Colin Lewis: The days of the FMCG marketing hegemony are numbered

The B2B marketing mindset of building ongoing relationships with customers rather than seeing them as one-time buyers is being adopted by businesses across the board so why are the FMCG giants still seen as the Holy Grail of marketing?

Working in consumer marketing is seen as the apex of the career pyramid. Indeed, it is taken almost for granted that consumer marketing, and in particular FMCG marketing, has the best brands, agencies and talent. Starting your career at Procter & Gamble, Coca-Cola or Diageo can set up your career for the long term.

But is it time to rethink this idea, when we see so much great marketing being done outside of the FMCG giants and, indeed, unconnected with consumer marketing? I’m tempted to ask the question: is the FMCG hegemony finally over?

Here is something you will never hear or read: what can consumer marketing learn from business-to-business marketing. B2B is often seen as the ugly stepsister of marketing. Not that sexy, not that interesting and certainly nothing to learn from.

Let’s see how true that really is. The dramatic effects of trends like cloud computing, managed services, the consumerisation of technology and the rise of software-as-a-service (SaaS) models have meant that the rules of the tech marketing game have changed. The outcome is that B2B customers don’t want to pay high prices out of capital expenditure budgets and now prefer lower cloud prices paid from operational spend.

The industry that has previously been dominated by the ‘pay first, consume later’ principle is now transforming to a ‘pay as you consume’ model. In other words, these B2B brands only get paid when and if the customer successfully consumes the business value of their product.

So why do we still believe that P&G, Coca-Cola and Diageo are the oracles of marketing, when there is so much evidence-based insight to show that there are a tonne of other ways to execute and deliver customer and shareholder value?

These vendors include some of the world’s biggest brands: Microsoft, Salesforce and Amazon (through its AWS division). The SaaS business model eliminates the risk for the customer, and the vendor has to relentlessly create and deliver value all the time, otherwise subscriptions fall off a cliff.

Concepts such as lifetime customer value and cost per acquisition are the most important metrics because these are the lifeblood of a business. SaaS brands have to think of customers not as buyers, but as future users, where delivery of the proposition is directly connected to the success, and indeed the share price, of the customer. These B2B brands have to continuously create value for the customer, otherwise it’s game over.

Compare that to my most recent experience with one of the UK’s best-known mobile operators, a household-name consumer brand. I had just switched after my patience had run out after 17 years of loyalty (yes, you read that right, 17 years) with another brand.

Within one month of joining, I rang the new carrier up to say that I wanted to move to a different, more expensive tariff. I was told that I would have to pay out the next two years of the new contract first. Not a case of continuously creating value, rather of extracting value from the customer.

Signs of change

There are signs of life that consumer marketing is slowly getting with the programme. A joint study by SAP, Siegel+Gale and Shift Thinking, based on 5,000 US consumers, asked them about their perceptions, usage, preference and advocacy of 50 brands. They also mapped this to net promoter scores (NPS), marketing expenditures and strategies.

‘Traditional’ or ‘existing’ brands, such as Gillette and Coca-Cola, were rated higher as being brands ‘that people look up to’. In comparison, ‘newer’ or ‘digital’ brands rate higher on the statement ‘makes my life easier’.

The research distinguishes between ‘purchase brands’, which focus on creating demand to buy the product, emphasising promotion, and ‘usage brands’, which focus on creating demand for use of the product and emphasise advocacy.

While this may be bit clunky and arbitrary, it’s interesting that the focus of usage brands is influencing how people experience them at every touchpoint, rather than on the transaction. The example quoted in the research is Apple’s retail stores.

In other words, a ‘usage mentality’ means the customer is not seen as a one-time buyer but a user with an ongoing relationship. Survey respondents showed more loyalty, preference and willingness to pay a premium for usage brands.

Of course, there are a lot of traditional consumer brands that have to focus on usage, such as credit cards. But the qualitative difference for newer, often digital brands is that they live and die on what happens after the purchase.

Have a bad experience at a chain hotel? That’s just too bad for the guest. Have a bad experience at an Airbnb? Not so good for the host.

B2B marketing has really changed the mood music about what’s possible, and now it’s time for it to trickle back into consumer marketing.

What is interesting is how this maps to the world of B2B and, in particular, SaaS business propositions. In many B2B SaaS companies, the brand and experience are one and the same. They even have a name for it in B2B: it’s called ‘building the marketing into the product’.

Instead of making people want things, B2B brands have to make things people want. They have to focus on how their products will make a customer’s life better. Radical, eh? As a result, customer service and loyalty are changed from cost centres to being drivers of growth and profitability.

This shift is real, and I believe the B2B marketing mindset is now even more relevant for consumer brands. Microsoft, Amazon AWS, Salesforce and Oracle are literally betting their business on this usage model.

They frame it within their business as ‘customer success’ and their share price is dependent on it. Their products’ consumption is guided by the priorities of their customers, so they have to deliver. A friend of mine from one of the top B2B tech brands tells me that their compensation is tied to ensuring value is delivered to each customer.

So why do we still believe that P&G, Coca-Cola and Diageo are the oracles of marketing, when there is so much evidence-based insight to show that there are a tonne of other ways to execute and deliver customer and shareholder value? Why is it this way and no other way? It’s legacy thinking and lazy thinking, in my opinion.

B2B marketing has really changed the mood music about what’s possible, and now it’s time for it to trickle back into consumer marketing. Dollar Shave Club turned the idea of buying a razor into a subscription business worth $1bn, and was bought by the definitive FMCG brand builder, Unilever.

Now it’s time for consumer marketing to move on from one-off purchases or ‘gotcha’ moments – like when I signed up for my new mobile phone operator – to positioning brands to ensure ongoing renewal and advocacy.

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Comments
  • Paul Bailey 11 Apr 2018 at 4:03 pm

    The fundamental point here is that FMCG brands really struggle with this approach – ‘Instead of making people want things, B2B brands have to make things people want.’

    Being market-oriented works well for B2B brands, because there is flexibility to shift the offering to something people might want. However, if you’re in the business of making a Good (ie, the G of FMCG) then you’re pretty wedded to making people want that thing.

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