FMCG Companies face an Innovation Gap

Closeup of Mind the Gap Platform Sign at Railroad Station on Diagonal Tilt

The old recieved wisdom still holds sway in the world of fmcg marketing. The classic fmcg giants have to change radically, not only in in terms of their communication and media strategies but also in their marketing and brand strategies, innovation set-up and innovation cycles. Many of them are perhaps hampered by their sheer size. Otherwise the innovation gap they face will mean that they face permanent pressure coupled with decline which will lead to lower margins and lower profit growth. This will bring the modern dinosaurs of the fmcg business to their knees if they don’t change their ways. Unfortunately the fmcg giants are still seen as quintessential training grounds, and are quickly usurped by more modern internet based businesses including e-commerce.

Modern categories like mobile phones for example broke the traditional way of marketing by getting better consumer engagement and moving with changes in consumer habits through quick innovation. There is much to learn from this category for the classical fmcg.

The Innovation Matrix

Efforts to improve existing offerings for existing users is referred to as incremental innovation. Incremental innovation includes re-configuring your convention agenda or theme. A new offering to existing users is also evolutionary. Revolutionary innovation is when you try to develop a new offering for a new set of consumers.

Unfortunately classic fmcg companies are constantly looking at the the incremental zone of innovation. Where their existing offerings are appealing to existing users. At the most, fmcg companies do small tweaks to both product and advertising, that ensure that they remain in the incremental zone. This ensures that the best that fmcg companies can do is to grow at single digit growth year after year, without any disruptive growth the way that companies like Patanjali have grown.

When they do try something more evolutionary, it is usually wildly off the mark in terms of the realities of the consumer although it might appeal to the intellectual side of their well educated marketing staff.

Useless Innovation

When Dove for example tried to match body types to their packaging range, it was a good example of useless innovation. ( no doubt this came from an intellectual piece of Unilever research, since nothing goes ahead without research ) Created by agency Ogilvy London, “Real Beauty Bottles” is a limited-edition run of six different body wash bottles to illustrate the power of body diversity–ranging from curvy to tall, petite to slim. In a statement Dove said, “Each bottle evokes the shapes, sizes, curves and edges that combine to make every woman their very own limited edition. They’re one of a kind–just like you. But sometimes we all need reminding of that. Recent research from the Dove Global Beauty and Confidence Report revealed that one in two women feels social media puts pressure on them to look a certain way. Thankfully, many women are fighting with us to spread beauty confidence.”

People of course either hated it or were laughing hysterically at the new packaging on social media. This video covers the overall reaction to this so called innovation.

Time and again new initiatives falter, because they are not based on the customer’s needs and have never been prototyped to solicit feedback.

Slow to embrace Digital

Indian consumers are already employing digital media in the purchasing cycle and across all FMCG categories. As one Bain report observed on the behaviour of fmcg companies ” To compete in the digital era, we propose that FMCGs shift through five “gears”: Stop and rethink the role of digital in their categories, brands and portfolios; choose where to focus among consumer and product segments; perfect the online and offline consumer experience; reallocate resources in marketing, promotion and research; and build the capabilities and partnerships necessary to deliver and sustain change”.

Unfortunately some of the largest fmcg companies while they dominate the main media, their efforts to engage with the digital consumer has been slow.

The Dove packaging was not what Ideo famously calls Human Centred Design. Human-centered design is a creative approach to problem solving and the backbone of the work at IDEO.org. It’s a process that starts with the people you’re designing for and ends with new solutions that are tailor made to suit their needs.

So the new Dove packaging failed because it did not understand what people desired. They didn’t want packaging that synchronised with their body type however intellectually powerful Unilever may have thought the idea is. It did not meet a real need from consumers.

The 21st Century Consumer

Global brands dominated the league tables of the most valuable brand of the 20th century. In the new millennium we see that most of the great corporations are no longer dominant and their key brands hardly made it to the list of the most valuable brands of the 21st century. Some corporations like General Foods and Gillette failed to exist. Others like Cadbury’s got bought over by Mondelez. Unilever has already faced an acquisition threat when Kraft Heinz of the US made an offer for Anglo-Dutch Unilever earlier this year.

One possible answer is that they did not see how the 21st century consumers had changed and how they were different from the 20th century consumers. The internet revolution has had far reaching changes in the way consumers behave and consume media, and in the way they react to traditional fmcg communication strategies.( Refer to Acuvate’s articleWhy a CPG firm’s Business Intelligence Needs AI

The quicker the fmcg company recognises the changing consumer the better it will be for them.

What they need is a radical innovation based business platform that delivers faster product cycles stimulated by the new breed of the 21st century consumers in an internet based world.

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Prabhakar Mundkur has spent 40 years in advertising and worked in India, Africa and Asia. He is currently Chief Mentor with HGS Interactive a part of HGS in the Hinduja Group. He is on the advisory board of Sol 's Arc (solsarc.org ) an NGO dedicated to special education for intellectually challenged children. He is also a member of Whiteboard ( whiteboardindia.org ) which supports senior management of NGOs in financial management, PR, Communication and HR through pro bono expertise.

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