A warning for large consumer brands

I want to share an article by Dave Knox, a former colleague who has been exposed to quite a bit of the CPG business from a variety of vantage points - brand manager, digital evangelist, thought leader, startup advisor, investor and agency leader. Dave recently authored an article for Adweek based on his new book describing an existential risk for large, incumbent brands. The article and the book are certainly worth a read.

The threat Dave describes strikes at the fundamental business model of CPG companies. Consumer goods companies have evolved and optimized themselves over the years for a very specific approach. Develop products and advertising based on detailed consumer understanding. Achieve broad distribution. Purchase lots of impressions with creative honed by agencies. Profit. Repeat.

This model is so ingrained that the competitive threats posed by companies with upstart business models (ie all of the digitally native brands selling only via ecommerce, subscription etc) were not on the radar for some time. Why not? One reason - their sales didn't show up in the syndicated data that serves as the scoreboard for established national brands - if the sales appear in Nielsen or IRI data they may as well not have happened!

So how is this relevant to consumer affairs?

  • As either a big brand or a challenger this is relevant to understanding the overall business environment. The stakes are high and things continue to evolve. Understanding the forces that impact the business is helpful for formulating winning strategy for consumer affairs that is relevant to the business.
  • Shifts in media landscape (ie declines in tv viewership and print circulation, media fragmentation, digital advertising fraud) combined with this kind of challenge to the business model makes alternative ways of driving consumer relationships (ie consumer affairs!) essential. If you haven't built a bridge to marketing - now is the time! And it is probably worth defining the value of your consumers, understanding their profile, putting your 'reach' in brand terms and so on beforehand.
  • The consumer affairs business model can also be subject to threats. Just as brands risk being disintermediated - so does consumer affairs! Did PR agencies get into social media and take a role? Do other functions and agencies now have direct conversations with your consumers? Could ratings and reviews replace the consumer data you capture? The strategies Dave lays out for brands to deal with threats can also be useful as consumer care faces potential challenges.

Despite these risks estabished brands have huge advantages and I fully expect most to survive and thrive for many years to come. But hopefully this is a useful reminder that brand survival is not a preordained outcome.

 

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Topics: insights, strategy, Innovation