Imagine a world where the national electricity grid has been dismembered and replaced by competing local generators. No longer is there a common currency of electricity available to all at the same voltage. No longer does every user have the same type of plug. No longer are there market clearing prices. Rather, incompatible standards and formats proliferate and the market fragments into a patchwork quilt dotted by instances of cut-throat competition and local monopoly.
Running a national business in such an environment would be hell. Simply establishing a uniform, business-wide supply would require hefty investment. Diverging energy prices would make the same business profitable in Area A and disastrously unprofitable in Area B. Some operators would be ecstatic, others frustrated beyond measure. So any attempt to recreate a common currency and consistent pricing would face a clash of interests.
An impossible nightmare? Probably. But in UK consumer goods – where information is now the energy source that drives its marketing machines – that’s the direction we’re heading in.
Recently, fmcg discovered its dream info-energy source: the equivalent of cold fusion, promising almost infinite supplies of info-energy for minimal generating costs. Yet, as scanning data surges through the system few of its hoped-for miracle benefits are materialising. Instead of unleashing the industry’s full creative and productive potential, it finds users struggling with info-energy overload. And the industry’s established attitudes, structures, relationships and budget predictions are unable to cope as the balance of power between info-energy generators, distributors and users shifts dramatically.
Result? Just as the scanning dials turn towards full market penetration, the total tracking services provided by Nielsen and IRI teeter dangerously on the edge. A rash move by any of the major players could bring the system down.
The industry’s dilemma is clear. In its former days as a combined info-generator and distributor Nielsen created and administered the industry’s info-national grid.
Scanning has transferred ownership of info-energy – and therefore market power – away from Nielsen to retailers and as they begin to flex their muscles they are placing intolerable strains on it.
Nielsen has complained for some time that its core market tracking services are losing money. It has been struggling to persuade retailers to agree fee reductions with mixed results. Last year, Safeway withdrew from Nielsen’s service, opting instead to join the ranks of independent info-energy generators by selling Safeway-specific trading data through data broker Simco.
And starting this month in a bold – and some say desperate – move, IRI-Infoscan is trying to do the same with its health and beauty service. UK retailers charge six times more for their data than their French peers who are the next most expensive in Europe, says IRI European chief executive Tim Bowles.
“We can’t recover that raw material cost,” he says. He’s losing 9m to 10m a year and the time has come to “draw a line in the sand”, he declares. Except he’s going for a double whammy. Not only is he asking retailers to reduce their fees, at the same time he’s asking manufacturers to pay more.
If the negotiations only involved three sets of players – retailers, manufacturers and info-distributors – they would be fraught enough. But matters are being complicated by the rapid emergence of a whole zoo of new info-generators offering exciting – but mutually incompatible – data streams.
We now have: beefed up panel services (could they really be a substitute for scanning-based market tracking?); lifestyle databases grow in size, depth and sophistication by the day; more and more data brokers are selling individual retailers’ trading data (the latest being WH Smith); and, waiting in the wings, there’s also retailer loyalty card data.
In theory, these new data sources should offer marketers a cornucopia: new tools, new connections, new insights. But the proliferation of info-generation without a common currency or a national grid could be a recipe for confusion, not clarity. That’s why, in the next few months, the major players need to make some fundamental strategic decisions.
Nielsen and IRI know their core product is being commoditised and that they have to improve their services by moving from simple market description data to offer information on why consumers are buying those particular products. Somehow they must convince cash-strapped clients that such services really do offer value for money.
Manufacturers on tight budgets struggling to turn a data flood into fruitful marketing irrigation now realise they can’t afford to buy it all. They have to decide which sources of info-energy to plump for. That means rethinking info-strategies, and budgets, from scratch.
Retailers, meanwhile, need to decide whether they see their scanning data as proprietary information. The must determine whether it is an exclusive tool to help secure competitive advantage and therefore kept it “secret”; as an asset to be sold at the highest price; or as a tool for building effective manufacturer/retailer partnerships. These are not compatible objectives. Again, a strategic choice must be made.
Back in the barcode’s earliest days the visionaries who saw its incredible potential were determined that everyone would benefit.
The Vade Mecum, an agreement signed by the original founders of the Article Number Association in November 1977, declared: “All concerned in the manufacture, distribution and retailing of mass- consumption articles shall be able to avail themselves of the basic data collected by the automatic cash registers at cost price.”
Every member of EAN International (of which the Article Number Association is a part) still subscribes to that commitment. So far, however, futurist Alvin Toffler’s prediction that “the coming struggle for power will increasingly turn into a struggle over the distribution of and access to knowledge” has been closer to the mark. Such power struggles are inevitable. But it would be sad if, in an industry where everyone loves to talk win-win-win, the actual outcome was lose-lose-lose.