacting to supply chain bottlenecks will be a game-changer for CPG businesses. Ecosystem collaboration and having end-to-end visibility across the extended supply chain provided by IoT sensors, blockchain, and integrated data, are crucial to understand where products are and how this will impact the end consumer.
Consumers like to receive updates from brands on their order status when they purchase something online. They also don’t mind waiting longer to receive it, as long as shipping times are clearly communicated to them. Using integrated, intelligent supply chain technologies solutions will help CPG businesses improve their awareness of operations and procedures to maximise assets, minimise spending, and seamlessly mitigate disruptions. It will also help ensure that customers always have the most up-to-date information regarding stock numbers or the status of their online order.
Final Thoughts
Consumer packaged goods companies will continue to feel the impact of the cost-of-living crisis in the coming months. During uncertain times it is more important to keep customers happy while meeting their diverse demands and expectations. Leveraging technology such as AI, machine learning and IoT is critical to help CPG businesses revolutionise internal processes and maximise speed and scalability while keeping the customer at the fore of all operations.
For more insights from CX experts at SAP, check out our video: SAP Introduces Its Latest Service Cloud Innovations
