Digital technology and mass market: by will or by force

@Cyril Bladier
19 September 2019

The mass market is probably one of the most affected by new digital uses. For a simple reason: consumers have massively made their digital transformation, unlike companies and institutions.

It’s the same difference as between the outboard and the supertanker. The outboard changes course quickly and is quite responsive, the liner needs time and distance to change course, slow down or stop.

Mass market distributors try to survive digital technology

Carrefour has been in turmoil for several years and for the first time Auchan recorded a loss in 2018 (1 billion euros). The cause: the end of the hypermarket model, customer disaffection and, of course, competition from the Internet.

Distribution is affected by consumer needs for precision and hyper-segmentation. Distribution becomes a reflection of what consumers expect online: personalization.

Several initiatives are launched: Monoprix is testing the opening on Sunday afternoons without staff, Auchan is testing a fully automatic store, Carrefour is setting up a lab in partnership with Google next to Station F and Monoprix is partnering with Amazon in the food sector, Intermarché is launching “pedestrian drive”, Système U is launching “drive trucks”…

Google is also affected

There are also changes online. The “retail search” is developing strongly: Internet users are looking for products they want to buy directly on a retailer website, no longer on a search engine, on Amazon in most cases. In 2015, product searches were 46% Amazon and 54% Google. Three years later, in 2018, the opposite is true. Google is also competing with AirBnb or Booking for lodging reservations.

On manufacturers’ side: Playing or Dying 

Consumers, without being hyper mature, are more so than most companies. There is therefore a challenge for consumer goods brands and a need to react quickly. Today, they are forced to reinvent themselves, even if not all of them do so. Some people know that within 2 to 5 years, they will have new jobs, companies or will be retired and are therefore rushing… to do nothing. Following a change of manager during the year, we go from a 5-year vision to a 15-day vision. 

An insoluble problem for manufacturers

Manufacturers are affected on all sides, between hammer and anvil. Distribution evolves from a physical to an online channel. As a result, manufacturers who have always been in indirect contact with customers are now in direct contact. It is an opportunity for better relationships and knowledge, but knowing how to manage it is necessary and being in the front line is not the culture of these brands. 

From a Push to a Pull approach

So customer relationship evolves (must evolve). Moving from a product, communication and distribution-centric culture to a customer-centric approach is needed. Thanks to digital technology, and especially Big Data, we have access to previously inaccessible information. For manufacturers, even if they are immersed in a very strong marketing culture, this transition from a Push to a Pull mode is very complex and absolutely not natural. Mass consumer marketing remains very strong (online or offline) not a push approach. Pull mode has often remained in books or in school. However, with the impact of digital technology, marketing is inherently more effective in a pull approach.

Digital technology impacts mass market products and brands: product becomes only one component of the offer. Related services (even more for premium categories) will become at least as important. These new services can be developed thanks to digital technology, especially because digital technology allows to significantly improve customer knowledge.

Failing is not the real risk 

Getting involved and achieving unsatisfactory results is not the real risk. The real risk is RONI (Risk Of Non Investment, the term is not new but increasingly current). What many leaders do not understand is that the longer they wait, the harder, longer and more expensive it will be. If your competitor is 5 years ahead of you, you have to make up the 5 years delay. Fortunately, since there is still a lot of amateurism, it doesn’t necessarily take 5 years to catch up on 5 years of delay. In digital terms, the “how” and “with whom” (after the “why”) often count more than the “how much”.

The risk?

Becoming a new Kodak. Managers were sitting on a goldmine with films and did not listen to the internal engineers who presented them with the first digital cameras: less margin, less renewal… no action plan.

Becoming a Nokia whose mobile phones were “must have” before a leader said that having the Internet on his phone and in his pocket would never interest anyone.

Or more recently Heinz, which experienced a terrible fiasco with the implementation of « zero-based budgeting process ».

Good practices in mass market

Like Mars, for example, which is investing heavily to develop related services, including in the petfood market. The particularity of Mars? It is still entirely owned by the Mars family.

Change is needed

Manufacturers have to choose:

  • Price or image?
  • Short or medium term?
  • On Amazon or not on Amazon? On Amazon I lose my premium image but if I don’t seize this opportunity, my competitors will do so.
  • How to reconcile a premium image despite a complex online distribution management in terms of premium positioning.

To analyze the options, the scope of possibilities, the company does not always have internal resources. The risk of relying solely on internal resources is also the risk of having a biased vision, based on an offline knowledge of the market, customers, needs and competition. In digital matters, external contributions from professionals who are not familiar with the sector are often a positive differentiating factor.

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