• by Larry Thomas , Columnist, January 23, 2017

Thanks to digital disruption, the nature of consumer packaged goods companies is changing. Rather than simply selling goods, leading CPG companies are looking to create and curate customer experiences. These experiences are underpinned by a new form of collaboration, using platforms to connect with consumers like never before.

Platform models were pioneered by the tech industry. Then companies like Uber and Airbnb overturned traditional service models to bring providers and users together in disintermediated value-exchange communities. Take Airbnb: it doesn’t just provide a place for people to stay, it provides a community in which people can earn money by opening their homes to others who want an experience that a traditional hotel cannot provide.

The consumer goods industry is being transformed by this platform economy. Brands are dissolving, identities becoming blurred, and CPG companies are struggling to build relevance in a world where the traditional push model no longer works.

Redefining the brand

In this age of the digital consumer CPG companies that want to engage with their customers need to understand where they fit in the ecosystem. For instance, does the brand offer consumers an experience, and can it engage consumers directly in an ecosystem of activity and connections? Or, does the brand offer utility products? Consumers buy “utility” brands on a frequent and predictable basis, whereas the “experience” brands come with a distinctive, memorable experience attached. Once a brand positions itself as an experience or utility brand, it can look to innovate in an engaging manner through platforms. 

The benefits of platforms

CPG companies must build a community of partners able to bundle offerings is a way that creates value for customers and for the wider platform community. This can help CPG companies stand out in several ways:

• Improved customer engagement. Consumers today research products online, discuss them on social media, share brand preferences with friends and try to influence product design and co-innovate with brands. Operating as a platform helps to enable CPG companies to capture attention and build strong connections with consumers.

• Enhanced customer satisfaction. Consumers set a high bar for ‘liquid’ experiences that seep across industries. By connecting to the broader ecosystem, CPG companies can provide solutions that extend the brand beyond the product to a service and enhanced experience.

• Generate lifetime value. CPG companies also have greater opportunities to create value by harnessing and monetizing ecosystem interactions.

• Network effects. Platforms become more valuable as more people use them, creating network effects. Network effects exist when two user groups generate network value for each other, resulting in mutual benefits that drive demand-side economies of scale. 

Transforming your brand

CPG companies need to look at how the wider ecosystem of digital players and providers can support to reinvigorate how they interact with consumers. For experience brands, this may mean working with expert providers to co-develop a platform capable of supporting a community comprising millions of users. It may also mean partnering with other brands that provide different yet complementary apps and services. Utility brands should develop partnerships, leverage consumer data and join established platforms. For each brand, this will create the most compelling, multifaceted experience for users.

To achieve this, there are six steps CPG companies must take as they move to a platform model:

1. Create a unified view of the customer across all channels and touch points. Companies must invest in integrating the brand experience across the organization at the data layer to benefit from a unified view of the user. 

2. Acquire data that helps to enable high interactivity and personalization among services, creating stickier and more engaged customer behavior. 

3. Strategically acquire user and usage data that other ecosystem players find valuable.

4. Determine which providers of complementary goods or services are needed on the platform to provide wider choice and a comprehensive solution for the consumer.

5. Ensure that participation on the platform provides partners a unique advantage when compared to participation on other existing channels. 

6. Determine key infrastructure and data assets needed to exercise control over the ecosystem.

The traditional brands of the past need to find new ways to connect directly with consumers to offer ongoing customer experiences that keep customers coming back for more. Brands that make the transition first stand to benefit from a significant competitive edge.