Johannesburg - A new battlefield is emerging for businesses as they seek to understand and win over more consumers.
This is according to a survey conducted by KPMG and the Consumer Goods Forum (CGF), which found 61 percent of senior executives in the consumer markets industry list building consumer trust as a core value. Some 32 percent say trust is and will be one of their biggest challenges over the next one to two years – second only to expansion and top line growth.
The survey of 539 consumer industry executives from 41 countries revealed most said they have knowledge of consumers’ behaviour, although only one in five had a strong confidence in this knowledge. A further 20 percent could not definitively claim that they have an accurate picture of what items their own customers are buying from their competitors versus themselves.
This third annual Top of Mind survey from KPMG and the CGF focuses on what is top of mind for senior decision makers in the consumer food, drink, goods and retail industry globally.
The “knowledge gap”
The report suggests some segments of the consumer industry lack understanding of the needs of their customers, an issue which could be hampering business growth. In response, businesses are attempting to close this “knowledge gap” by engaging more with customers as a pathway to growth.
According to the report, there are two key priorities which companies are focusing on, apart from growth and expansion: an omni-channel customer focus (letting customers shop on their own terms) and winning consumer trust.
In South Africa, manufacturers represented 55 percent of the companies surveyed compared to the global average of 48 percent. This resulted in significant differences in the figures reported in areas such as online and mobile sales, which currently accounted for two percent of total sales, with expectations that this will grow to three percent by 2015 and seven percent by 2020.
This compared to the global average of 11 percent currently growing to 15 percent in 2015 and 24 percent in 2020. This is in contrast to countries such as China where online sales currently represent 24 percent of turnover with predictions that this will grow to 48 percent by 2020.
“It is however encouraging to see that revenue for the majority of South African respondents increased by between 3-10 percent (45 percent of entities) and more than 10 percent (36 percent of entities) based on the previous year,” said Dean Wallace, KPMG director for Consumer Markets and Technology.
“What was interesting is that 73 percent of the South African respondents included ethical labour practices as one of the most important issue in building consumer trust. This contrast to the global average of 33 percent. The next highest country in this category was Mexico at 42 percent,” said Wallace.
Focus areas
Further afield, most companies view top-line growth, consumer trust and omni-channel strategy and technology as not only most the important focus areas but also the biggest challenges, whereas South African companies view top-line growth as the number one priority, followed by consumer trust. The biggest challenges were identified as expansion or top-line growth supply chain and operations, and consumer health and wellness.
Customer retention and entering new markets are most likely to help South African companies with driving top-line growth. For global entities, the most likely sources of top-line growth are new sales channels and distribution strategies, followed by product innovation.
“What also stood out was the fact that 91 percent of South African companies agreed that building consumer trust is one of their core values. It is encouraging to note that South African companies engage more with clients through social media than other African regions in order to nurture customer loyalty. However, it should also be noted that these companies are well below other regions in terms of loyalty and membership programmes.
When it comes to cyber space, South African companies believe they have sufficient skills and technology to manage cyber security risks, they have also experienced the least data breaches in the past financial year. In line with the global trend, South African companies see the most significant threat resulting from a data breach being reputational damage and loss of consumer trust, followed by intellectual property loss.
Building trust
Globally, most companies see the following issues as most important in building consumer trust: a) consumer health and wellness; b) food and product safety. But, for South African companies the following issues were most important in building consumer trust: a) ethical labour practices; b) consumer health and wellness.
Fundamentally, most key drivers of sustainable practices for South African entities include: building customer trust, reputation/brand, competitive differentiation, cost reductions or incentives, which is aligned with global trends.
“With top-line expansion and growth being this year’s top priority as well as the top challenge, the survey data clearly shows that a new battleground is emerging – how to understand and win over customers,” said Wallace.
“There are some hard choices to be made to build or maintain a competitive advantage. Furthermore, companies must be aware of and proactively address potential disruptors, the optimal time is usually long before you think it’s the optimal time.”
IOL