As my everyday conversations with clients underline, consumer products companies have made huge investments in digital capabilities and data in recent years. And for good reason—according to Forbes, digital and analytics investments can unleash almost US$500 billion in value for consumer packaged goods (CPG) companies by 2023. This puts them ahead of some other industries in terms of their ability to capture and monetize consumer information.
So far, so good. But now they face the critical next step, which is likely to prove much harder: determining how to make money from all that information, while navigating a retail and consumer interaction model that’s becoming ever more digital by the day.
Consumer markets companies are not alone in facing challenges around data. As the recent PwC book Beyond Digital points out, winning in any industry today demands more than digitization. It also requires using the data companies gather to compete in new ways. That means it is imperative for them to acquire or develop the tools and skills needed to marshal and interrogate a mass of data to enable smarter, faster, more value-creating decisions, and improve the consumer experience.
Proceeding with care
Even more than in other industries, consumer markets companies using customers’ information to achieve efficiency raises significant risks—as our forthcoming Global Consumer Insights Pulse Survey (launching June 14) confirms. Of more than 9,000 people interviewed in 25 territories, 58% say that protection of their personal data greatly impacts the trust they have in a brand. And 54% are open to sharing their data only when companies have a clear data security policy in place. Privacy considerations can also be more significant in some regions. For example, the EU’s General Data Protection Regulation (GDPR) has made European consumers, in general, more conscious of data protection than their American peers.
Consumer products companies have made huge investments in digital capabilities and data in recent years. Now they face the hard part: determining how to make money from all that information.
The clear implication? As consumer markets companies set out to turn customer data into business value, they need to tread very carefully. In particular, they must be sure to stay within today’s rigorous data privacy regulations and to operate robust data governance processes.
Why retailers have a head start
As retailers and consumer goods players embark on this journey, they face very different pathways. Let’s take retailers first. In the race to exploit digital insights, they have clear advantages. Why? Because they’re awash with data, generated and collected via their ongoing direct engagement with consumers—including through loyalty programs—and their intimate oversight of products flows.
As a result, they have huge pools of data rich with customer insights. While they develop use cases to generate more value from this asset, they can simultaneously pursue three goals:
• Improve and personalize the experience for customers, by anticipating their needs, offering them the right product at the right time via the right channel and service mix, and tailoring the end-to-end buying journey invisibly to their individual requirements.
• Make omnichannel digital retail operations more efficient—both internally and across their ecosystem—through closer data-enabled collaboration.
• Sell data insights externally to turn their data lakes from a cost into a profit center.
Several of the large retailers I’ve been working with recently are doing all three of these things, at different levels of maturity. How? They’re mobilizing their people and technology to build a business model that capitalizes on data internally and also provides data insights to the outside world. As a result, these companies will provide data services to other companies, including startups, in a secure manner, creating higher value both for themselves and for others in their ecosystem.
Consumers goods companies catch up
Next, consider consumer goods businesses. The ability to turn data in actionable insights is every bit as critical a success factor for these organizations as it is for retailers. But these companies are one step removed from the end customers, and have less visibility into consumers’ behavior, preferences, and transactions. This makes consumer goods players more exposed to market disruption, and at risk of failing to detect the initially subtle signs of major shifts in consumer preferences.
Many brands are creating direct-to-consumer strategies or setting up a handful of retail outlets. But I believe most will need to join the retailers’ data ecosystems to get the complementary insights they need, develop a closely integrated supply chain, and meet consumers’ expectations for transparency and traceability.
The quest for value
The message? Today, every business needs to go beyond digital. But the challenges in doing so can differ dramatically, even within the same industry. So ask yourself: Where is your business starting from on its quest to turn data into value? And do you have the right competencies to collect, sanitize, and secure the data you have, to create the use cases that will power new business models? If not, it’s time to raise your game around data and people, and go beyond digital before your competitors do.
- Sabine Durand-Hayes is the global leader of PwC’s global consumer markets industries practice. She is a partner with PwC France.