How CPG brands can navigate economic challenges
Inflation is rising at its fastest pace in three decades and this is a trend that is set to continue for the foreseeable - the Bank of England anticipates that inflation could peak at more than 13% this year. Costs of food and fuel, and a range of consumer products – from clothing and footwear to furniture, household goods, electronics and more – are now at the highest they’ve been in years. These are all factors contributing to the ongoing decline in consumer spending – recent ONS retail sale figures show sales have been on a downward trend since summer 2021.
The ongoing cost of living crisis has meant that the average consumer has no choice but to be more conscious with spending, resulting in evolving buying habits. But with consumer confidence hitting a record low this August in the UK, there remains uncertainty around how this will affect spending in the long-term. As consumer spending behaviours become ever more difficult to anticipate and predict, how can consumer packaged goods (CPG) companies navigate changing demands and ensure customer loyalty is secured?
To manage the macro challenges facing them, CPG brands should channel their efforts into three key directions: providing unrivalled customer experience (CX), demonstrating sustainable action credentials, and ensuring resilient supply chains.
Putting the consumer first
Today’s consumers value experience when they shop or interact with a brand and are much more selective about how and who they spend their money with. The modern consumer purchases with a great emphasis on responsible consumption and health and wellbeing while demanding more personalised outcomes from brands. The stakes of getting the experience wrong are high, as 71% of UK consumers haven’t gone back to a brand after vowing to never shop there again.
Successful CPG companies are those that can provide a personalised experience where and when customers want it. They can do this by leveraging AI and data analytics to create dynamic consumer profiles that enable them to personalise campaigns in real-time, adapt to consumer context and needs while also helping to ensure data security and consumer privacy. Using cloud-based, AI-powered analytics, brands can gain a richer understanding of each customer in the moment and bring valuable insights into product development.
Demonstrate sustainable action
Customers have become increasingly aware of how and where a product has been made. The use of raw materials, worker treatment, packaging and delivery have all become top of mind when choosing what products to buy, and this influences their buying decisions. In fact, according to Accenture, two-thirds (66%) of consumers will now make more ethical and sustainable choices when shopping. Responsible businesses not only attract more customers but drive financial success. This is because customers pay attention to the sustainability credentials of companies and will often boycott ones with negative values.
There are several ways that CPG brands can become more sustainable – from measuring their carbon footprint to reducing plastic packaging and introducing circularity as an integral part of their business model. And this is all achievable with the right technology. For example, AI technology can help CPG brands guide customers through a pain-free returns experience while automating the disposition process. Furthermore, the ability to make a product’s sustainability credentials easily accessible to consumers with QR codes can provide CPG companies with a competitive advantage.
Building supply chain resilience
The ongoing customer demand for quality products - as seen in the past few months, contributing to supply volatility, has become a new reality that is here to stay. Being agile in reacting to supply chain bottlenecks will be a game-changer for CPG businesses. Ecosystem collaboration and having end-to-end visibility across the extended supply chain provided by IoT sensors, blockchain, and integrated data, are crucial to understand where products are and how this will impact the end consumer.
Consumers like to receive updates from brands on their order status when they purchase something online. They also don’t mind waiting longer to receive it, as long as shipping times are clearly communicated to them. Using integrated, intelligent supply chain technologies solutions will help CPG businesses improve their awareness of operations and procedures to maximise assets, minimise spending, and seamlessly mitigate disruptions. It will also help ensure that customers always have the most up-to-date information regarding stock numbers or the status of their online order.
A roadmap for the future
If inflation continues to rise at the pace that has been seen in previous month, it’s set to be a difficult time ahead, both for CPG companies and consumers. As such, brands need to be doing more to keep consumers on side and secure their loyalty by ensuring that customers are put front and centre of all decision making. It will be critical that CPG businesses utilise technology such as AI, machine learning and IoT, in the months ahead to transform internal processes and maximise efficiency and agility, while keeping the customer at the centre of operations.