From products to experiences: Why Customer Experience matters in CPG

It's not new to suggest digitisation has changed the makeup of the retail industry and, in extension, how retail experiences are judged. However, the digital economy also presents new opportunities for consumer packaged goods manufacturers to bypass retailers entirely. Can the revolution in the CPG supply chain mean an evolution of customer experience?

The author(s)

  • Stephen Yap Head of VoC Programmes
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Today’s business headlines are dominated by the disruption of traditional business models. Extensive bandwidth and newsprint has been devoted, for example, to how Amazon has rewritten the rules of retail. While retail experiences and the retail industry are being profoundly reinvented, the digital economy presents consumer packaged goods (CPG) manufacturers with the chance to bypass retailers entirely and sell directly to consumers. And with that, they have chance to redefine Customer Experience (CX) in the CPG landscape.

This route to market is already well-established in sectors such as apparel, where success stories such as ASOS and Boden have created digital-first businesses integrating design and manufacture with direct sales under one branded roof. The direct-to-consumer (DtC) model is now taking hold in other markets, with the likes of Unilever’s Dollar Shave Club, PMI’s iQOS and Nestlé’s Nespresso selling replenishment products directly to millions of customers around the world via wholly-owned channels.

CPG brands have long been the biggest spenders and among the most sophisticated users of consumer research, with new product development, brand & communications insights and shopper understanding being mainstays of every CPG brand. On the other hand, CPG firms are relative newcomers to CX, which hitherto has predominantly been the domain of service industries such as banking, insurance and hospitality, and makers of durables such as electronics and cars.

As CPG firms introduce new business models in which they increasingly control customer touchpoints, CX is firmly on the radar. The promise of DtC is the ability to build longitudinal relationships with consumers, gathering data on their preferences and purchase behaviours that enhances targeting and enables personalised, relevant offers – in real-time.

To accomplish this, CPG companies must establish new (to them) operational and channel capabilities such as contact centres, to deal with new (to them) consumer interactions such as technical support, database updates and product returns. In the DtC world, the traditional CPG disciplines of path-to-purchase mapping and shelf optimisation will evolve into the need to understand the total customer journey.

This has significant implications for how CPG firms think about driving emotional equity and brand closeness; it can’t be seen as just about delivering on the customer’s ‘Job to be Done’ through superior product performance. It is also about providing a consistently great service experience and user experience; delivering on the Brand Promise at every touchpoint and delivering in a seamless, ‘frictionless’ fashion to deliver that Return on Customer Experience Investment (ROCXI); driving up retention, share of spend and advocacy – and, of course, operational efficiency.

As their mandate grows from brand and category management to experience design and touchpoint optimisation, CPGs have some catching up to do, compared with service industries accustomed to owning the end-to-end customer relationship and interactions. The good news is that customer-centricity comes naturally to CPGs, whose organisations and DNA are infused with expertise in pinpointing and targeting human needs and motivations: the opportunity now exists for them to directly activate these themselves. CX may be a new concept in fast-moving consumer goods, but the path is wide open for them to lead the way.

The author(s)

  • Stephen Yap Head of VoC Programmes

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