Consumers Are Changing: Now What?
The following is a guest commentary for CNBC.com.
As the global economy recovers slowly, there is a sense of hope from businesses that a corner has been turned. But optimistic shareholder expectations appear to be out of kilter with the weak projections for global economic growth. If stock markets are correct, then companies must grow rapidly to meet analyst expectations in the next few years.
To reach that growth target, the non-financial companies in the S&P Global 1200, alone, must find an additional $5 trillion in revenue each year, according to Accenture's analysis. In regions or industries where the overall size of the market is static -- or may even be shrinking -- the ability to capture market share will become paramount.
Until now it has not been certain where businesses expect to find that growth. We know that many companies can no longer simply ride the wave of overall or even slowing emerging market expansion. Until recently, the global economy was expected to be growing at approximately 4 percent. But weakness in mature markets and domestic challenges in certain emerging economies, such as India and Brazil, have reduced that to less than 3 percent. And developed economies are, collectively, looking at a year of growth little more than 1 percent.
But new evidence points to the extraordinary transformation in consumer behavior as a critical but overlooked source of growth. Capitalizing on new consumer behavior offers a great prospect for re-energizing the global economy and generating profitable business growth today.
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How is the consumer changing? In a global survey we have just published, we identify 10 significant changes. For example, consumers have become increasingly connected. A big majority -- 73 percent -- say they have been using the Internet to research and buy products and services more in the past three years. Additionally, their use of social media is disrupting patterns of loyalty, creating new forms of commercial communities and recreating the process of purchasing. Just over half of consumers globally tell us they increasingly consider the environmental impact of the product or manufacturer before purchasing. That percentage rises to just under two-thirds when we look at those surveyed in emerging markets.
All this suggests that companies can no longer focus on the "where" and the "who" of selling. It is insufficient for companies to target, for instance, the next wave of emerging economies and the over 55-year-olds in mature markets. Instead, they must give new attention to the "how" and the "why" of consumption. The always-on, networked consumer is the new "how," and the independent, co-operative and socially conscientious consumer is the "why."
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The challenge is that while nearly three-quarters (73 percent) of business executives we surveyed globally acknowledge that consumer behavior has changed markedly in the last three years, the same proportion said they do not fully understand the consumer changes under way. Even eight out of 10 said they believe that their companies are not taking full advantage of the opportunities these changes present.
It is imperative that companies invest in capabilities that help them better understand and act on these changes. That includes embracing advanced analytics tools that interpret rapidly changing data and assist in identifying select opportunities. For instance, the analytics program of a leading media-rental company enables it to recommend movie and TV titles based on an individual consumer's preferences and rental history.
Businesses should also consider adopting more agile business models and partnerships to improve their strategic and operational responsiveness. A global car-rental company replicated the business model of new players offering hourly rentals. By meeting disruption head-on, the company has been able to use its scale and scope to reduce the threat of new competition while improving customer service.These steps can help them, for example, deliver more tailored services and to shift from traditional products to the more experiential offerings that consumers expect today.
It may come as no surprise that the extent of recent change in consumer behavior has been greatest in emerging markets. Perhaps more worryingly for companies in mature economies seeking growth at home or abroad, emerging markets businesses consider themselves better-prepared to seize the opportunities.
Given that some markets are stagnant or even shrinking, many of the opportunities generated by changing consumer behavior will replace, rather than add to, existing revenues. This means that, unless they respond more effectively, incumbent companies face a real risk of being displaced by more agile competitors eager to raise their market share.
Accenture estimates that a range of sectors we identify as being propelled by these changes in consumer behavior are set to grow by $2.4 trillion by 2016. Experience suggests that businesses will have to move with speed and agility to meet the demands of the new consumer, particularly at a time when markets remain volatile and shareholders have high expectations for revenue growth.
Mark Spelman is a Managing Director at Accenture.