Silos changing: Biz initiatives responding to savvy consumers says Cambashi expert

Posted on 7 Feb 2012 by The Manufacturer

This week, Mike Evans discusses manufacturers’ business initiatives that respond to more informed consumer purchasing behaviour.

Experts at industry analyst and market consulting firm Cambashi contribute a regular blog for TM titled ‘Silos Changing’ which explores how new software applications enable manufacturers to implement business initiatives in the new economy.

Mike Evans, research director , Cambashi

Historically, product manufacturers had it easy.  Consumers happily accepted information about products from the retailer and manufacturer.  Very often, supply of new products was constrained by material and capacity shortages.  Large manufacturers could set prices.  The balance of power between the consumer and producer was very much in favour of the producer.

Now, the situation has reversed.  Large retailers account for an important proportion of manufacturers’ revenues; they are responsive to the consumer and pass pressure onto the manufacturer.  Social media and the Internet provide alternative sources of information on products and customer service.  Globalisation has increased competition.  Pricing power has eroded.

Any transaction has a risk versus price trade off.  Consumers’ risk is whether or not the product will do what is expected.  An extreme case is eBay, where the goods might not turn up or be as described.  Consumers can assess the risk when they buy a product that is a commodity or where they have good knowledge.  Then they will buy on price, or detect from the price that the offer is too good to be true.  When a consumer only buys the item occasionally, or it is outside their sphere of knowledge, the risk element in the decision becomes more important.

Consumers have always asked friends and relations about their experiences as a strategy to assess risk. Today, they can go on-line and see what the Internet community says about it. The reliability of this information is dubious and we will discuss the issues surrounding social media in more detail in a future blog.

Many manufacturers emphasise the importance of moving focus onto providing a first class customer experience. That extends to dissatisfied customers.  Many may well be in the wrong; but poor handling of such complaints can damage the product’s reputation. The way that complaints, warranty claims and repairs are handled is disproportionately important.  Very often, business processes are optimised to deal with the 99.9% of routine cases.  Dynamic Case Management, where exceptions can be handled swiftly and sensitively by staff empowered to act is one way to deal with this issue.

Increasingly, products have lots of options and require configuration to match the consumer’s needs and preferences.  If the selection process is difficult, at best it will slow down the sale. Simplified purchasing choices can be provided on the Internet much more easily than in a paper catalogue.  Choices that are incompatible with an earlier selection can be greyed out. Knowing the customer profile, expert or novice, allows an appropriate level of information to be shown, in the right terminology.

“Cockroach marketing” is another successful initiative; the consumer is invited to try the product, before they buy.  The hope is that they will enjoy using it so much they won’t be able to return it.  Used products are generally less valuable but it is possible to organise distribution of demonstrator models and even to design products for trial use.  For example, the enclosure on a handheld electronic device can be replaced at the end of each trial.

Enterprise applications suppliers Infor, IFS, Microsoft, Oracle and SAP all offer functionality that supports business processes communicating with prospective and existing customers.  There are also a number of specialists who help harness the Internet to enhance communication with consumers.  In future blogs we will go on to talk about how these deployments help implement the business initiatives that capitalise on savvy consumers.