Sunday, Nov 28
Competitive Pricing Using PromotionsThe analytics opportunity

Competitive Pricing Using PromotionsThe analytics opportunity

Nicked named the 4 P's of marketing, Price, Product, Place, and Promotion have been identified as the four pillars of a successful marketing strategy, which when properly combined, could get the product or service to the right audience at the right time. However, coordinating these key ingredients, often referred to as the Marketing Mix, is one of the teething troubles of most marketers and retail businesses since time immemorial. 

Recently, increasing competition driven by globalization, digitization, and increasing taste for entrepreneurship, makes it very important for businesses to coherently blend the 4 P’s to remain competitive; serving the needs of their customers. Even more complicated for most businesses, especially retailers, is how to combine promotions with pricing that will not eat into the profit margins of the organization.

A recent McKinsey research shows that many retailers underestimate the value of coordinating decisions on pricing and promotions. Such uncoordinated and counterproductive decisions happen much more often than most retailers realize, and they are expensive. In some cases, promotions don’t turn a profit at all, or at least they don’t add nearly as much profitable revenue as retailers expect.

Addressing this 50 TVM Competitive Pricing Using PromotionsThe analytics opportunity conflict can quickly turn into a game of cat and mouse, in which retailers find themselves constantly chasing the next issue in a highly reactive way. Sometimes they simply avoid the problem by keeping prices low or making small adjustments across the board, in effect, creating a permanent discount on their entire assortment. 

PRICING AND PROMOTIONS ANALYTICS

Luckily, research has shown that with better analytics, e-commerce retailers can create value by intelligently linking pricing and promotions based on optimal price setting and promotion design.

For instance, McKinsey found in its research that several innovative e-commerce retailers increase revenue and profits by three to five percentage points using a highly differentiated analytics process and often achieve improved customer satisfaction and loyalty as well. The analytic process involves three main steps that can help retailers or marketers in general increase sales whilst achieving customer satisfaction.

DETERMINING PRICE SENSITIVITY FACTORS

The first thing to do in the analytics is to determine the factors to include in the price sensitivity analyses. For a better understanding, a price-sensitivity score considers the extent to which customers perceive a product’s price and, as a result, react to price changes. If a product has a higher price-sensitivity score, it means that a customer is less likely to accept a price increase. In this case, the price should be kept at a competitive level.

However, most businesses use only a small number of variables to determine the price-sensitivity score. “While most companies consider price sensitivity when they make pricing decisions, the scores often don’t incorporate enough factors and thus aren’t as accurate as they could be. The best price-sensitivity scores are calculated with advanced analytics, using input factors that take customer, competitor, and company considerations into account” - McKinsey. Incorporating several factors into the sensitivity score is necessary for several reasons.

For instance, price elasticity is based on different models for each product category, because customer behavior including purchase frequency and reaction to price-changes, differs for each product. By aggregating individual input factors for price sensitivity and promotion affinity, individual scores for each product category can be developed. With price sensitivity identified for all products, items are then grouped into three buckets based on their scores: top sensitivity, midlevel sensitivity, and low sensitivity.

TOP SENSITIVITY

Items falling into this category, according to McKinsey, are everyday products or key value items, such as common grocery items, whose prices most customers know, making it easy for them to compare shops.

As a result, customers are especially price sensitive when it comes to these products, and their prices must be competitive. These products typically account for 10 to 20 percent of a retailer’s sales. Investing in keeping their prices low, pays off in significantly better customer price perception, which leads to more frequent visits and larger baskets.

MIDLEVEL SENSITIVITY

The midlevel sensitivity or Foreground items have attributes that are more important to customers than price and hence do not require as great a degree of competitiveness in pricing as key value items. However, their prices should be competitive enough to avoid any negative impact on customers’ price perception.

Prices for these items can be set within a range that falls between, for example, the highest and lowest competitor prices, or the minimum margin and recommended retail price. LOW SENSITIVITY Items in the low sensitivity bucket are either products for which price is not an attribute that customers focus on much at all, or products for which a price comparison isn’t possible. Correspondingly, the products in this bucket offer the strongest opportunity for retailers to finance their investment in low prices for the key value items. 

BUILD A CLEARER PICTURE OF WHERE TO TARGET PROMOTIONS

After determining the factors that will help improve the accuracy of a price-sensitivity score, retail leaders need to rethink how they score promotions to better understand their impact on a particular product’s sales or profits. Promotion-affinity scores, according to McKinsey, primarily measures the impact of earlier promotions in terms of transaction- and customer-based success factors and basket composition.

The most important are increases achieved in revenue and margin. Depending on the specific situation, retailers can adjust the relative importance of five other factors: customers’ willingness to buy the product without a promotion, the increase in the number of transactions due to discounts, volume purchased of the product promoted, basket product variance, and any changes in buying behavior, such as more frequent store visits or larger baskets.

Finding the right path through this complexity requires two things: an overview of each relevant key performance indicator (KPI) that needs to be understood, and a way to express the cumulative results of all relevant KPIs. This cumulative KPI or “total customer effect” (TCE) shows how much additional revenue or margin a promotion accounts for by looking at what additional sales (or gross profit) it generates and whether it actually brought more customers into the store or increased the value of their baskets. 

OPTIMALLY LINK PRICES AND PROMOTIONS

To make better pricing and promotions decisions, companies need to then combine both scores in a price-promotion matrix so that an optimal balance can be identified for each product being sold. The retailer or marketing manager will then place the products into one of four quadrants of the matrix: High price sensitivity and high promotion affinity- Retailers using this approach respond to consumer sensitivity regarding prices for these products with a “low-low” approach— that is, both setting the lowest prices possible and maximizing discounts.

Also, they focus promotions on products in this category that specifically help to increase frequency of purchase or basket size. High price sensitivity and low promotion affinity- For these necessity-type products, leading retailers use a strategy of keeping regular prices low, at a level below the recommended retail price but above what a promotional price would be.

Low price sensitivity and high promotion affinity-These occasional purchases are given a “high-low” strategy, with prices that are close to the recommended retail or highest competitor prices but with discounts that lower promotional prices as much as possible. Leading retailers also vary promotion type, mix, and frequency, and they focus on product categories with high promotion affinity.

Low price sensitivity and low promotion Affinity- Leading retailers generate additional value with these products by increasing the margin earned on them. They price these items close to their highest competitors’ prices, and they reduce or stop promotions on them.

PRACTICAL APPLICATIONS

McKinsey first tested the approach in five product categories in a single country for periods ranging from four to six weeks. After this pilot phase was concluded successfully, the bulk of the results were carried over to other categories and countries and optimized further. Motivated by this success, the retailer has since launched a pricing-and-promotions transformation across other products and countries.

As a result, the company expects its sales revenue to increase by 3 to 5 percent and profits to grow by two to four percentage points over the three years following implementation of the approach. Also, its brand position has already improved and is far less dependent on discount promotions. This means that retail leaders need to build a clearer picture of where to target promotions.

Finding the right path requires an overview of each relevant KPI that needs to be understood, and a way to express the cumulative results of all relevant KPIs. The cumulative KPI shows the success of a specific promotion and whether it actually brought more customers into the store or increased the value of their baskets.

Effectively and profitably linking pricing and promotions together in this analytical method can increase revenue and profits by three to five percentage points overall. In addition, those companies that efficiently implement this approach often achieve improved customer satisfaction and loyalty as well

Creativity, Analytics, And Purpose- New Growth Paradigm

Maximizing profits for shareholders or owners of organizations is one of the main goals of every business from time immemorial. Yet, in an attempt to achieve this goal, companies still do not lose sight of another equally important goal, long-term growth. While growth is easy to envisage, achieving it has never been an easy task for any business due to several challenges that come along with the business cycle of economies where businesses operate in addition to company-specific constraints. More importantly, achieving the desired growth in the 21st century is much more difficult due to fierce competition from rivals, as a result of globalization, and this has been complicated by the economic fallout from the coronavirus pandemic.

Despite its negative impacts on businesses, COVID-19 has created several opportunities within the business environment. Within a span of a few months, a decade’s worth of e-commerce adoption took place as the pandemic raged, leading to many new, digital-first market places. For now, it is clear that only companies that are ready to leverage innovation, digitization and above all creativity and purpose will thrive within “the new normal”.

Historically, driving the growth of a company was seen as the main duty of the Chief Executive Officer (CEO), even though the role of employees has never been underestimated. However, the historic shifts brought on by the pandemic has also fundamentally changed the role of marketing leadership and the chief marketing officer (CMO). According to McKinsey’s new research, 78 percent of CEOs are now banking on marketing leaders to drive growth during the pandemic. This has totally changed the dynamics of the game, making innovative marketing the hallmark of every successful company.

In the current research, McKinsey found three elements that are currently driving growth across the globe, “growth triple play”. This include creativity, analytics, and purpose. Overall, McKinsey’s research shows that companies that integrate creativity, analytics, and purpose are delivering at least two times the growth of their peers. Yet, only 7 percent of companies are delivering on the “growth triple play” by unifying creativity, analytics, and purpose. For such companies, their average revenue growth between 2018 and 2019 was 2.3 times higher than companies that do not adopt the “growth triple play”. The effect is 2.7 times higher between 2019 and 2020.

Even before the pandemic, companies that had developed all three capabilities were logging double the growth of their industry peers, a margin that only increased once the COVID-19 crisis hit. Between 2018 and 2019, companies using just one of the capabilities, either creativity, analytics, or purpose, saw an average growth rate of more than 6 percent. Meanwhile, adding a second component saw growth rates climb to more than 7 percent and for those that employed the full triple play, growth rates climbed to more than 12 percent.

The Growth Triple Play

McKinsey highlighted the interconnection between the key elements of the triple play, saying the elements of the triple play turn out to be mutually reinforcing. According to McKinsey, the speed and granularity delivered by analytics is far more powerful when integrated with innovative, breakthrough creative ideas and programs. Both resonate with customers in a deeper way when they are connected to purpose. Triple-play companies that have learned to integrate all three elements are 1.8 times more likely to be in the top quartile of growth within their sectors, says McKinsey.

Moreover, McKinsey insists that the last revolution in marketing was all about the fusion of creativity and data analytics. However, the only new thing today is partly the addition of purpose, the statement of a goal higher than just ringing up the next transaction. Purpose, according to Ann Mukherjee, CEO North America at Pernod Ricard, can vary widely, as long as it is true to what the brand ultimately stands for.

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Purpose could be about fun. Purpose could be about indulgence. Purpose could be about being a rebel. Purpose could be about saving the world. But purpose must be intrinsic to what the brand’s narrative is

- Ann Mukherjee, Chairman and CEO North America - Pernod Ricard

McKinsey outlined specific steps taken by companies to activate the triple play across the full sweep of their marketing practice, emphasizing that the triple play is not a theoretical exercise but very workable and practical, with proven positive results.

Infuse Creativity With Analytics

Companies that benefit tremendously from the triple play are those that are able to infuse creativity with analytics. Creativity is part of the genesis of marketing and the breakthrough ideas that have always underpinned bold, imaginative campaigns.

Creativity starts by thinking and dreaming big, by opening the aperture to new ideas and approaches to delight customers. Placing the customer at the center and forefront is key to the discipline of creativity. Triple-play companies take more than a 360-degree view of their customers.

Moreover, creativity is what gives rise to new campaigns, new products, innovative ways to serve consumers, and more. McKinsey believes the addition of granular data and analytics can unleash creativity more effectively to drive deeply personalized customer interactions using iterative, test-and-learn approaches. By using marketing sensors to monitor changes in consumer behavior, analytics helps marketers make decisions faster.

Deploy Analytics With Purpose

Another important feature of such companies is their ability to deploy analytics with purpose. Creating moments that are meaningful for customers requires analytical horsepower and precision to discover customer intentions, interests, and unmet needs. Recently, companies are generating massive quantities of data and so it’s purpose that will aid marketers to determine which insights matter most and to focus their efforts there. To this end, triple-play companies prioritize flexibility in their analytics and data architecture to not only co-create strategy with the C-suite but also to share those insights across the organization.

Focus On The Purpose

Moreover, to benefit more from the triple play, the marketing officer must always focus on the company’s purpose. Purpose, according to McKinsey, acts as a North Star, guiding the overall direction as CMOs and marketers make crucial decisions that shape long-term growth. Linking purpose to creativity and analytics helps companies recognize the opportunities that are going to resonate most deeply with customers.

McKinsey explained that CMOs and marketers must understand the power of purpose and weave it into the culture, creating a recognizable sense of mission for customers, employees, prospective employees, and other stakeholders. Therefore, marketing officers must be clear on what purpose of their organizations are so as to help drive its growth.

Winning In The Next-Normal World

Marketing leaders have a once-in-a-generation opportunity to lead, shape, and drive the growth agenda. Luckily, they can take advantage of this opportunity by integrating creativity, analytics, and purpose across the full spectrum of marketing activities. Already, the most successful CMOs are deftly using the precision and rigor of analytics to anticipate and satisfy customer needs, guided by purpose and energized with creative approaches.

However, winning in this next-normal world means orchestrating functions, across the organization and partnerships in the extended ecosystem, based on a richer understanding of customer wants and needs.

For now, as CEOs are increasingly depending on their marketing leaders to deliver growth, the most successful marketers will definitely be those that are willing to make fundamental changes to position themselves and their organizations to thrive post-COVID.

In line with this, McKinsey highlighted three important things that these CMOs must do to post-COVID: lead from the front as a unifier; inspire a better outcome with purpose; and fire up the full growth triple play.

Most CMOs can achieve the first two but, for the last, McKinsey admits it’s very difficult for a company to be able to deploy the full growth triple play. It is therefore, not surprising that only that only 7 percent of companies have been able to deploy the full growth triple play. McKinsey explained that only those that have developed the necessary capabilities are able to integrate creativity, analytics, and purpose.

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Make the triple play core to company culture. Creativity is so fundamental to the marketing discipline, going back to its very roots, that every CMO and marketer should have a firm grip on the building blocks of visual representation, messaging, and media. But creativity also includes the ability to bring novel and disruptive new ideas to the surface, where those ideas can be refined, tested, and either scaled or discarded.

That last part, however, is heavily dependent on the strategic analytical muscle, especially the ability to collect proprietary data and use it to generate insights that can drive value. Purpose helps set the overall direction, ensuring that every product or service, no matter how disruptive or surprising, is true to the brand identity and recognizable as such by customers.

Seizing The Big Moment

Even in the most volatile of times, there are companies that are driving growth that is twice as high as their peers’ through creativity, analytics, and purpose, as per McKinsey’s research. As a result, by drawing on the full power of the growth triple play, CMOs and marketers can increase their odds of success, elevating their profile and their organization to new heights, and creating impact along the way.

For those that get it right, it can be the start of a new era where marketing is ascendant, and Marketing and the CMO is at the heart of decision-making. But to do so, McKinsey advised such companies to act on new ideas, rigorous data-bound execution, and an unerring sense of purpose at the core. The most resolute CMOs and marketers can rise above the chaos to lead the charge, inspiring their organization and their customers along the way.

Managing Post-Pandemic Customer Experience

Managing Post-Pandemic Customer Experience

Customer experience for any prospective customer or existing one is the currency for future transactions and recommendations of the involved organizations. The fallout from the pandemic, has been one of the most challenging years for businesses affected by consumer behaviour and buying habits. Businesses have started opening up, although it rarely does mean ‘business as usual’ because business life has been disrupted by a pandemic determined to cause havoc. That notwithstanding, the resilience, innovation and grits of humans once again come to play as we have strategically placed ourselves in an advantageous position to win by all means. For the foreseeable future, we will not be returning to the way “we always did it” because businesses such as restaurants, gyms, hair salons among others globally which have walk-in traffic will have to make adjustments to meet the new expectations of their customers.
Incisively, there is going to be an evidential change on how businesses are going to change post-COVID-19 and this is particularly vital to Business-to-Consumer businesses that have seen their customers’ buying habits change almost overnight. Undoubtedly, as we emerge from the pandemic and businesses fully reopen, they will have to adjust to a new experience in which health and safety is a major concern. This, however, only charts the path for business owners to consider how they will manage the post-pandemic customer experience because the truth is that consumers will ‘eternally’ not stop shopping at and doing business with the companies they’ve always done business with. What they have done, is to reimagine their customer experience and expectation with their go-to shops and businesses.

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RE-IMAGINING THE CUSTOMER EXPERIENCE

According to Forbes, prior to the entrance of the virus, consumers would visit certain types of businesses on an almost daily basis. “Those included grocery stores, gyms, restaurants, beauty salons and more. In fact, 78% of consumers said that before the pandemic they visited these types of businesses at least three times a week in person. After COVID-19 occurred, that number dropped to less than half at 34%”. Surprisingly, however, “curbside pickup and delivery have been around for years, yet it took a pandemic to make it a mainstream way of doing business. Today, 75% of consumers report they use this option on a regular basis. Twenty-five percent say that this is the only way they will buy unless it’s an emergency.

Also, it maintains that, eighty-seven percent of consumers say businesses should continue to provide delivery and curbside pickup to reduce the need for in-person transactions. What came along with the pandemic into the world is also the development of a “health consciousness”, which hitherto was non-existent to some level. Consumers in their bid to maximize their purchase experience have taken the pain to seek out information on a business’s health and safety standards before visiting. They have become quite the health practitioners as they investigate to know whether they are walking into a safe place. As a result of the current stance of consumers, businesses have been advised to publicly showcase their health and safety guidelines and policies. Doing this shows your business cares about its customers and employees, and that was Apple’s mode of work. In mid-March of 2020, Apple computer was one of the first major retailers to announce it was closing all its retail stores. The message was clear. They were focused on the health of customers and employees. That was more important than staying open and making sales. “Even as businesses are starting to reopen as we exit the pandemic, Apple recently announced the closing of 11 stores in four states that have experienced a spike in COVID-19 cases. Its goal is to protect both customers and employees. Apple is demonstrating just how far it will go to create a safe environment”.

‘HEALTHY’ MARKETING STRATEGY

Invariably, consumers swiftly align to businesses they can trust and when it comes to matters of their health when these entities are involved, it becomes even more salient for them. Creating confidence post-pandemic, businesses must still factor in strategic steps in promoting health and safety. Companies across the global expanse have seen the significance in being transparent in creating the perfect healthy haven for their revered consumers who ensure their figures make sense and their dreams stay alive. Indeed, companies are stepping up their focus on health and safety for their customers and employees. Airlines have taken off with the health strategy by explicitly creating a pictorial view on how they cleaned the seats and cabin after every flight, how the air filtration system worked, how the cabin crew would wear masks and more. Similarly, hotels showcased their plans to create safe environments for their guests. If you publicly communicate your policies and processes, it is imperative to be strict and diligent about them. Don’t make commitments you can’t live up to. Undoubtedly, the unpredictable nature of the pandemic, particularly with its entrance caught everyone off-guard and if there’s anything it has taught us, it is to be predictive and not reactive when it comes to customer experience. Hitherto, companies were more reactionary in nature. For instance, when a customer encounters a rude sales person at a shop, management quickly implement a change to offset any future confrontation. Today, however, customer preferences, buying habits and loyalties change overnight, making it critical for businesses to not just react to customer sentiment but also predict what’s next. This could include the use of social channels, buying patterns or even changes that need to be made to the website. The data is there; businesses just need to think differently and be willing to disrupt themselves.

DEFINING A NEW ERA OF CUSTOMER EXPERIENCE

Over the years, customer experience has gradually outpaced variables such as price, product quality, which prior to this were quite the priority in most organisations. The pandemic has made this thought even more real, and its seriousness of purpose more profound. For all intents and purposes, businesses that offer a superior opportunity when it comes to customer experience will become and sustain market leadership. Contrarily, those who do not prioritize customer service will struggle to compete effectively in this experienced economy. In 2020, ZK Research found that, two-thirds of millennials admitted changing loyalties to a brand becomes a single bad experience.

Moving forward, business success will ultimately require comprehensive understanding of what the experience consumer desire looks like in the post-pandemic era. Online and mobile experience have become the buzzword in this new phase of interaction. So, it is imperative for businesses and organizations to exploit the mobile experience. Candidly speaking, the move to mobile is the biggest change many organizations would have gone through since the pandemic began. Pre-pandemic, it was just another alternative method of interacting with customers. Presently, the social-distancing rule of engagement has shaken things up a bit and it’s the only way we can interact with some organizations. Futuristically, it may stay that way indefinitely. The convenience of mobile with its ability to tap into location services, push notifications make it a simplified experience for users. The reality is most organizations have barely tapped into harnessing mobile data. Moving forward, companies must endeavour to also improve part of its company culture. Making it part of the company’s mission ensures everyone in the company has a focus on customer experience.

The pandemic has altered ways businesses deal with customers, and these changes are here for good. Therefore, businesses trying to make a major impact on their industry, must essentially understand their core audience, budgets, shopping habits, goals, the most appealing options available to them, etc. before they can start to really engage them. A successful company focusing on customer engagement will use this data to anticipate buyer needs and position itself as the ideal solution in light of this information. Mainly, company leaders and business owners from all discipline have to put customer experience at the top of their priority list. This is because, the pandemic has changed more than the way we work; it has changed everything, from the way we shop, exercise, travel, entertain and almost everything else in our lives.

Method to madness: Artificial intelligence, closing the global organizational skills gap

Method to madness: Artificial intelligence, closing the global organizational skills gap

Eat or be eaten. Like nomads, with no permanent resident, sitting in an open air, camped around a bonfire to ward off the chilling air and gazing upon a wishing star in hopeful anticipation for the next green pasture for its flock, technological advancement is herding humanity to grazing points through the plains and valleys of the tech world.

The dominant way of life for mankind has always been that of a “wanderer” who, having an insatiable drive and relentless proclivities for growth, bellied in an unbridled and almost rebellious mode of optimism and belief in the future where an utopia of ease, comfort and convenience reside never knows STOP! There really isn’t a destination to man’s odyssey into the quest of finding a perpetual and inexhaustible pasture of opportunities.

Habitation. Truly, people’s dwelling place by no means philosophical or mythical has always been housed in the thoughts and heart of transition. The flock of ideas which drive people to the point of revolution not just to self but a global agenda of transformational growth has been embedded within the fodder of technological advancement. More than just milking convenience and industrialization from the udder of modernization, there isn’t a permanent cap on the vast expanse of people’s need for supremacy, dominance and progression, particularly in an era where the organizational corporate strata is experiencing such rude infiltration by the ‘tech bug’ leaving befuddled and laggard employees out in the cold of unemployment.

Accomplishment. Until the core of earth has been dredged by man’s advancement in the technological space in its bid to improve life, work and utility inherent in organizational operations, the intention remains to scaffold ideas which are curiously crafted in the laboratories of our imagination to create that ‘perfect’ tower. Whether that tower will be a ‘Babel’ in disguise, waiting to disrupt lives permanently, can only be watched with bated breath or perhaps a long pause of apprehension. It may not have the popular vote, poll high numbers but election of ideas are always balloted with test runs in hopes the biometric imprint isn’t rejected or validated.

Humans versus robots

Scenes of 80’s movie the ‘Terminator’ with its subsequent sequels readily comes to mind when the mere mention of robots is earnestly discussed as an option in a work environment. Indeed, there is the palpable fear and unease anchored on expert’s development of a tech effigy which has the possibility of either toppling, competing, leveraging or razing down the deliverables of businesses and operations. The notion of machines being able to simulate human beings and the ability to do intelligent things, for doubters, may go rogue and end up at the apex of the ‘food chain’.

Quite sublimely, humans and robots are competing for space in most businesses and organizations; with the latter’s win arguably imminent. This has become more evident with the big reveal from the pandemic announcement and as such, the  “replacement of humans with machines may pick up more speed in coming months as companies move from survival mode to figuring out how to operate while the pandemic drags on”.

Economists at MIT and Boston University insists that robots could replace as many as 2 million more workers in manufacturing alone by 2025. Daniel Susskind, a fellow in economics at Balliol College, University of Oxford, and the author of A World Without Work: Technology, Automation and How We Should Respond, opines that, “this pandemic has created a very strong incentive to automate the work of human beings. Machines don’t fall ill, they don’t need to isolate to protect peers, and they don’t need to take time off work.”

The blizzard of artificial intelligence in altering business

Artificial Intelligence has permeated very cracks and crevices of the globe in a desperate attempt to survive at all cost. In its efforts to satisfy a parched desert of needs with its flowing creek of fresh supply, it may as well be corked shut by the steering control it might have in navigating and dictating the pace of progress for humanity. Candidly, Artificial intelligence is certainly not a new concept. What was once just a figment of the imagination of some of our most famous science fiction writers, artificial intelligence (AI) is taking root in our everyday lives. We’re still a few years away from having robots at our beck and call. That notwithstanding, AI has pretty much had a profound impact in more restrained ways. Weather forecasts, Face Detection and Recognition, Google’s search predictions, voice recognition, Digital Assistants such as Apple’s Siri and a throng of other AI influenced gadget have surreptitiously invaded homes, organizations and the culture of life. Now, what these technologies have in common are “machine-learning algorithms that enable them to react and respond in real time”. “There will be growing pains as AI technology evolves, but the positive effect it will have on society in terms of efficiency is immeasurable”- Mckinsey Global Institute.

Talent Trends Report for 2020 released by Randstad Sourceright indicates that, as AI continues to disrupt the world, upskilling and reskilling will be crucial in developing workers’ competencies to complement technological innovation. However, only about a fifth of businesses around the world, approximately twenty two percent, are currently training existing employees to help them adapt to AI.

Futuristically, ‘talent fluidity’ and employees ability to reorient their skills to aptly suit   organization’s changing needs especially with the surge of AI and digitalization. This, will be critical to the future of work. “Of the 800 senior executives and HR leaders surveyed, as many (66 percent) plan to provide training and reskilling in AI as those who plan to develop workers’ soft skills (60 percent). This is reflective of the company’s 2019 research, which suggested the most sought-after skills included both technical capabilities grossing 43 percent with soft skills like communications raking in some 41 percent. Yet, while 91 percent of those surveyed believe that it is their company’s responsibility to provide reskilling to meet business needs, nearly one-third of respondents who intend to offer reskilling said they aren’t sure how to do so”.

The Chief Executive Officer of Randstad global businesses and executive board member, Rebecca Henderson, once stated, “Digitalization has changed the way we work and has redefined the skills that are most important for employees to possess. Yet, while employers have acknowledged that it is crucial for their businesses to reskill staff to keep up with changing technology and bolster the soft skills that only humans can possess, it is troubling that so few companies are currently offering this necessary training.”

Companies are earnestly grappling with the addition to AI and soft skills, companies also “plan to train existing employees in analytics skills (59 percent), technical capabilities (57 percent) and cloud computing (54 percent). Nearly two fifths of respondents (38 percent) view reskilling as an important measure for redeploying employees who are at risk of losing their jobs due to automation”.

AI, “the second coming” of software

Amir Husain, founder and CEO SparkCognition clearly categorized AI as the “second coming of software”. It's a form of software that makes decisions on its own, that's able to act even in situations not foreseen by the programmers. Artificial intelligence has a wider latitude of decision-making ability as opposed to traditional software." Those traits make artificial intelligence highly valuable throughout many industries, whether it's simply helping visitors and staff make their way around a corporate campus efficiently or performing a task as complex as monitoring a wind turbine to predict when it will need repairs.

Before the pandemic, McKinsey Global Institute estimated 375 million workers will have to transition and change occupations by 2030 because of automation and AI. Highlighting the importance of reskilling and retraining as a result of the revolution fast-tracked by the pandemic, North America managing partner, Liz Hilton Segel emphasized that organizations should identify the skills their recovery business model depends on, then develop and scale tailored resources and programs to close any skills gaps among their employees. “Every organization needs now to recommit to reskilling as a competency of their organization. I am surprised by how many organizations still don’t have a reskilling competency, and I’m hopeful this moment will change that.”

The Internet of Business is here to stay

According to McKinsey, nowhere has AI had a greater impact in the early stages of the 21st century than in the office. “Machine-learning technologies are driving increases in productivity never before seen. From workflow management tools to trend predictions and even the way brands purchase advertising, AI is changing the way we do business. In fact, a Japanese venture capital firm recently became the first company in history to nominate an AI board member for its ability to predict market trends faster than humans.

“Big data is a goldmine for businesses, but companies are practically drowning in it. Yet, it’s been a primary driver for AI advancements, as machine-learning technologies can collect and organize massive amounts of information to make predictions and insights that are far beyond the capabilities of manual processing”.

 With the toppling of jobs and displacement of employees imminent, it is apparent not even morphing skills to suit business update can save the neck of workers from the AI ‘guillotine’. Not only will this technological beast breeze through the park in increasing organizational efficiency, “it dramatically reduces the likelihood that a critical mistake will be made”. Among other things, “AI can detect irregular patterns, such as spam filtering or payment fraud, and alert businesses in real time about suspicious activities. Businesses can ‘train’ AI machines to handle incoming customer support calls, reducing costs. It can even be used to optimize the sales funnel by scanning the database and searching the Web for prospects that exhibit the same buying patterns as existing customers”.

Undoubtedly, there is much vested interest and boundless potential for AI development and the stakes are high as it has become almost impossible to imagine a future of work without its presence. “We’re already seeing an increase in workplace productivity, thanks to AI advancements. By the end of the decade, AI will become commonplace in everyday life, whether it’s self-driving cars, more accurate weather predictions, or space exploration. We will even see machine-learning algorithms used to prevent cyber terrorism and payment fraud, albeit with increasing public debate over privacy implications. AI will also have a strong impact in healthcare advancements due to its ability to analyze massive amounts of genomic data, leading to more accurate prevention and treatment of medical conditions on a personalized level”.

Fellow feeling, goodwill and intuitions are certainly traits that cannot be aptly learned by machines to completely yank out human participations in the work environment. With constant experimentations, test runs, regulations on the extent of machine infiltration in our work spaces, it will certainly take to warm up to its presence, so for those holding their breath on this one, an exhale is in order. “As easy as it is for machine-learning technology to self-improve, what it lacks is intuition. There’s a gut instinct that can’t be replicated via algorithms, making humans an important piece of the puzzle”. Be that as it may, it has become imperative for not only employees but organization, corporate institutions and businesses at large to redefine, recalibrate and reorient their way of operation to remain relevant and man these machines instead of forcing them to redundancy.

Millennials drive the evolution of the Consumer-Packaged Goods Industry (CPG)

The consumer-packaged-goods industry, has struggled to grow in the past decade after about 40 years of strong growth. A look back at recent decades of developed-market based CPG companies shows that, they have consistently managed to grow, but not always profitably. Its recent struggles are because of a confluence of large-scale trends, many of which have seen an acceleration during the COVID-19 crisis.

There has been the need for markets across board to evolve to meet the needs of the modern consumer, and Consumer Packaged Goods industry (CPG) is no exception.

With Millennials especially entering the phase of their lives where their spending ability is peaking, they are reshaping the trends that had seen the CPG industry so profitable in the past and in the process, creating an evolution.

Modern Internet technology has had an enormous and ongoing impact on the consumer goods sector. The ways products are manufactured, distributed, marketed, and sold have all evolved dramatically over the past few decades.

Performance in the consumer goods sector depends heavily on consumer behaviour. Developing new flavours, fashions, and styles and marketing them to consumers is a priority.

 

The Consumer-Packaged Goods industry

The CPG industry has relatively low-cost commodities that are consumed and replenished on a frequent basis. CPG products are typically packaged individually or in small quantities and are not designed for long-term use.

These goods can be considered as fast moving consumer goods, which are packaged goods with high sales volume, rapid inventory turnover, and often short shelf lives, such as foods and beverages, cosmetics, tobacco, apparels, cleaning supplies, toiletries amongst others.

The old model alone works no more

The Consumer-packaged goods industry has had an unusually, very stable model for a very long time, which most industry players used. This was as a result of five well documented elements.

First, these players were focused on mass-market, brand building and product innovation. That helped them generate stable growth and also gross margins that were usually about 25 percentage points above their non-branded peers. Many consumer goods sector companies are faced with a range of close competitors, substitute goods, and potential rivals. Competition on price and quality is often fierce, so brand identification and differentiation were critical to consumer goods sector companies' performance.

It was also about partnering closely with retailers and other elements of the mass channels in order to gain broad distribution. These companies also really thrived in developing markets by building brands and distribution as consumers became more-able to pay for consumer goods.

It was also about driving cost out of the operating model. And finally, it was about using Mergers and Acquisitions (M&A) to consolidate markets and generate more organic growth.

 

The Millennial Effect

Millennials are different from older generations in many ways. They prefer authentic, special, difference and sustainability is important to them. They tend to be more conscious eaters and are four times more likely than older consumers to say that, they resist buying from established brands.

GlobalData, a recognized leader in providing business information and analytics, found out in a study that, the older we get, the less likely we are to want to experiment with novel flavours and fragrances whiles millennials are more open to new and innovative concepts, indicative of wider exposure to foreign cultures and products from an early age.

Millennials are also importantly, entering the phase of their lives in which their spending is peaking. Yet, studies indicate, only 7 percent of them would consider themselves loyal to brands. Many of the 1.8 billion millennials worldwide today associate consumption with higher motives: they are more keenly aware of their health, value the local origin of products, and support the sharing economy.

This is emphasized by recent studies that concluded that 64% of consumers are now belief-driven buyers who want brands to deliver on societal issues, as well as products. This means that millennials will switch, choose, avoid or even boycott a brand based entirely on its stance on social issues. Therefore, you need to provide more than a great product to win them over and can lose them with just one small slip up.

Millennials also look out for more than a functional definition of a value proposition of a product. For instance, we all know that we should drink two litres of water every day. A value proposition will be for a water company to indicate something on the cap of a mineral-water bottle that shows the number of bottles needed to complete the drinking of two litters of water in a day. That moves the hand because this is what millennials are looking for and can subsequently lead to brand loyalty.

The concept of products having ‘badge value’ is most applicable to Millennials. This is a generation of consumers that value having differentiated products that they can show off via social media or help them get noticed at a party. Studies also indicate that 63 percent of millennials follow brands on social-media channels. These and other market trends bring fundamental changes that the internal structures of many companies fail to adequately reflect.

GlobalData sums this up perfectly, “Millennials are digital natives with a curiosity easily piqued by unusual things seen online and in social media. They are less loyal and more easily swayed by influences such as the media or recommendations by friends.”

From a convenience perspective, Millennials tend to live a very ‘on-the-fly’ lifestyle. Products that fit into their lifestyles can be considered winners with them, whether it’s a recloseable drink package or a travel size product that fits into a purse, wallet or bag.

This is a generation that is much more willing to try new things as compared to their predecessors. The wine segment gives a prime example of the difference between the two generations. A decade ago, wine in a non-glass package would have never worked, consumers just weren’t willing to accept the change. Now, you can look at the store shelves to see the success of wine in a box, wine in cans, and now wine in aluminium bottles. These success stories have been driven by the willingness of Millennials to experiment with new products and new formats.

Millennials cover a wide age range, and with many going into family formation, this can generally and substantially change what consumers want and demand as well as the core of the Consumer-Packaged Goods Industry.

Rise of e-market places

The growth of e-marketplaces also factors into the evolution of the Consumer-Packaged Goods industry with companies like Amazon, Alibaba, JD.com and Pinduoduo making up to 65 percent of revenue growth over the past five years. This growth has been accelerated by the COVID-19 pandemic as there was a notable growth in online demand as customers stayed at home during the pandemic, resulting in a trend of shopping for food on the internet rather than in stores.

During the crisis, Amazon surged by 65 percent in grocery categories in the United States and 80 percent in major European markets. Tesco, Britain's largest supermarket chain, also announced that before the pandemic, around 9% of its sales were online, a figure that has grown to more than 16%. The retailer now serves nearly 1.5 million customers online each week, up from around 600,000 at the start of the pandemic.

It was surveyed that, approximately 15 percent of US consumers tried grocery delivery for the first time during the COVID-19 crisis. Among those first timers, more than 80 percent say they were satisfied with the ease and safety of the experience; 70 percent even found it enjoyable and 40 percent intend to continue getting their groceries delivered after the crisis, suggesting that they have abandoned any previously held beliefs about grocery delivery being unreliable or inconvenient, instead, being surprised and delighted by the benefits of delivery.

Consumer-goods industry players therefore need to be abreast with the rising importance of e-marketplaces in many markets around the world to strategize accordingly.

 

Packaging

Brands that are successful with Millennials today, truly understand that the package should be considered an important part in the production of Consumer Packaged Goods. Packaging is the first thing the consumer sees when they pick up the product off the shelf.

According to Nielsen, a leading global information and measurement company, approximately 60% of decision making happens at the shelf. No other marketing spend can impact a buyer at the moment of truth in the store and throughout the life of a product.

Nielsen indicates that, “Perceptions of a product begin as soon as consumers lay eyes on it. Packaging helps brands get noticed and, more importantly, can significantly elevate perceptions of a product.

LRCFF Clear Coffee, for example, a coffee product recently launched in Slovakia and the UK, gained traction and stands out from rivals thanks to its eye-catching clear colour and packaging. The brand claims the colour addresses teeth staining concerns associated with traditional coffee drinking, while also offering something surprising and unique.

The CPG industry is evolving and will look very different in a few years. It is fast becoming a much bigger industry, with larger global players and more competition from up and-coming companies in emerging markets especially as millennials do not have a problem with switching to new brands.

Already, these changes are compelling CPG companies to rethink how they do business and pursue growth. Companies that fail to adapt to these changes or that make suboptimal choices will most likely be left behind by more strategic and action-oriented competitors.

THE SNOWBALLING IMPACT OF COVID-19 PANDEMIC ON BUSINESSES GLOBALLY

THE SNOWBALLING IMPACT OF COVID-19 PANDEMIC ON BUSINESSES GLOBALLY

Reality unusually seem more relatable to business owners than prospects for the future. Businesses are founded on the pillars of the future with the bricklaying of ideas, innovation, risks, test runs and skill upgrade, as an edifice of dominance, is constructed based on the successful prediction of these ideas and visions. They are what one may humorously call “economic fortunetellers” who ply their commodities on charts, graphs, pitches, researches and simulated test runs on their products and services which invariably become the future. In all their sixth sense and foresightedness, not a single business was prepared for the economic and financial shock lurking in the corner, and all it took was a sling of a carrier and a stone from a virus.

For what resembled a common cold which will blow over with some home remedy of ‘contain and treat’, it seems a boardroom of the best minds, suited up in well-meaning ideas couldn’t draft a convincing proposal to convince the COVID-19 investor to sign off the shares it has in the economy. The virus broke ranks and went for the juicer part of what controls and makes the world’s economy move on its stability axis- business. Invariably, businesses are the heart and lifeblood of any economy and if there are frictions within the space of transaction where there’s supposed to be exchange of goods and services, it will likely result in wears and tears in the long term.

Interconnected economies

It is an accepted fact that we have a pandemic situation on our hand, and likewise have we heard and seen the overwhelming decimation of human lives and heart wrenching occurrences in hospitals globally. With millions of people around the world in a virtual lockdown, there is an inevitable ripple effect of its impact in global economies and has brought a stark visibility of how operations, interactions, trade, commerce, transactions and international relations amongst countries globally, overlap in value and purpose. Revenues, profits, capital and liquidities all bear resemblance to a country’s viability, growth and supremacy by their interplay and interdependence on each other’s resources. Economic interdependence oils the machinery of nations and currently, countries are reviewing their trade policies whiles in the case of the United States, they are on the verge of decoupling with China on international trade. Manufacturing companies have had to either close down permanently or reduce workforce, businesses which are heavily reliant on daily transactions with consumers such as restaurants have been left high and dry, shops have had to cut back on losses and other companies are either encouraging staff to work from home or risk shutdown.

According to Investopedia,

“specific industries bear the brunt of the damage, shops and restaurants start to empty out, if not close their doors altogether. Non-essential travel slows down, curtailing revenue for not just airlines and business cruise-ship operators, but smaller businesses that rely on tourism revenue. However, those employed in seemingly unrelated industries can also feel the secondary effects of social distancing. For example, … banks may have to absorb more loan defaults as a portion of its customer base loses work. And oil companies see prices plummet as investors sense weaker demand”.

Measuring the effects of the pandemic

Container operation in port of durban South AfricaContainer operation in port of durban, South Africa

World Trade Organization (WTO) reports that Trade was already slowing in 2019 before the virus struck, weighed down by trade tensions and slowing economic growth. World merchandise trade registered a slight decline for the year by ‑0.1% in volume terms after rising by 2.9% in the previous year. Meanwhile, the dollar value of world merchandise exports in 2019 fell by 3% to US$ 18.89 trillion. In contrast, world commercial services trade increased in 2019, with exports in dollar terms rising by 2% to US$ 6.03 trillion. The pace of expansion was slower than in 2018, when services trade increased by 9%.

Currently, no one can comprehensively give precise definitions and statistics on the impact of the virus on businesses because the pandemic is an ongoing process, a “snowballing voyager” which doesn’t have a clearly defined destination or timeline, for now. Investopedia reports that, In the U.S for example, retail sales dropped by 8.7% in April, the greatest monthly drop since the government begun collecting data and the Federal Reserve confirms it by indicating it’s the worst dip in manufacturing output since the 1940’s.

The Organization for Economic and Cooperation Development last year, projected GDP growth in 2020 and beyond, but today, the picture is starkly different. It intimated that, “the path to economic recovery is highly uncertain and is vulnerable to another wave of infections. Two scenarios are likely: first, a second wave of Covid-19 hits, with renewed lock-downs, and world GDP plummets 7.6 % in 2020; the other, a second wave is avoided and global GDP falls 6% this year. In both scenarios, the recovery will be slow and the crisis will leave long-lasting scars.”

This is certainly not the first pandemic we have had to confront, but it is certainly the one which has had the most severe toll on global economies. “While the mortality rate of the corona virus is almost certainly less than that of the Spanish flu, its economic toll is already severe. Those economic shortwaves are being felt from Beijing to Madrid, creating a drag on the world economy that hasn’t been seen for decades. The IMF recently announced its forecast for a 3% drop in global output in 2020 which would be the worse slide in recent memory. The organization envisions a muted recovery next year, with GDP growth of 5.8% worldwide”.

The origin and epicenter of the virus, China, from early evidence of the impact of the COVID-19 conducted by emarketer found the severity of the short-term effects on SMEs. “In February 2020, 30 per cent reported that, due to a cash shortage, they would be able to sustain their business for no more than three months; 30 percent reported that they would be able to sustain their business for six to twelve months. Furthermore, 30 per cent of firms have seen their income fall by more than 50 per cent, with almost a third reporting a 20 to 50 per cent reduction. Three months after the COVID-19 outbreak in China, many small businesses are not working at full capacity. Many employees continue to work from home, and business owners attempt to fix broken supply chains and look for new domestic and overseas contracts. Estimates suggest that each ten-day period of lost work in the Chinese economy reduces quarterly GDP growth by 0.39 to 0.46 percent”.

WTO is of the view that, value chain disruption was already an issue when COVID‑19 was mostly confined to China. It remains a salient factor now that the disease has become more widespread. The waves of the pandemic travelled to the shores of Africa and did equal damage and the effects transcends subliminal impact to tangible manifestation on businesses. A survey conducted by the African Trade Policy Centre along with other agencies on the coronavirus disease (COVID-19) pandemic and its impact on Africa with strong inclinations on the impact of COVID-19 on businesses and trade, identified the challenges faced and responses made by these businesses.

Interestingly, a universal attribution from global accounts which has had damning repercussions and has resulted in the current economic challenges particularly for most businesses has been the imposition of restrictions. Despite its innocent motive of mitigating the spread of the virus, it has equally grounded most businesses, rendered their activities almost inoperable and African businesses are functioning with considerably less employees than under normal circumstances. ATPC said, “The rate of capacity utilization ranges from 30-40% (for small-sized enterprises) to 50-60% (for large-sized enterprises). It also tends to vary depending on the sector in which the business operates, with the average of respondents indicating rates of capacity utilization of around 30-40% for goods, and 40-50% for services. Within these broad sectors, there are quite large differences. In general, manufacturing operations, travel/hospitality and transportation services appear to be operating at their lowest capacities”.

Implications from the shutdown of economies on a global scale directly translated to the freezing of capital as human movements were restrained, as a result, closure of businesses, dearth of operational cash flows, drop in demand and reduction of opportunities to meet new customers are the main challenges faced by African businesses.

The World Trade Organization’s Director-General Roberto Azevêdo addressed the impact of the pandemic by saying, “the unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself. The immediate goal is to bring the pandemic under control and mitigate the economic damage to people, companies and countries. But policymakers must start planning for the aftermath of the pandemic”.  Trade is likely to fall more steeply in sectors characterized by complex value chain linkages, particularly in electronics and automotive products and according to the OECD Trade in Value Added (TiVa) database, the share of foreign value added in electronics exports was around 10% for the United States, 25% for China, more than 30% for Korea, greater than 40% for Singapore and more than 50% for Mexico, Malaysia and Vietnam.

Morale may be low, spirits may be crushed but between the cracks of ailing economies, socio-economic despondencies and businesses being irreparably split into halves is that ray of defiant conviction that things will look up. But the implications of the burgeoning rate of COVID-related cases and its mutating tendencies cannot override a system ready to build a firewall of resistance and fortitude. Businesses must also realize that they can’t make plans only to survive the bad times imposed by the pandemic.

There is a documentary made some years back which used the first part of the title of this article. The documentary was made

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