Third of three parts
After learning to live with less during the height of the pandemic, many consumers have shifted to pursuing simpler, less consumerist values, according to the EY Future Consumer Index. The study surveyed over 21,000 consumers in 27 countries to determine how consumers see changes in their values and how they look at life. With consumers less willing to spend, businesses have the opportunity to rethink the concept of growth and how to evaluate it.
In the previous parts of this article, we discussed the drivers that could reshape consumption patterns, the significant changes in those patterns that are predicted to occur over the next few years, the factors affecting drivers of growth, and their implications for consumer companies.
In this last part, we discuss how redefining success will reshape business as we know it and how companies can further understand changing consumer expectations.
HOW REDEFINING SUCCESS WILL RESHAPE BUSINESS
Consumer companies will need to examine their strategies, business models, and operational structures for them to adapt to this shifting consumer climate and make sure they are relevant to the evolving definitions of value. While not all potential changes will occur suddenly, the current trends already show significant changes in how consumer companies will define and assess success.
The Future Consumer Index identified the following drivers that can reshape the existing measures of success:
Peer-to-peer models. Peer-to-peer activities are expanding quickly thanks to community platforms, online marketplaces, social selling, and agile payment systems. This makes it possible for customers to independently sell, buy, trade, exchange, and gift goods and services. While this is not a new concept, the sudden growth of backyard businesses during the pandemic, as we have seen in our Philippine market, has given rise to a new generation of microentrepreneurs.
Pricing at ‘true cost’. The desire for “true prices” that take into account social, environmental, and health concerns is growing despite the fact that algorithms can already optimize prices in real time for commercial impact. Product pricing may become more individualized to user profiles as data quality and analytics capabilities continue to advance.
Well-being as status. As consumers promote lifestyles that emphasize well-being instead of wealth, exercise, sports apparel, healthier meals, and wellness getaways serve as status symbols.
Co-creation with consumers. Through social influencers and crowdsourcing, interactive media has given rise to a wave of user-generated content. According to the Digital 2023 Global Overview Report, a social media study produced in partnership with social media agencies Meltwater and We Are Social, Philippine social media users account for as much as 72.5% of the population. Less restrictive intellectual property laws, 3D printing, and open-source tools may also potentially make it easier for customers to collaborate with brands to co-design, manufacture, market, and share the value of goods and services.
Enhanced leadership through AI. The delivery of optimized insights that support operational and strategic direction will come more frequently via AI and automation. When business leaders outsource certain judgments and make more decisions based on facts and data, this could ultimately redefine functional positions within boardrooms.
UNDERSTANDING CHANGING CONSUMER EXPECTATIONS
Companies will need to adapt to a world where growth and wealth are no longer the exclusive measures for development and success. Businesses will have the ability to control what lies ahead for them by recognizing what factors can potentially influence consumer expectations and behavior through the following points of action:
Developing fresh value pools. While some existing value pools will provide revenue, others will make additional contributions that will help to create a more comprehensive understanding of how “good” is defined. Having strong financial balance sheets alone will not help a business succeed in the market, especially if they come at the expense of other factors, such as environmental, social, and governance (ESG) considerations. A company’s success cannot be determined solely by how many or how much of a product it can sell, but also by the services it can provide, the impact it can make, and the values or communities it can support.
Innovating ways to meet consumer needs. Through scaling AI, releasing new manufacturing techniques, and unlocking efficient operating constructs, technology will allow consumer companies to deliver personalization at a lower cost and with less resource use. By enabling customers to participate in value creation through peer-to-peer selling and brand collaboration, service-based models that span several categories and industries will become more prevalent in order to meet consumer expectations. A new corporate mission that satisfies expectations for wellbeing by evaluating the true costs and benefits beyond those measured in financial currency will be foundational for this development.
Reviewing impact and contribution. Retailers can offer more value in terms of the insights and data they share back to brands, their contributions to employee wellbeing, and their position in the community on top of the revenue generated by their stores. The success of consumer goods companies may also depend just as much on their capacity to address systemic environmental problems or enhance consumer health as it does on their capacity to persuade customers to buy their goods.
REDEFINING SUCCESS TO BUILD LONG-TERM VALUE
Of all the factors discussed, long-term value remains the most important. As social and environmental key performance indicators join financial metrics as drivers of long-term value, intangible assets are likewise becoming more significant in driving value. New definitions of success will challenge the prioritization of growth as stakeholder knowledge and influence expands through increased connectivity and transparency.
Growth and profitability are currently viewed as indicators of how well consumer companies are able to meet the demands of the market. However, given rapidly and dramatically changing consumer behavior and priorities, companies will need to reimagine new strategies to build long-term value and sustainably deliver the products and experiences that consumers, both today and in the near future, truly want.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Maria Kathrina S. Macaisa-Peña is a business consulting partner and the consumer products and retail sector leader of SGV & Co.
RELATED STORIES:
