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LATEST THINKING

Brands as platforms

Digital disruption has influenced a shift in focus for consumer packaged goods companies.

Overview

The platform imperative

The consumer goods industry has directly been affected by today’s platform economy. Brands are dissolving, and identities are becoming blurred. CPG companies must figure out how to build awareness and relevance at a time when the traditional push model has been disrupted.

When brands operate as a platform, they enable platform participants to bundle offerings in a way that creates a comprehensive source of value for consumers—and also the participants in the platform. However, the majority of CPG brands are in the early stages of adopting interactive, digital services or connected products to promote existing brands. In sum, they hold a small stake in the platform world.

Background

Platform businesses bring together producers and users in efficient exchanges of value. Uber, for example, connects drivers and passengers just as YouTube connects videographers and viewers. And, platform businesses benefit from network effects—the more participants on the platform, the greater the value produced.

Platforms allow collaboration, which has become essential for CPG companies that want to survive in the digital world. The power of platforms enables CPG companies to:

Engage consumers. Consumers have taken control of the path to purchase—they research products online, they discuss them on social media, they share brand preferences with friends and they want to influence product design and co-innovate with brands. Operating as a platform enables CPG companies to capture attention and build strong connections with consumers.

Meet high expectations. Consumers today have “liquid expectations.” They have set a high bar for experiences that seep across industries. By connecting to the broader ecosystem, CPG companies can provide solutions that extend the brand beyond the product, to a service and to enhanced experience.

Generate lifetime value. Higher engagement among consumers and higher usage of core assets associated with the brand will strengthen and lengthen consumer relationships. CPG companies also have greater opportunities to create value by harnessing and monetizing ecosystem interactions.

Key findings

Platforms lead to the creation of network effects: Platforms become more valuable as more users use them. Network effects exist when two user groups (typically, producer and consumer) generate network value for each other, resulting in mutual benefits that drive demand-side economies of scale.

These “network effects” include:

  • Creating smarter products that absorb data and influence behavior based on data.

  • Building communities of consumers who benefit from direct exchange.

  • Engaging users and personalizing the usage experience.

  • Forming an ecosystem of partner brands and service providers to unleash value.

Analysis

Understanding where you fit in the platform world

To understand where they fit in the big picture, organizations must determine whether they have a utility or an experience brand.

Does the brand offer consumers an experience, and can it engage consumers directly in an ecosystem of activity and connections? Or, does the brand offer utility—such as the laundry detergent needed to wash clothes? The utility brand can use inconspicuous connections to stay relevant and build loyalty. The platform implications vary for each type of brand.

For experience brands, the platform enhances a consumer’s experience with the core product or service. An experience-led brand with a deep level of consumer engagement could be a platform through which an ecosystem of partners creates value. For utility brands, the platform enhances the efficiency and convenience of core products or services.

The pathway to become a platform business model is to understand the complete ecosystem of activities and touch points that shape the overall experience for a consumer. In this ecosystem, the ability to dynamically understand who the consumer is, what she/he wants and to provide services that exceed the consumer’s expectations requires CPG brands to play the role of “platform orchestrator.”

Recommendations

Moving from interactive service/connected product to a platform

Regardless of what type of brand you are—utility or experience—there are six key factors to get right:

  1. Unified view. Create a unified view of the user across all channels and touch points. If you currently manage the interactive brand as service as a silo experiment in your organization, invest in integrating across the organization at the data layer to benefit from a unified view of the user.

  2. Behavior design and personalization. Acquire data that enables high interactivity and personalization among your services, creating stickier and engaged behavior.

  3. Ecosystem strategy. Strategically acquire user/usage data that other ecosystem players find valuable.

  4. Partner strategy. Determine which providers of complementary goods or services are needed on the platform to provide wider choice and an end-to-end solution for the consumer.

  5. Partner incentives. Ensure that participation on your platform provides partners a unique advantage when compared to participation on other existing channels.

  6. Control. Determine key infrastructure and data assets that you need to own to exercise control over the ecosystem.