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Understanding Consumer Behavior and How to Think in New Boxes - More from FCPC's Supply Chain Symposium

The two final presenters at last week’s FCPC (Food and Consumer Products of Canada) Supply Chain Symposium provided the attendees with some interesting insights into the minds of Canadian consumers and how to successfully bring new products and services to market.  Here is what they had to say.

Carman Allison, Director Consumer Insight, Nielsen entitled his presentation, The Cautious Consumer.  He began his talk by highlighting that Canada ranks number 11 in consumer confidence (while the US ranks number 20).  Mr. Allison noted that twenty percent of Canadians have no spare cash and essentially live paycheque to paycheque.  Forty-nine percent of Canadians believe that we are still living in a recession.  The Canadian debt to income ratio is now higher than the ratio in the United States.  The statistics shared by Mr. Allison point to a consumer that is both cautious and increasingly cost conscious. 

Mr. Allison then went on to share some statistics on Canadian purchasing behavior.  Canadians can now buy key staples such as milk from their local drug or convenience store.  As a result, we are making 43 fewer trips, on average, to the grocery store per year.  This is a drop of 19%.

In 1970, 38.7 percent of Canadians lived in 1-2 member households; in 2012, this has jumped to 62.7 percent.  In addition to slower family growth, Canadians are much more deal and price conscious.  Thirty-six percent of goods sold (48% of unit sales) are bought due to a price cut.  Discount retailers now represent 49.7 percent of sales and this is expected to surpass 50% in the next few years.  Ninety-five percent of consumers read flyers, 62% read each page and 77% read flyers on a weekly basis.

Mr. Allison outlined the migration from big box stores to smaller stores to buying online to virtual stores to smartphone purchases.  Thirty-seven percent of Canadians own smartphones and 24 percent are willing to make purchases on their smartphone.  The percentages skew higher for younger buyers.  The 4 PM e mail blast represents one of the creative uses of available technologies to spur sales.  As consumers contemplate their dinner menu, the e mail blast directs consumers to some potential purchases they can make at the highlighted grocery store on the way home.  Overall online sales have increased by 11 percent in the last year and now represent $1.2 billion in revenue.  The increase in the value of the Canadian dollar against the US dollar has also produced a 20 percent increase in cross-border traffic as compared to the prior year. 

Alan Iny, Senior Global Specialist, The Boston Consulting Group elaborated on his model of Thinking in New Boxes that he outlined to lead off the Symposium.  Mr. Iny shared a five step model of business creativity that will be detailed in his forthcoming book.  This first element of the process is Doubt.  He urged everyone to look at our current ideas as working hypotheses.  To change reality, one needs to change our perception of reality.

The second step is to Explore a range of ideas.  Step three is based on the thought that “no idea is born good.”  The best way to develop good ideas is to develop a lot of ideas.  Mr. Iny labeled this stage Diverge.  The next step filters the bad ideas from the good ones.  He called this Converge.  Finally, the there is a requirement to continually Re-evaluate one’s business concepts and ideas.  “No idea is good forever.”  While both Blackberry and Dell developed unique business models that produced strong results for several years, they were each overtaken by new and competing business models and changes in consumer requirements. 

The winning ideas need to be market tested and refined (or re-evaluated).  Microsoft came up with the original design for a tablet computer (e.g. the Newton), but it was not sufficiently refined and marketable.  Apple was able to create the iPad, the most successful tablet computer to date.  Similarly, they were able to launch a number of other unique products (e.g. iPod, iTouch) that went through the process of doubt, exploration, divergence, convergence, and re-evaluation until they were each ready for “prime time.” 

As you can tell from the last two blogs, the FCPC’s Supply Chain Symposium was clearly a thought-provoking and insightful day.  Demographics, technology, consumer shopping patterns, retail models and distribution systems are all in a state of flux.  The winning companies will be able to adapt their product and service value propositions and supply chains to compete in this exciting new world.

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