Understanding the consumer

Consumer buying behavior is changing with the advent of the social networking revolution. A Finat congress panel brought together a global retailer, brand owner, converter and design agency to discuss the implications. Andy Thomas reports

A very interesting panel session at the Finat 2011 congress brought together a leading designer, brand manager, retailer and converter to discuss the future direction of the labels industry.

Christian Plenge, who runs German-based Metro’s Future Store initiative, conceded that retailers are struggling to come to grips with a tectonic shift in patterns of consumer behavior.

‘Our problem is that we need to look deeper into our consumer base and identify new trend categories. Social networking is the new reality, but most of us still think in terms of the traditional store paradigm. We can’t control these new structures by our traditional marketing methods – advertizing campaigns or customer relationship management – because the new structures are de-centralized and people are free to do what they want.’

Plenge pointed out that social networking is NOT an activity exclusive to young people. ‘That is another mistake. The average age of a YouTube user is 39. Half of e-Bay users are over 50.’

Retailers have to fight for customers’ attention on this new terrain. ‘You need to provide games, or attract people to put themselves on YouTube, for example. You need to be present where and when the customer wants to play.’

This new paradigm has brought changes in how people consume. ‘Quality of life becomes more important than product ownership, and experience and emotions replace value for money. In other words, traditional values no longer sell products. We need to understand how to make buying an experience.’

Metro has set up an ‘open innovation network’ which allows partners to test new ideas in a real store environment.

Rick Olthof of Dutch branding agency Cartils is already carrying our design projects in the beer and spirits sector targeted at the new ‘Experience Society’.

‘In a time of crisis, like the banking crisis, consumers react to events outside their control by buying things of value to their personal life.’ Brands are responding by linking the ‘off-line world’ to the social networking world. He cited Heineken’s ‘Thanks a Million’ campaign, where it hired ‘Heineken girls’ to visit bars in Amsterdam and embrace anybody they found drinking Heineken. The video went viral with one million ‘likes’ on Facebook. ‘Heineken was thanking consumers for liking them and consumers liked them back on-line.’

Critically, Olthof said the label is the key carrier for these messages. He used Smirnoff’s successful launch in Brazil of a limited edition drink which combined a new apple flavor reflected in the clever packaging and label design as an example. ‘You can peel a full body label off like a green apple skin. So you combine packaging with a new flavor and a new experience.’

Arno Melchior at global household, health and personal care brand Reckitt Benckiser explained how the company’s strategy was to concentrate on 19 successful ‘power’ brands with global growth potential, and focus innovation there.

‘Now we generate 40 percent of our revenue from products launched in the last three years. Our power brands represent 70 percent of our turnover.’

Because innovation can be focused, these products have higher margins than ‘bread and butter’ products. Melchior gave as an example the typically low margin household cleaning sector. ‘If we can make something with a customer benefit, they will spend more money – for example pump actions sprays instead of aerosols and "no touch" hand soap dispensers, we launched at height of bird flu epidemic.’

In the case of the Harpic cleaning product, the company moved to shrink sleeve labels to increase the surface area to communicate with the consumer. ‘In cosmetics we are moving away from cheaper to higher quality packaging, which carries the message “this product is worth the money”. This of course means you have to have better quality labels with high quality design.’

Geoff Martin, president and CEO of global converting giant CCL, said the ‘digital transformation’ had profoundly affected CCL and its relationship with end users.

‘To be successful in today’s tough economic climate, brands need to be intelligent with their marketing campaigns. By applying cost-effective strategies to promote themselves online, brands can strengthen their international presence, retain existing customers, and attract new clients.’

CCL Label therefore launched CCLIND.TV – a multimedia content website with video images and updates on the latest CCL news from around the world.

CCL set up a digital marketing team which produced a series of short films on every aspect of running a label company and buying and using labels, with a library currently totaling 1,000 clips. The first one was filmed in 2009, the year the H1/M1 virus broke. ‘That first video went to the makers of carbonated drinks, talking about a label that allowed you to personally identify your bottle of mineral water by writing indelibly on a panel,’ said Martin. The company’s annual video budget adds up to around 45 thousand dollars.

In a Q&A session, the panel agreed that when operating in global markets, it is crucial to understand local differences in packaging and label formats. Arno Melchior pointed out, for example, that in India the 200 milliliter sachet is the biggest selling category, while in Europe this is just a promotional size.

Arno Melchior said that in the developing markets ‘we are moving all of our products into higher quality’. Products such as Detol, shower gels and shampoos launched recently use a lot of clear labels and hot foil stamping. ‘Local companies are improving their quality and if you do not follow as global company you will be out.’

Geoff Martin said the challenge for FMCG companies is to get both a global look and local customization. ‘An example is that in China most people have black hair, so label design is focused on properties like anti-dandruff etc, rather than on hair color.’

A discussion on the importance of ‘Sustainability’ produced some interesting comments. Christian Plenge rather stunned delegates when he said that although sustainability is very important for Metro on a corporate level, ‘for German consumers it is not important at all.’

Arno Melchior agreed: ‘at the end of the day, consumers say yes in marketing panels, but if they have to make a decision in shops, it’s a different story! All over the world people say one thing and do another.’

At the same time, Reckitt Benckiser has a range of in-house initiatives, including co-shipping products with competitors. ‘We would rather have just one truck full of competitor products than three partially full trucks.’

Melchior said replacing oil-based with plant-based plastics was not necessarily the best option. ‘This is good for Coke, but for an aggressive domestic household cleaner it does not make sense. People would then say, “why are you are selling chemicals in environment friendly bottles?”’

Geoff Martin said that in emerging markets there is very little interest in sustainability. ‘Quality of life is most important. When we get an audit in Brazil, the questions are about child labor and how much we pay people. Sustainability is more an issue for North America and Europe.’

One converter asked how easy it was to get involved with new product design.

Melchior said he likes to work with suppliers at an early stage. ‘Development departments and purchasing departments have different views of the world! So involve us as soon as possible in your new ideas. When we develop something we have a website where you can put ideas on. We also discuss our innovations with consumers and our customers to make sure the product will be listed. And we do a lot of consumer testing, so we need to work closely together.

For Metro, Christian Plenge welcomed new ideas. ‘Even a worldwide company like us cannot know all the global trends that can harm us or help us. That’s why our open innovation network is so important.’

Rick Olthof said his designers would welcome more input from converters. ‘We need to keep up with new techniques, but we can’t make all the running.’ 

Pictured: Christian Plenge, Metro group; Rik Olthof, Cartlis; Arno Melchior, Reckitt Benckiser; Geoff Martin, CCL Label

This article was published in L&L issue 4, 2011