- Setting up digital governance
- How businesses can take control of their online sales in 3 steps
- Stay ahead of the competition thanks to a shorter Time to Market
- Deploying your digital solution internationally
- How to overcome digital disruption by personalizing your offer
When premium consumer brands go digital
This use case presents the challenges faced by premium consumer brands in their quest to benefit from digital transformation.
Digital has brought a real breakthrough, which required premium consumer brands to change gears. The distribution of value-added products has shifted to digital, allowing new players to compete with existing leaders for a share of the consumer pie. This is how our customers from the premium consumer sector were caught off guard by a threat that most of them weren’t able to anticipate quickly enough: a wave of new retailers with perfect digital skills — e-retailers — whose market shares in the distribution of value-added products increased very rapidly.
The four major challenges of digital governance of premium consumer brands
- Should one let local initiatives develop or launch a massive overarching project to solve the problem once and for all?
- How to invest one’s resources in digital? Should a CDO (Chief Digital Officer) be appointed? Can the problem be solved by a change of organizational structure?
- Should one act piecemeal and in a pragmatic way, or spend more time finding the ideal strategy?
- Should one immediately create a “digital lab” or “digital factory”, or any other research unit to innovate and win the digital battle?
A real-life example: do not look for the ideal strategy, but move forward step by step
A major animal feed manufacturer had selected few projects, but each cost between €5 million and €10 million. Time-to-market was estimated at around 2 to 3 years. By changing its work methodology, this manufacturer learnt to quickly develop initiatives (less than 6 months), at a lower cost (about 500,000 euros), deploy them massively within 1 year, and obtain visible and quantifiable business benefits 1 year after deployment. The company was able to save 2 to 4 million euros and accelerate its processes while transforming digital from a waste center to a source of profit.
How businesses can take control of their online sales in 3 steps
This use case offers solutions to major brands wanting to be in command of their digital channel and restore a favorable balance of power against e-merchants.
According to ecommercenews.eu, the share of e-commerce in retail sales is about 19.2% for the UK; for the US, the figures were approximately 14.3% as reported by Internet Retailer, and the at the global level, e-commerce sales account for 15% of the total retail sales (digitacommerce360). Only a few years ago, nobody could have anticipated such an outburst of e-commerce transactions.
In this context, brands have no other choice but to deal with the online channel and reinvent their sales processes. Failure to do so would tip the balance of power in favor of the new entrants.
4 major challenges brands face against e-retailers
- Lack of bargaining power. By allowing e-merchants to grow, brands have weakened their position. In the early days of e-commerce, e-merchants needed to sell known brands to develop their reputation. Now, it is manufacturers who need to sell their products via known and popular platforms. The balance of power has been reversed, and e-merchants now can impose their decisions on brands.
- Lack of e-commerce expertise. Manufacturers are familiar with in-store sales but have no experience in online sales. Without any empirical knowledge in this field, they rely on e-merchants and hence end up losing even more bargaining power.
- Lack of control over sales. As a direct consequence of this uneven distribution of power, the brand can no longer impose its decisions on an e-merchant, whether they concern price, promotion, layout, etc.
- E-merchants know customers better than manufacturers. Despite the arrival of supermarkets in the 1960s, brands have still managed to maintain some influence because they knew their customers’ habits better than the retailer. In the digital realm, e-merchants own all the customer data and therefore have control over invaluable information.
A real-life example: Deploying a sales strategy across 28 European countries
A major food group wanted to develop its selective distribution strategy. To this end, it had adjusted its general terms and conditions several times, to no avail. We provided one of its subsidiaries with the method, tools and support to enforce new sales agreements in 28 European countries. Our progressive and pragmatic approach proved to be fruitful, unlike the “Big Bang” method initially adopted by the group. The first step was carried out in 4 months: the 28 countries adapted their sales agreements and trained their sales representatives. This progressive change required continuous support over three years.
Stay ahead of the competition thanks to a shorter Time to Market (TTM)
This use case presents two complementary solutions designed to optimize the go-to-market strategy, a crucial step in which time plays against the company.
Go-to-market strategies are the Achilles heel of premium consumer brands
In recent years, brands have rapidly accelerated the pace of their product or service launch strategies, also known as go-to-market strategies. Refining a product or service for several months or years before launching it is a trait of the past now. New players, particularly those operating in the high-tech sector, have gradually developed strategies based on the rapid launch of a minimum viable product (MVP) that evolves thanks to customer feedback. Regulated and protected industries, such as the banking sector, have had to change, due to the emergence of online business models.
For large traditional companies, brand reputation is no longer sufficient to protect them. Alternative solutions such as buying innovations or start-ups for vast sums of money will only curb competition momentarily. Besides, this is not a viable solution in the long term. Also, the “winner takes all” rule applies to many segments. As they open up new markets, such new businesses can gain a lead that is difficult for the competition to outdo.
In this context, we have identified three primary reasons for the deployment delays experienced by many premium consumer brands. They provide us a starting point to devise solutions for these companies.
- Master technology: success requires new ways of working. Businesses that are accustomed to 6-month delays for the set-up of a server, when launching a new project, will be guaranteed to mess up their go-to-market strategy.
- Organize and balance roles: entrusting go-to-market to IT without any real involvement of the business owners is a mistake that we regularly encounter. Business results must drive a go-to-market strategy. Managers’ participation should be proactive and go beyond criticizing IT for their lack of results. This means that business owners should head the project, based on a list of objectives and with support of experts all along the project life.
- Select the right pilot users. As the first testers of the product or service, pilot users are crucial TTM players. They give their feedback and co-construct the MVP. It is therefore essential to choose the right people whose feedback will be relevant, and who have a vested interest in developing a better offer. This is harder than it seems as, in many cases, few pilots can suggest innovative ideas and bring real added value to a project.
A real-life example: save 300 million euros by changing your corporate culture
A large pharmaceutical group had delayed the launch of its digital transformation projects owing to a long-winded and convoluted process. They were aware of that problem. They had been working on a solution to reduce their TTM for the past ten years. This flawed process consisted of 300 tasks that resulted in unnecessary hurdles and slowed down its clinical studies, leading to a waste of time and money. We worked with them for several months, and at the end, the number of tasks was reduced to 80 and now stands at just under 50. The main benefit is that their clinical studies are now starting on time. This is no small change. Such a large company usually deploys large-scale studies across 200 countries. Whenever they reduce their TTM by two months, they can achieve savings worth 300 million euros.
Deploying your digital solution internationally in 5 steps
This use case summarizes the main factors of failure of an international deployment and presents the solutions to deal with them. This stage of deployment is very often underestimated and is the cause of many project failures.
The deployment of a product or service on an international scale is not an easy endeavor and is often underestimated by brands. It involves an operational part (for example, the design of an e-commerce website adapted to each country). Many businesses seem to think that this is where deployment projects come to an end. However, this is just the technical part of the project. One may surmise that it accounts for 10% of the overall initiative at the most. The whole process should be understood in a much more comprehensive manner and encompasses multiple stages (market selection, market monitoring, continuous improvement, etc.). Eventually, the project should bring tangible business results.
Four factors leading to failure of international digital deployments
- Underestimating deployment costs: From our experience in the field, we know that if you have spent 100 on creating an offer, you have to invest 1,000 to drive it into action. However, companies often do the opposite. Deploying on a large scale is a job in itself and must be supported by a well-established strategy that takes time and resources into account.
- Designing a concept poorly suited to a particular country: the business nuances subsisting in different countries should never be overlooked. For example, not all countries use the Internet in the same way. In China, users rarely visit static corporate websites, as the Chinese mainly use online marketplaces and local social platforms like WeChat. A lack of preparation will most probably lead to failure. Hence, you must take into consideration the country’s business customs where you want to deploy your offer to achieve fruitful results.
- Lacking the skills required for the success of the project: Deploying an international solution requires additional skills which may not be available within the company. For example, when a brand wishes to sell to consumers, asking manufacturers dealing with distributors in B2B to turn to B2C, requires logistical and digital skills that they do not have.
- Underestimating the speed of deployment: Digital has accelerated everything, and technology is forcing brands to act quickly in several countries at the same time. For example, changing a brand’s terms and conditions in Europe requires action on each of the 28 countries at the same time.
A real-life example: What happens if you start your deployment in the wrong country?
A French automotive parts manufacturer had chosen China as the first country to deploy its offer, due to its business potential. However, the size and culture of the country quickly made this first deployment difficult, and the manufacturer had never had past experiences upon which to draw. Another customer, an industrialist in the foodstuffs sector, began its rollout with the French market. In this instance, the size of the market added three years to the deployment of the solution. It then created a domino effect on the schedule of other services.
How to overcome digital disruption by personalizing your offer
In this case, we delineate the key success factors comprising a customization strategy.
Customizing your product to protect your distribution channels and overcome digital disruption
The rise of e-commerce has had an impact on premium consumer brands beyond selling prices and brand image. It has also had a significant influence regarding the role of marketing intermediaries such as retailers and more generally, prescribers. A manufacturer benefits from intermediaries who advise consumers on its products and build their loyalty towards the brand. For example, a veterinarian recommends a pet owner on animal products, an optician guides his client through a choice of glasses, etc. E-commerce disrupts this process, by promoting a preferred channel that bypasses existing prescribers, and hence is unfavorable for both parties.
Brands must react swiftly without sacrificing their channel intermediaries, which have always been an essential component of their sales strategy. Developing an online sales channel is, therefore, a priority if a brand wants to regain control over both selling prices and its image. However, opening an online flagship store (an online store that sells only the brand’s products) would trigger direct competition with its prescribers. A solution emerges for the resolution of this issue: product customization.
Four critical success factors for successful product customization
- If at first you don’t succeed; try, try, again! There is nothing like asking customers for feed-back to grasp the drivers and inhibitors of a particular market. There is no point in losing time if such inhibitors are not identified. The most effective way to do so is to proceed by trial and error, then adapt and improve your project as it moves forward.
- Customization cannot be devised in isolation. Starting to customize a product requires additional skills, whether regarding the development of the product itself, or logistics, or retail network management. The company will have to open up its ecosystem and work with partners offering the necessary expertise. Such an approach is more effective when it comes to implementation speed than acquiring skills internally. It is also compatible with a rapid scale-up strategy of the project as well.
- Personalization is a cross-organizational business project. Customization cannot just be one amongst many projects but a strategic orientation, which must be led on a full-time basis by one of the company’s top managers.
- Customization strategies are 15-year projects. It is crucial to move quickly into the market and then work on the prescription channel. At the same time, the company must be able to streamline its manufacturing facilities to make the personalization of its products possible.