Digital Transformation

Topic 3

The Business Paradigm Shift

Element 3.1
The New Digital Consumer
 THE WORD DIGITAL IS MISLEADING.

IT’S NOT ABOUT TECHNOLOGY,

IT’S ABOUT

PEOPLE
 3.1 Digital consumer

Why Have Consumers Changed?

Technology Empowerment Globalization Supply > Demand

 3.1 The New Digital Consumers
Why Have Consumers Changed?
Technology Empowered The world at your fingertips
Digital technology has transformed consumer habits.
Interestingly, customers use their mobile devices for
various online shopping activities such as
researching product features, locating a store,
etc. ​AI and deep learning have changed the way
people interact with information, technology, brands
and services, enabling personalized experiences.
62% of the World’s Population is Online,
4.9 billion internet users searching,
discovering, sharing, asking, comparing,
purchasing products and services instantly
from smartphones — here in lays their
power.
 3.1 Digital consumer
Why Have Consumers Changed?

Globalization Consumers are able to “shop the

world.”

Globalization Connected consumers have

access to information about products and
services around the world, driving demand and
adaptation in their own markets.

Chinese consumers can easily purchase seafood from

India, Thailand, Russia, United States, Chile and other
countries from the fresh-food platform every day.
3.1 Digital consumer

Why Have Consumers Changed?

Supply > Demand

As more and more brands

flood the market, consumers
come away with the power to
demand better and more
personalized products from
brands looking to differentiate.
50 million
In the past years, more than 50 million new products
from 200,000 local and foreign brands hit the market
through Alibaba’s retail platform Tmall. That means a
new product is launched on Tmall every 0.52 second
on average.
3.1 Digital consumer

How Have Consumers Changed?

Changes in
consumer segments

Consumers
are
changing

Changes in Changes in way of

brand values receiving
information
 3.1 Digital consumer
How Have Consumers Changed?
1 Changes in
consumer segments
As consumer economy matures, its consumers are
developing more diverse preferences for products
and services. Distinct consumer segments have
emerged as a result of the structural demographic
and behavioral changes, and each segment has a
unique set of needs.
 The New Digital Consumer

How Have Consumers Changed?– The Post-Lazy Economy

Convenient hotpot
 Some people in the city earn a lucrative
income, dress elegantly, socialize frequently
but never bother to do any household
chores or grocery shopping. Robot vacuum
 Workplace challenges keep them too
occupied to pay attention to anything else
besides their career.
 They don’t care much about their home life
and like to keep things simple, but they work
hard on their job, fitness, beauty and
hobbies.
Food
delivery
service
The New Digital Consumer

How Have Consumers Changed?– The Post-Lazy Economy

Professional Dog Walkers

Home-cooked meals
In-Home Organizer
 3.1 Digital consumer

Changes in consumer segments - the Single Person

 Proud, Playful
 Disposable income
 Desire for Convenience
 Eating Alone
 Different Values
 3.1 Digital consumer

Changes in consumer segments - the Menopause woman

 About 27 million people, or nearly 20% of the

workforce in the U.S., experience menopause,
according to the Society for Human Resource
Management.
3.1 Digital consumer

Changes in consumer segments - the Sports moms

 Some 60 million kids play organized youth sports in the U.S.

 3.1 Digital consumer

How Have Consumers Changed?

Consumers used to judge products mainly by how

Changes in well they worked. Now, they also care about the
2 brand’s purpose that matches their own values and
brand values beliefs.
 3.1 Digital consumer

The old way of profiling customers is vague and shallow. It doesn’t help us understand them well or target them
precisely.

Basic Information: Behavioral True situations: Spiritual Cores:

 Demographic characteristics:  Life stage  Mentality
attributes  Daily scenarios  Lifestyle  Value
 Social attributes  Media habits  Hobbies  Personality
 Consumption
behavior

Ninety-five percent of people‘s decisions are emotional and only five percent are rational. Most brand purchases are emotional decisions made
by consumers in a short time. Taking advantages of this 95% and reaching and moving consumers is the best way for brands to occupy
consumers’ mental space.

——Yabing He, Vice President of Brand Marketing and Media Department and Consumer Insight
Department of P&G Greater China
 3.1 Digital consumer

Changes in Brand values

GDT Case study

Everlane: Creating Emotional Brand Connection

This case study teaches students about the applications

of customer centricity in brand building and how to
develop a consumer-to-brand mindset.
 3.1 Digital consumer

Changes in Brand values

 is an American clothing retailer that sells primarily online.

 Founded in 2011
 70 employees
 “We believe we can all make a difference”. Our way: Exceptional quality.
Ethical factories. Radical Transparency.
 Hit $100M+ Revenue in 2016
 Everlane is No. 40 on the 2018 World’s Most Innovative Companies list.
 3.1 Digital consumer

Changes in Brand values

Everlane’s target demographic is

described as “conscientious
young people”, with an emphasis
on the millennial market.

Millennials are in the vanguard

Fair labor
Sustainable resourcing
Environment protection
brands that are doing good in the world
……
 3.1 Digital consumer

Changes in Brand values

Transparency

Production process

Everlane’s quirky team highlights behind-the-

scenes views and glimpses of real moments
in production and sales.
The company prides itself on its “ethical factories.” The company
shares some information on the factories that produces its clothing,
The photos of the workers show how they enjoy their work.
 3.1 Digital consumer

Changes in Brand values

Transparency

Cost

Everlanes' most well=known feature; their cost

breakdown on website By offering transparency
customers can hold the brand accountable for how
products are produced , and the prices they are sold at
 3.1 Digital consumer

Changes in Brand values

Value

Environmental awareness

Consumers now ask, what can your

brand do for the world? How will your brand solve
problems?

Everlane’s products are fully sourced from recyclable

or sustainable materials, a concept that resonates well Everlane turned recycled water bottles into
coats.
with a generation concerned with climate change.
 3.1 Digital consumer

Changes in Brand values

Value

Are some customers willing to pay more than the

lowest possible price?
Everlane developed a Choose What You Pay
model for overstocked items, where customers can
pick up, say, a dress shirt for one of three different
prices. The website explains that the lowest one
lets Everlane recoup its costs, while paying more
allows it to invest in future product development.
Twelve percent of shoppers opt to pay more.
On a $75 sweater, the discounted prices are $32, $39, or $68.
 The cheapest price covers Everlane's production and shipping costs;
 The second goes a step further, covering that plus "overhead for our
70-person team."
 The highest price, which is only $7 less than the sweater's original
price, includes all of that and also allows Everlane to "invest in
growth."
 Culture and stereotypes of cat person

While there are over 74 million cats in over 30% of

American homes, there is still a hesitant, stereotypical
notion around what it means to be a cat owner, especially
women, as eccentric, chronically single, and distinctively
neurotic.
The term of cat lady is usually synonymous with a
spinster, meaning someone who's never married and
usually lonely. It's a negative connotation that was
painted even in the earliest of cat ladies. Consider
witches and their black cats and the Old Maid card game
illustrated with a woman and cat. All of this adds up to the
meaning and origin of a “crazy cat lady.”
The brand, strengthening the bond between cats and cat
persons, wanted to build a product that resonated with this
community, without pigeon-holing them into an existing,
outdated mold, but by recognizing and celebrating the
diversity of what it means to be a cat parent.
 3.1 Digital consumer
How Have Consumers Changed?
3 Changes in
Way of Receiving
Information
In the past, traditional media (TV, broadcast, newspaper,
etc.) dominated the flow of information. it was common
for companies to broadcast their message through
various advertisement media.
Today, Consumers are exposed to more, through digital
channels, friends and increased brand penetration.
They are better equipped to research products and find
exactly what they want.
3.1 Digital consumer

How Have Consumers Changed?

Decentralized
 3.1 Digital consumer
The New Digital Consumer
Fragmented
Connectivity, along with the presence of multiple devices and screens, brings distractions.
It hampers the customers’ ability to focus and often limits their ability to decide.

Larger Quantity And Variety More Fragmented Higher Pace

The variety of media has become more
Consumer behavior is diversified, Every day there are a lot of news, hot
and more abundant, and the amount of
fragmented and the paths (to reach events, and new information. With the
content delivered every second has
them) are complex. It will be more and rapid switching of focus points, the
increased dramatically. Points of entry in
more difficult to integrate resources life cycle of IP becomes shorter and
space and time are getting scattered,
for effective communication. shorter.
and it is more and more difficult to reach
the target consumers.

Television, broadcast, paper Switching between

Weibo popular
Apps installed per 1 minute/time
media, smart phones,
tablets…
multiple media and
screens
50+ person on average
search update
frequency

Livestreaming, short videos
WeChat official
New trends keep End devices owned Baidu real-time hot
1 hour/time
coming
5-6 by an urban family
on average
events update frequency

accounts have 518 posts/year Users’ favorite

Headlines, news
Multi-platform, cross-device forms of
summary information in 2016
 3.1 Digital consumer

How Have Consumers Changed?

Changes in
consumer segments

The
Consumers "consumer decision making process”
are
changing are changing
Changes in Changes in Way of
brand values Receiving Information
Element 3.2
The B2C Model & Its Constraints
3.2 The B2C Model and Its Constraints

The B2C Model Constraints in the Digital Era

“Customer First”
Is it just a slogan?
3.2 The B2C Model and Its Constraints

The B2C Model Constraints in the Digital Era

Henry Ford was the founder of the Ford Motor

Company which famously developed the assembly
line to mass produce cars

➢ Developed and manufactured the first

automobile that many middle-class
Americans could afford

➢ Converted the automobile from an expensive

curiosity into a practical convenience that
would profoundly impact the 20th century

➢ Introduced the Model T which revolutionized

transportation and American industry
3.2 The B2C Model and Its Constraints

The B2C Model Constraints in the Digital Era

Traditional B2C Models

BIG
MANUFACTURER + BIG
RETAIL + BIG
BRANDING + BIG
MARKETING

Supply Chain Distribution Reactive Mass

Efficiency Power Customers Marketing
3.2 The B2C Model and Its Constraints

The B2C Model Constraints in the Digital Era

Major Limitations

Rigid Product Unreliable Consumer Struggle with

Development Feedback Channels Shortened Life Cycles
 The example of the constraints of B2C model

Although P&G's value is "consumer is the boss", it's not

easy for a multinational enterprise that emphasizes the
American gene and whose headquarters has an
absolute say to get close to the local consumers.

The management has also been criticized for being too

slow in reacting to changing trends in key markets such
as China.

“A few years ago we got too central and global and too slow to address market opportunities. We
need more direct ownership for our regional managers all the way to the store shelf,”
——CEO David Taylor
 The example of the constraints of B2C model

P&G missed the shift in the channels where

Chinese consumers are shopping more and
more online.

While P&G historically served all channels, it had a

strong focus on the hyper and superstores. The
company‘s advertising methods also need to change,
because the reach of traditional TV is declining, trust
in digital media is eroding and e-commerce
continues to expand
 The example of the constraints of B2C model
In China, P&G learns one size doesn’t fit all

Chinese consumers value a product‘s good

appearance, and they would likely buy
"pretty looks" and "charming intrinsic value"
items.

P & G China once reported the preference

of Chinese consumers for product
packaging to the U.S. headquarters, but the
headquarters refused the idea by "it will take
at least 18 months to change the packaging,
under the global unified standard, the scale A niche shampoo has become popular
is too large and the cost is too high". on Chinese social media by its
The packaging of head & shoulders attractive packaging. Young ladies on
embodies the characteristics of global the social media praised that
standardization, mass production and shampoo’s packaging is a match to sky
low cost. color.
Element 3.3
From B2C to C2B
The Rising of New Brands – New Needs, New Products

Traditional Supplements Care/of

Personalized daily vitamin packs
 The Rising of New Brands – New Needs, New Products
The new first aid brand Welly, ‘for life fully lived,’ turns products such as bandages into ‘badges of honor’
“Injury is actually a trophy of a well-lived life.”
Unilever acquired Welly Health on February 10, 2021
 The Rising of New Brands – New Needs, New Products

The only plastic-free and clean way to replace the paste

you've used your whole life.
With ecommerce platform and social media, brands and consumers are closer than ever

Digital Shift Gives Rise To DTC Brands

(Direct to Consumer Brands)

Ecommerce
platform
Brands or
Consumers
Social
media

……
 The rise of the Direct to Consumer brands in China
“New made in China” brands
Alibaba double 11 has seen several new local brands disrupt existing categories, evolving from
challengers to competitors at unprecedented speed.

Ubras, a digital-native brand Founded in 2015, the Chinese

Founded in 2016, Local
beverage brand Genki
Forest outsold Coca-Cola
and Pepsi on Tmall in 2020.
specialising in one-size lingerie
founded in 2016, surpassed
Uniqlo in just two years to
become the platform’s No 1
selling underwear brand.
coffee brand Saturnbird mainly
produces specialty instant coffee,
has surpassed that of Nestle’s to
become the No. 1 in Tmall’s
coffee category.
 3.3 From B2C to C2B

Transforming from B2C to C2B

Companies can create new products that

customers really want by keeping an eye on
what’s popular online, on social media, and in the
news. They can make and sell these products
C2B innovation fast through a few channels. If a product is a hit,
is they scale it up. If not, they drop it and try
becoming the norm in China. something else. The whole cycle, from idea to
launch, is super quick - just weeks instead of
months.

Source: BCG, What China Reveals about the Future of Innovation

 DIGITAL TRANSFORMATION
REDEFINES BUSINESS
People

Redefine
Place Product
Redefine “People”

Hot sleepers
Everyone
Menopause women

“As i got older, I felt like i am getting hotter. I am

my own heater. I hate sweat! i still need
blanket in the summer because of feeling of
cozy, but this is a bit countering of it (need
to sleep cool)”
 Redefine “Product”

Normal duvet Rest Evercool cooling comforter

Keep warm Cool to touch

Add a little weight for snug fit Buttery Soft
Need a duvet cover Quick Dry
Machine washable
Redefine “Place”

Offline store Omni channel

Shopify store
www.restduvet.com
Amazon Store
FOR preoccupied minds that are sleep deprived
REST is the duvet that recharges them to be the
best version of themselves
BY customising the comfort they need for high
quality sleep
AS A RESULT OF constant innovation on form,
material and technology that sets new
benchmarks, offering ideal temperature, weight,
softness and breathability.
3.3 From B2C to C2B

Transforming from B2C to C2B

“ B2C and C2B is not simply a reversion of letters, it is the disruption of the entire
business logic. It is a transformation of business network from traditional supply chain
to internet collaboration. This is a revolution of business paradigm shift.

”
- Ming Zeng
Chairman of the Academic Council of Alibaba Group
 3.3 From B2C to C2B
CUSTOMER DATA
Capture more online data
Use engaging content, suck as
entertainment and live shows,
to keep consumers online.
Capture a wider range of data
Work with third-party companies
that offer insights, launch affinity
programs,and forge data-sharing
partnerships with social media
companies
Translate data into actionable
Insight
Integrate data from the entire value
chain (including customer
feedback,transaction data, and social
media) into a single customer view
CRITICAL FACTORS OF C2B INNOVATION
ACCESS TO DISTRIBUTION
Launch products through a
rapid, asset-light approach
Distribute products through e-
commerce
channels only
Pilot tests limit launches to
specific
business units, customer
segments, or
geographic markets
FLEXIBLE MANUFACTURING
Use shorter production runs with
faster turnaround time
Develop an agile supply chain in order
to react quickly to changes in
consumer demand and to
economically produce a greater
variety of products
Build strategic relationships with
suppliers
Involve suppliers more directly in the
innovation process to leverage their
capabilities and insights and reduce
the time to market.
AGILE PRODUCT DEVELOPMENT
Foster an agile organizational
structure and culture
Push innovation at decision-making
authority for launches to frontline
teams
Focus on speed
Get products out quickly, capture
feedback, shut down unsuccessful
launches, and scale up the winners
Shift the organizational mindset
Treat launch failures as an inherent
part of the process, learn from them,
and keep innovating
Sources: Alibaba and BCG analysis.
CUSTOMER DATA – Data Analysis
CUSTOMER DATA – Data Analysis
Capture a wider range of data and translate data into actionable insights
CUSTOMER DATA – Data Analysis
Capture a wider range of data and translate data into actionable insights
CUSTOMER DATA – Data Analysis
Capture a wider range of data and translate data into actionable insights
CUSTOMER DATA – Consumer Interview

More than 40
Zoom Interviews with the duvet consumers
ACCESS TO DISTRIBUTION
FLEXIBLE MANUFACTURING
Use shorter production runs with faster turnaround time, build strategic relationships with suppliers
To continuously pursue the best product, we experienced 5 versions of product design in 2 months and
a new sample every 15 days on average
 Foster an agile organizational structure and culture

Overseas agile team

China team
Core team member

USA Singapore Singapore USA USA Canada

Consumer Brand Creative Brand VI PR Content
insights strategy strategy creation

Martin Nancy Amy

Product Product design Social media
development & operation
& Branding execution &
Supply chain Influencer
management marketing
Local ecosystem Vietnam Spain New Zealand Philippines USA Philippines Bulgaria India
partners Advertising Data Operation Customer Web Affiliate Email Google
analysis service developer marketing marketing Advertising
 Digital Transformation

Topic 3

The Business Paradigm Shift