FMCG firms can use digital in three ways

The disruption in consumer goods due to digital will increase at an unprecedented speed. A study by the Confederation of Indian Industries and the Boston Consulting Group, titled "Re-imagining FMCG in

Proliferation in internet connectivity, evolution of new business models and increase in digital media consumption would provide companies enormous opportunity to create value. Others who fail to capitalise on these opportunities would be under pressure.

FMCG companies can make three disruptive moves to win in the digital world:

• Shaping digital influence: This entails connecting with the consumers along the purchase pathway by building brand equity online and creating strong advocates for the brand.
• Winning with E-commerce: Creating a profitable e-commerce business entails strategic choices around the channel - brand.com or/and market places/vertical specialists. Companies would need to think through operating choices to avoid channel conflict.
• Digitising operations: Companies can create substantial value by leveraging digital across the value chain to enhance efficiency and effectiveness of operations.

To realise these opportunities, some old world capabilities need to be recast, while others need to be built afresh.

• Recasting old world capabilities: Capabilities from the physical world such as product placement, supply chain, and partnership with retailers need to be recast for the digital world.
• Building new capabilities: Companies would need to build new "fit for purpose" capabilities to compete in the digital world. These would include analytics based decision making, a digital ready organisation, and a nimble IT system that allows companies to follow a 'test, scale and grow' approach in digital.

Take a top-down view to the opportunity
Most FMCG companies are unclear on the opportunity it provides for them. We recommend companies take a top-down view of the opportunity: the likely revenue (& associated profit pools) and degree of digital influence for each category.

The answer would vary by category very significantly. In some categories, e.g. health/ OTC, e-commerce would grow to account for 12-15 per cent of category sales by 2025 while other, e.g. staples, laundry, contribution from e-commerce would be much lower. Similarly for some categories e.g. baby food, degree of online influence would be significant (5-7 per cent), yet e-commerce contribution would continue to be low (2-4 per cent).

Companies need to assess their starting position, investment appetite and the trajectory they would undertake (e.g. would they lead/actively shape online or be a follower). This strategic view would determine the level and shape of the investment required.

Within the same category, organisations may choose to take different paths e.g. a leading FMCG global player has an evolved digital offering (self-owned e-commerce portal with the option of personalised offerings for consumers, active social media engagement, social listening for generating rich insights) for its premium portfolio while continuing to have a basic digital presence for rest of the portfolio.

Take a data driven approach
There is a clear opportunity for companies to revisit both the strategic stance (level and shape of spend) and the effectiveness of spend.

Companies need to reexamine the following strategic choices:

• What should be the level of spend in digital?
• What digital platforms is the core consumer engaging in? Hence, what platforms should we invest in?
• What would be objectives for selected platforms and what campaign tactics and engagement techniques should be adopted?

While most companies has started to measure effectiveness of their spend through specific metrics tied to given objectives, companies further ahead on the maturity curve have taken a programmatic media buying approach which seeks to buy specific digital audiences rather than buying an inventory of click through.

Provide rich content and engage communities
Digitally influenced consumers spend considerable time online engaging with the brand across the purchase pathway. Most companies have created rich, immersive content on their websites/ online platforms. Best in class companies are pushing the envelope further to create content that is personalised, adapted to micro-segments of consumers and co-creating products/solutions.

A key strategic choice is leveraging existing social medial platforms vs building own platforms to drive community engagement. The decision would be based on:

• Level of engagement: Existing social media platforms help the brand achieve rapid reach, however, own platforms allow much deeper engagement relationships and rich insights.
• Starting position: For brands with limited social media presence, harnessing an owned platform would entail considerable efforts; however, if the brand enjoys a high social media following, migrating the fan base to an owned platform would be relatively lower effort.