Automated decision making needs a ketchup effect
Ultra-expensive or dirt cheap? Average, mid-priced consumer products hardly exist anymore. We live in a time of stark retail contrasts where consumers either hunt for the bargain at the end of the rainbow or splurge beyond reason. Could the automated decision-making of zero touch consumption restore some normalcy to shopping, or will the divergence go even further? Find out below.
Already back in 2006, the Economist had an article about the disappearance of the mid-market, talking about how consumers increasingly either buy on the cheap or quite premium. Since then similar patterns have been discovered across the board, such as the polarization of grocery shopping.
However, new forms of automated decision-making could soon shift the focus away from expensive vs. cheap to aspirational vs. zero touch. Both areas will be driven by the most personal type of automation, namely a virtual assistant in your phone or other smart device, and retailers who latch on to this have much to gain, particularly on what is today the low end, where automation can improve customer retention.
Consumers increasingly expect servitization of their everyday purchasing behaviors. In our consumer trends report for 2019, we call this zero-touch consumption and put the spotlight on how that could likely come about.
We’re often invested in brands because the cost of switching simply becomes too high. We spend a lot of money or time on assets that only work in a specific eco system. For example, if we switch, from an iPhone to an Android phone, all our apps become unusable although the exact same ones most likely exist on “the other side”.
But what about Netflix or HBO? Spotify or Apple Music? Xbox Game Pass or UPlay Plus? Apple Arcade or Google Play Pass?
While there may be no direct monetary loss in switching from one subscription service to the other, just creating new profiles and playlists can be a real pain. The point here being that subscriptions are almost just as good at creating lock-in, as Heinz are at dominating the ketchup market.
But subscription services from fast-moving consumer goods retailers are thin on the ground. They may be locked-in to the retail infrastructure itself, a system that has been perfected gradually over decades and now hinders them to be as fast as the goods they move. Or maybe retailers are simply just focused on products and assume that much of this does not apply to them. If the latter is the case, a change of mindset is needed. As marketing superstar Philp Kotler put it: “Every business is a service business.” And with connected technology that means every single product really is a service waiting to happen.
While consumers want virtual assistants for advice with aspirational purchases, such as a new shirt, they see just as much need for help with routine stuff. A lot of FMCG shopping just has to get done, or else there won’t be anything on the dinner table that night. Not everyone finds going to the supermarket to buy groceries stimulating, and consequently 49 percent of virtual assistant users would like to automate household restocking of generic items.
So, imagine that you instead have a subscription and these items are automatically re-stocked by your friendly virtual shopping assistant, who also at this stage has the (virtual) keys to your front door and is fully connected to your smart fridge, cleaning cupboard, and… well all the places where those products need to go.
Now, you might think that makers of toilet paper or ketchup or whatever it is that people perceive to be generic may be facing a downhill battle. Since they do not have strong brands, they will just continue to fight price wars until the end of days.
But I would beg to disagree. Instead, automated decision-making can open the door for sticky services. Spotify basically offers the same music as Apple Music, Tidal and the other competitors – with just a few exclusives to stand out. In that sense, the music is as generic as ketchup: It is not the product itself that creates lock-in but the way it is servitized.
When I go to the supermarket, I get exhausted by the overabundance of choice. And I am not alone in this. Already today, roughly half of all those who regularly shop using a smartphone want to only see relevant items when making choices.
I don’t need to see one hundred brands of toilet paper. As long as it is environmentally certified and reasonably soft, I honestly just go for price; and as long as the ketchup is low on sugar and additives, again I go for price. That makes me extremely disloyal to such brands, since I pick up whatever is marked down on that specific day.
But let’s say ketchup was a subscription service. Then I would shop around only once and stick to that choice if there were no strong indications that I made an extremely bad choice. I would be locked-in to that service, plain and simple.
The mid-market is certainly disappearing and that is causing a veritable retail apocalypse. But rather than a separation of up- and down-market, the battleground will be moving to aspirational and zero touch shopping. Aided by the automated decision support of virtual shopping assistants, consumers will increasingly spend time on high-involvement shopping as well as getting help to automatically restock everything else. But although this may be driven by consumer choice, both areas also offer better opportunity for retailers to create sticky services, whereas much of today’s retail doesn’t.
Which other digital technologies will change your life in the future? Read the 10 Hot Consumer Trends 2019 in full today.