The term “frictionless commerce” is widely used to describe how digital technologies are blending product purchases seamlessly into consumers’ daily lives. In the ultimate manifestation of frictionless commerce, purchases will be automatically initiated on behalf of consumers (with their advance consent) using real-time, integrated data from known preferences, past behaviors, sensors, and other sources. Envision, for example, a “smart fridge” automatically ordering food items it senses are running low. That is not common yet, but ever since consumers were offered the option to shop online from home, rather than having to go to a store, technology has been rapidly removing friction from commerce.
As frictionless commerce accelerates, so will a momentous shift in the node of commerce. In the era of department stores and supermarkets, consumers selected brands from store aisles and shelves. Over the past several decades, the in-store experience has been increasingly displaced by online shopping, via home computer and mobile phone. As consumers become connected to everything, all the time, the node of commerce will be consumers themselves, rather than any distinguishable “channel.”
The Danger of Disintermediation
Frictionless commerce will test the emotional bonds that make consumers loyal to established brands. Already, consumers are being disintermediated from traditional brand choices via search engine and online retailer algorithms that determine which products are presented to consumers, and in what sequence. That puts all brands in danger. Most consumers are at best passively loyal. When algorithms replace consumer emotions as the prime force shaping purchase decisions, consumers could easily forego their customary brand choices in exchange for the speed and convenience of whatever is offered by the self-interested, digitally empowered parties now taking control of consumer choice.
To remain successful, established brands must give consumers a reason to interrupt the increasingly automated purchasing process and actively choose a brand, rather than passively accepting substitutes. We call this “building brand friction in a frictionless world.”
Are brands adapting to this new reality? Our 2017 survey of 170 top Consumer Packaged Goods (CPG) and Retail CEOs, COOs, and CFOs revealed a conscious shift away from traditional mass production and mass marketing practices toward more personalized approaches.
This certainly makes sense. As consumers become the node of commerce, companies will be challenged as never before to accurately perceive and seamlessly deliver what each consumer wants with unprecedented precision. Yet when viewed in the context of rapidly advancing frictionless commerce, the envisioned shift toward personalization appears modest. Do leaders grasp just how much adaptation will be required to build brand friction in a frictionless world?
To begin, even the most capable and sophisticated marketing organizations will need to fundamentally change their mission and shape. Traditionally, marketing’s most important task was to broadcast the company’s brands to consumers. In contrast, as consumers become the true node of commerce, marketing must first and foremost become a listening post. Analytics — which in many companies is still isolated from the core business — will be foundational to this listening mission, and so must be made central to the marketing function, rather than serving as marketing’s internal supplier.
The most vital leap for marketing will be evolving into an exponentially more effective translator of consumers’ needs, preferences, and desires. Most companies have no shortage of consumer data. What many still lack is the insight required to use that data to decisively win market share. The best marketing organizations will effectively fill that void through an advanced synthesis of brain and heart.
If this envisioned evolution proves accurate, marketing’s most important audience will be the rest of the company, as marketing becomes less an external advocate for the company and brand, and more an internal advocate for the consumer, guiding the formulation of myriad nuanced offers.
Even greater adaptation will be required of the larger organization. Leaders of major CPG and retail enterprises readily acknowledge the difficulty of initiating fast action across silos. P&L and brand groupings that optimized efficiency in the age of mass production and mass marketing often make it impossible for companies to nimbly react to consumer desires.
Influence vs. Affluence
We see peer influence as a growing force in determining where consumers spend money and what attracts them to brands. Affluence, the traditional source of consumer power, is being supplanted by consumer communities, shaped by shared interests and self-selected demographics. Persuasive individuals can now change the fate of brands with relative ease — underscoring the need to focus on how consumers think and what they value.
In sum, the changing world in which CPG and retail companies compete offers clear imperatives to evolve from today’s omnichannel obsession to more consumer-centric models. It is time to rethink everything you do from the consumer’s perspective. Stop resting on comfortable assumptions about the strength of your brands, your customer loyalty scores, or current success. Right now, complacency is your worst enemy.
Here are a few ways to start adapting to the realities of frictionless commerce:
- Use data to understand customers on their terms. Be prepared to offer consumers meaningful value in exchange for their proprietary data. Demonstrably use their data to enhance their lives.
- Redefine your target market. Traditional demographics are no longer sufficient. They will be increasingly replaced by “personagraphics” — the use of psychographics, anthropology, and sociology to identity individual needs and desires across crisply defined consumer cohorts, around which future consumer decision models will be built.
- Rely on listening and translating more than on broadcasting. Challenge the complacency that stems from having an abundance of consumer data. Build markedly more sophisticated ability to identify and anticipate the new keys to brand loyalty in a frictionless world.
- Shift focus from channel strategies to consumer centricity. Digital connectivity appears destined to make channels all but indistinguishable. Strategically redirect resources away from understanding channels toward deeper understanding of consumers.
- Tap influence. As the mass marketing age fades, create brand friction via increased use of membership models and event-driven marketing. Build a sense of community within target cohorts by facilitating a network effect for influencers.
For the past century or more, technology has greatly empowered brands by connecting them with consumers on a mass scale. Now technology threatens to have the opposite effect, as the automation and algorithms of frictionless commerce distintermediate brands from the consumers they seek to serve. This crucial trend compels established CPG and retail brands to let go of much that is familiar and comforting. It is time to boldly experiment with new approaches, expressly aimed at building brand friction in a frictionless world.
from HBR.org https://ift.tt/2kn8HoG
