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CEM for FMCG: P&G vs Unilever
Experience Management as Peril and Possibility
Mr. Paul Ward
Vice President, Customer Experience, YourMusicOn
G-CEM International Partner (US)
www.Pkward.com
The challenge for producers of fast moving consumer goods has never been greater. Conceiving well-differentiated products, manufacturing them with global supply chains, helping to merchandise and support products - all of this has become a low-margin business sensitive to economic factors such as currency exchange, fuel prices and capital liquidity.
Bucking this trend has been temporarily easier given the drop in fuel prices at the end of 2009. Coupled with holding the line on prices and careful promotion management, some FMCG companies such as Unilever have actually posted profits - although on the same volume of products sold through.
But Unilever's story is not over yet. New CEO Paul Polman focuses on the fundamentals. "Their primary focus is on boosting volumes, which will hopefully be achieved by: maintaining basic competitiveness, boosting innovation, attempting to grow in all markets rather than just shifting focus to developing markets, sharpening the organization and culture, improving the efficiency of the supply chain, and strengthening brand portfolios," according to Daniel Palmer reporting in AFN ("Unilever focused on volumes, 'no such thing as holding share' in FMCG", February 6, 2009).
Polman nevertheless wants to bring in the voice of the customer. "[We] are putting increased capabilities in place to drive shopper knowledge into our plans. In the US we have just opened our new Customer Innovation Centre and the first customers are already coming through the door." And innovation is necessary, because FMCG companies have used the same tools for years to merchandise products in-store, creating a red ocean of price-sensitive customers who often shift loyalty based on promotions.
Can customer experience management be a science that gives competitive advantage to companies like Procter & Gamble and Unilever? You bet, but it's challenging because great CEM forces companies to rethink they way they define and build brands, and obligates them to engage their customers in new and redesigned touchpoints.
In the past, the common tools for FMCG sell-through focused on merchandising: Cross-merchandise with compatible products (razors with shaving cream, soft drinks with chips); putting products at eye level; even "buying" blocks of shelves for a single brand or manufacturer. The retailers benefit from this competition for location and space from their suppliers; in fact, you'll often find that stores tend to favor two or three main suppliers because the dynamic between retailer and suppliers makes true variety less profitable to retailers, and too expensive for third- or fourth-tier producers.
The Internet can change that. In fact, the Internet can change merchandising and branding altogether. The Internet supports web and email touchpoints that are increasingly used by fast moving consumer goods companies in innovation, relationship-building, brand-building and closed-loop marketing that feeds back service issues into value proposition development. Procter & Gamble's incredible success with the Swiffer is nothing less than a true experience innovation: Instead of making your house clean as the key benefit (outcome-based marketing would endorse this approach), P&G decided to make the act of cleaning itself a clean thing to do. P&G's CEO A.G. Lafley has famously said that people don't remember benefits, they remember experiences. And one of the experiences people hated when mopping and cleaning floors with the filthy water that accumulated in the bucket. Swiffer takes that away.
And the brilliance of the Swiffer goes further: because it uses disposable components that have to be repurchased. It's not selling a mop once and waiting for the customer to buy another one five years from now. It's a continuous revenue stream - combined with a continually appreciated experience.
Lafley said in Entrepreneur magazine, "[We] introduced the Swiffer Quick Clean lineup in 1998 in test markets. Ten years later we have a brand that does about $800 million in sales. The trial rate in the U.S. is only 10 to 14 percent. So 86 to 90 percent of U.S. households still have not tried the Swiffer Quick Cleaning system. We know if you try it, two-thirds of consumers claim they will convert to regular purchase and usage of Swiffer. So I don't need new-product innovation to get Swiffer going. I need new trial and sampling innovation."
Now, sampling has long been known to be the most effective way to sell. But notice that the sampling here is really not of the product, but of the experience. In a post-commodity, post-service economy, companies have to differentiate on the experiences they provide, and sampling experiences is a natural part of the evolution of business. The win for FMCG companies who focus on experience is that sampling experiences make the product and the brand much more real to the customer.
A term I've adopted from both psychology and business to describe this phenomenon is appropriability. In short, rehearsing the experience allows your unconscious mind to appropriate - to adopt - the brand values you're trying to push. At that moment, the experience becomes a memory and a filter. And that filter eliminates the competition from your customer's consideration. So, the question is, how can a FMCG company develop such opportunities for appropriation? Again: the Internet and e-mails let you open a dialog with early adopters. For much less than the costs associated with price promotions, a company can get sample products in the hands of customers and let them either provide their feedback in a closed community (as major FMCG companies all do nowadays), or even provide feedback publicly. After all, consumers trust consumers more than they trust traditional integrated strategic marketing - and trust in ISM continues to plummet year after year.
The consequence of this shift towards experience innovation is that FMCG companies are adopting new ways of thinking about branding and customer engagement. They need new staff, new competences, and new metrics. This is the stuff of good customer experience management, and its time has come.
There are perils. Unilever's campaign promoting real beauty (to promote and position its Dove soap product line) was an excellent foray into winning the hearts and minds of people - where people are not just consumers of products, but creators and defenders of social values. By focusing publicly with a YouTube campaign on real beauty, Unilver was trying to align with core human values that - in classic CEM analysis - should have won them good will.
But Unilever is a house of brands, not a branded house. That is, they are an umbrella organization where brand values are defined product-by- product. (Apple is a branded house: everything they sell "feels" like Apple?s brand.) And so many Unilever products positioned themselves as a means to become more beautiful - skinnier, younger, more attractive - in stark contrast to the values promoted in the real beauty campaign.
This made the Dove campaign seem inauthentic. And whenever a company's values are viewed as inauthentic, the company's brand is seriously diminished. This is especially so in the United States, which puts a high value on a person's and company's consistency in thought and behavior. Americans do not tolerate well the hypocrite. Leveraging the principles of customer experience management without a thorough grounding is perilous.
But CEM is a huge opportunity. Lafley is right: People remember experiences (if they're designed right). And if people love the experiences they have with FMCG, then these companies have a better chance to win the brand battles played out all too often on the shelves at your local stores.
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About the author
Paul is a strategist providing customer relationship management (CRM) and customer experience management (CEM) consulting for growth-focused enterprises. Currently VP of Customer Experience at a new high-tech consumer startup. He leads management strategy seminars in Asia, Europe and North America.
Paul is a graduate of the TRIUM Global Executive MBA program (ranked #3 globally by Financial Times) through London School of Economics, NYU-Stern, and Hautes Etudes Commerciales (HEC). His studies took place in Shanghai, Sao Paulo, Paris, New York, and London. As part of TRIUM he also studied with Hong Kong University of Science & Technology and in Sao Paulo with Funda??o Dom Cabral [FDC]. Currently head of the TRIUM alumni steering committee, Paul is organizing events in Shanghai, Florence, San Francisco and Paris. He lectured at Cornell University on Internet trends, social networks and the impact of the Web on economics and globalization. He also lectured at American University (Washington DC) and Robert H. Smith School of Business (University of Maryland, USA) on customer experience management, competitiveness and brand equity. Paul is also the editorial board member of CRM Today.
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