During Module 5 of Squared Online we ask participants to complete a whitepaper on how future digital trends will impact a specific industry. The top 3 whitepapers are shared on this blog as a celebration of all their hard efforts!
Congratulations to team 15 for this stellar piece of work on "How The Internet of (Everyday) Things Can Strengthen Connectivity With FMCG Customers". Team members include: Alissa Sklar, Anna Robinson, Bianca Searle, Holly Jobbins, Israel Garcilazo, Jennifer Tomlin and Ross Sheil.
The Internet of Things (IoT) has the potential to transform the fast moving consumer goods (FMCG) sector by leveraging physical products to provide next level engagement with customers. Here, we consider the opportunities, and challenges, facing FMCG brands in leveraging ‘everyday’ products as connecting (rather than merely connected) channels.
The term the IoT was coined in 19991 and refers to the connection of devices to the internet or to each other, including anything from telephones to coffee machines, wearable devices to fridges2. Today, there are around 14 billion objects connected to the internet and analysts estimate that the number of connected devices could reach up to 100 billion by 20203. Forbes predicts that in the future “anything that can be connected, will be connected” ; addressing this opportunity, this paper considers how FMCG brands can capitalise on this trend today.
FMCG accounts for around half of consumer spending. However, a major challenge for FMCG brands in creating personalised digital experiences that extend the customer journey post-purchase. Overall, FMCG sales fell in 2016 but online sales grew5, demonstrating how brands that have embraced a digital approach are thriving6.
The IoT doesn’t have to be limited to connected devices. This trend challenges us to imagine new and creative ways to transform ‘everyday’ consumer goods like snacks, beverages, toiletries and cleaning products into valuable customer touchpoints. The Internet of Everyday Things uses the physical product as a connector to extend the customer journey. With purchase redemption, a QR code on packaging or under-the-cap code customers can enter onto a mobile web platform – to provide opt-in data to brands in return for rewards that drive long-term loyalty.
This offers FMCG brands an exciting opportunity to go beyond just connecting with their customers but develop strategies to also gather customer data. These insights into customer behaviour and purchasing patterns help personalise marketing activity, implement cost-effective retargeting, and ultimately, drive sales and loyalty.
For the FMCG sector, the digital revolution is about to get physical.
Industry Innovations in Practice
Forward-thinking FMCG brands have started to experiment with IoT technology to fi nd new ways to connect with customers. The majority of examples cited below are alcohol and cosmetic brands who are thinking about their products not just as a one-off sale, but a loop of improvements, data gathering, and ongoing conversation with their customers.
Malibu’s #BecauseSummer Campaign
- This campaign explored the boundaries of in packaging technology by using contactless payment technology, activated by tapping a phone on the bottle’s logo7.
- Smartphone users could access exclusive content including bar locators, prize draws, and drinks recipes creating a ‘direct digital touchpoint for consumers.’
“This was a great opportunity to take that accepted behaviour and move it on to consumer goods and turning it into an experience.” - Malibu Marketing Manager
Johnnie Walker Gets Smarter
- Introduced a ‘smart bottle’ for its flagship Blue Label whisky which included a sensor tag to detect the sealed and opened state of the bottle8.
- Personalised notifications were sent to consumers who read the tags on smartphones.
- Customers would receive sequential communications on how best to enjoy the product.
- The technology also helps to combat counterfeit products.
“There is a huge amount of digital interaction that is happening with our products. These are people standing in stores or bars and wondering whether they buy the single malt or the blend, highland or lowland.” - Vice President, Diageo
Nivea’s Sun Band - an analogue digital connector
- Nivea’s Sun Band ad in Brazilian magazines combined print and mobile execution to pop a bracelet out of a printed advert, download an app and set a Bluetooth perimeter to help parents keep track of their children on the beach9.
- It showed the brand’s commitment to protecting children and created an immersive, valueadded experience that provided a powerful reason to choose Nivea over competitive brands.
“These products are in their bags every day and are almost as personal as their mobile device. There’s a great opportunity to have them as connected devices as well, creating a territory for ongoing customer engagement.”10 - L'Oreal's Head of Digital and Media
Further evidence of how the IOT is improving the FMCG customer experience includes:
- Amazon Dash uses programmed physical ‘buttons’ placed around the home to allow customers to reorder household goods when they are running out. According to Amazon, orders made through the Dash button increased threefold in two months, with orders taking place more than twice a minute11.
- Samsung’s Smart Fridge detects spoilage or items going out of date and prompts customers to order replacements directly from the appliance12.
- Jamaican beer company Red Stripe used under-the-cap code mobile purchase redemption to generate a 29% increase over sales forecast13.
- Beacon technology being used by retailers from McDonald’s to Waitrose push location-based, personalised content such as offers and products when in proximity, offering a great opportunity for FMCG brands to ‘surprise and delight’ customers and drive sales14.
Future gazing - The Internet of Everything?
The examples we have shared are mostly one-off campaigns that haven’t resulted in longer-term changes in customer behaviour. Cost-effective tactics such as connecting product packaging or Amazon Dash buttons can help demonstrate the benefits of the IoT to encourage longer term, greater investment.
Here we outline recommendations for how FMCG marketers can benefit from the IoT, followed by a discussion of risks and challenges.
Rethinking the customer journey
- In the crowded FMCG marketplace, these connecting technologies allow us to understand more about consumer motivations, needs and wants. With this data, it is possible to more effectively guide prospects through the consumer journey, then extend it after purchase.
Mobile is key
- FMCG products are purchased on the fl y, often by habit or impulse. Consumers use their phones to purchase items, or in the store to get recipes, makeup ideas, reviews, participate in promotions. Prompts and notifi cations when products are ready to be replaced reach consumers wherever they are, and can drive repeat sales.
Finding a common language
- Connected devices currently communicate through a Babel of different and often15 incompatible formats, posing data management challenges. Amazon Echo and Google Alexa are examples of voice assistants that can allow consumers to effciently reorder household items. FMCG industry experts will need to keep an eye on which are likely to be the breakaway technologies.
Connectivity through affiliate partnerships
- FMCG marketers should look to strategic partnerships with smart appliance manufacturers, other brands and online influencers
- Technology that lets marketers know when labels are opened or containers are nearing empty can offer critical data about consumer usage patterns. These can also be used to send notifi cations about promotions or drive repurchase.
Merging online & onine channels
- Digital connections challenge FMCG marketers to develop frictionless lines of communication with the customer at every touchpoint.
Industry Gaps: Barriers to Change
As with the adoption of many disruptive trends, the strategies recommended above carry elements of risk. A recent report revealed that 97% of companies found that the IoT is already delivering or will soon deliver signifi cant benefits. However, only 21% have fully deployed IoT based solutions so far16. To increase the uptake of IoT technologies security, lack of skills and connectivity need to be addressed.
Data management and compliance is a key challenge for brands looking to adopt the IoT into their marketing activity. Consumers are more willing to share data if it is clear how it benefi ts them, but government restrictions on data compliance require careful consideration of what data is collected, how it is managed, where it is stored, and how it is to be used17. FMCG brands will need to establish systems and equip employees with the ability to address privacy concerns, manage data security, and respond to evolving regulatory requirements.
The costs involved in experimenting with new technologies can be prohibitive. To amplify the impact of the IoT and bring about measurable change in consumer behaviour, we need to be able to demonstrate the ROI of investing in higher-cost technology for relatively low-cost goods.
Changing consumer behaviours can be difficult. Technologies need to offer clear benefits and incentives to customers to get them to log into websites, enter product codes, download apps or change their behaviour patterns.
Securing a more connected future for FMCG brands
The digital phenomenon of the Internet of Things offers innovative ways to monitor and analyse the customer journey across online and offine channels to strengthen brand loyalty and drive sales. This ultimately enables brands to deliver a more customer-centric experience and is what elevates the IoT from a fad to a genuine trend. The IoT has the potential to generate up to $11.1 trillion a year in economic value18 and it is estimated that $6 trillion will be spent on IoT solutions by 202019.
FMCG brands that fail to embrace the opportunities presented by the IoT risk being left ‘on the shelf’ in a constantly innovating, highly competitive marketplace. When it comes to implementing the latest in digital and connected technology, the FMCG sector will fi nd that their oldest property - the physical product - previously regarded as ‘dumb’ devices, can become their newest digital marketing asset. Whether connected or not, these things can facilitate connection to all other channels to extend and enrich the consumer journey.
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