Consumer behavior is changing, and to be successful, brands have to keep up—but many are struggling because they feel like the inmates are running the asylum. They can’t control the marketing message or the distribution anymore. In this two-post series, I explain why—and what companies can do about it.
Consumer habits are changing.
For most of the 20th century, consumers bought quality, dependability, and predictability, because poorly designed or manufactured products could be dangerous.
Today, expectations have increased. Consumers ask: Is the company communicating with me in an authentic way? Does it resonate with my values? Does it help me identify as part of a tribe? Is it more of an experience than a transaction?
That may be expressed in different ways in different countries, but at its core is a desire to have a higher set of needs fulfilled.
It surprises me just how much the landscape has shifted. I hear companies in the most basic categories you can imagine—like water and toothpaste—say they need more authentic engagement with their customers. In China, companies are telling authentic stories about instant noodles!
A lot of food and beverage companies are losing share to smaller companies.
The rise of influencers is shaping consumption.
The brands that embrace influencers are creating a lot of sustainable value for shareholders, and the brands that don’t are being left behind.
Many food and beverage companies, for example, are losing share to smaller companies. People go in a supermarket and think, “This packaging looks cool; it seems like me. Let me try something different.” Maybe Google it. And then they take a picture and post it on Instagram.
Cosmetic and luxury goods retailers are different. They’re succeeding because they’re embracing influencers. They offer an experience. You try on the product; you want to share that experience with your friends.
I had a very interesting experience on my last trip to Tokyo. I went on a street fashion tour with a YouTube influencer.
He took me to all these cool stores that were off the beaten path, and introduced me to multiple designers. It was a very enriching experience to hear from someone who’s on the ground, seeing what’s going on and able to discuss how companies should think about fashion when engaging with consumers.
I didn’t realize how popular this individual was until he was stopped multiple times on the street by tourists saying, “Hey, I saw you on YouTube. Great to meet you.”
In sum, when consumers, particularly millennials, are engaging with brands, they want to give and receive feedback. They want to be heard, and they want their voice to be iterated throughout the product and the interaction.
It’s interesting to engage with the companies that get this and have shifted to embrace this type of authentic two-way conversation.
An estimated 50% of all searches will be voice-based by roughly 2020. Voice is just a more natural way to interact.
Voice technology is changing purchasing.
Voice is just a more natural way to interact since it’s faster and easier than clicking through an app or web page. It’s grown so fast that an estimated 50% of all searches will be voice-based by roughly 2020.
This is causing many consumer packaged-goods companies to be deathly afraid of voice search as voice gives more power to platforms than with a traditional search.
In a traditional search, you are presented with many options, and brands can engage through advertisements and campaigns. In contrast, with a voice request, the platform may select just one definitive result and the journey may end there.
It’s already difficult to advertise and build new brands, and it will become exponentially more difficult in a world where people don’t see and interact with the brands when they are searching.
Companies have lost control of distribution.
Historically, unless you were traveling to different parts of the world, you just didn’t have access to products from Japan and France.
A company bought shelf space with a retailer, and the retailer controlled what the consumer saw. When I used to walk into a supermarket, I would hesitate to try things I didn’t recognize.
Today, you can go online and see those products with the click of a button, or you can follow an influencer from many different countries. Now when I see something new, I think it looks interesting. It’s the treasure hunt experience—that experience of being able to engage and try new things.
This is one reason people are opting into things that they personally identify with instead of being guided toward certain products.
In part two of this series, I’ll look at how companies can—and should—respond to these changes.
Blog Series: Consumer Consumption Trends
Part 2: Consumer Trends Drive Big Changes for Companies
Kwesi Smith, CFA, is a research analyst on William Blair’s Global Equity team.